-----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, UcEsj/tI0HlkDiy54JrxbLmyRwyRs62XDPfEZmpzsPPwxjUTEuvE2gBt8/hgZYRt MpleEpejWx2I6mvRE2QqSg== 0000897069-97-000505.txt : 19971229 0000897069-97-000505.hdr.sgml : 19971229 ACCESSION NUMBER: 0000897069-97-000505 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971224 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSHKOSH TRUCK CORP CENTRAL INDEX KEY: 0000775158 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 390520270 STATE OF INCORPORATION: WI FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-13886 FILM NUMBER: 97744398 BUSINESS ADDRESS: STREET 1: 2307 OREGON ST STREET 2: P O BOX 2566 CITY: OSHKOSH STATE: WI ZIP: 54903 BUSINESS PHONE: 4142359151 MAIL ADDRESS: STREET 2: 2307 OREGON ST P O BOX 2566 CITY: OSHKOSH STATE: WI ZIP: 54903 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) (X) Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended September 30, 1997, 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: 0-13886 Oshkosh Truck Corporation (Exact name of registrant as specified in its charter) Wisconsin 39-0520270 (State of other jurisdiction of (I.R.S. Employer Identification) incorporation or organization) P. O. Box 2566, Oshkosh, WI 54903-2566 (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: (414) 235-9151 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock (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. X Aggregate market value of the voting stock held by non-affiliates of the registrant as of November 15, 1997: Class A Common Stock, $.01 par value - No Established Market Value Common Stock, $.01 par value - $131,352,978 Number of shares outstanding of each of the registrant's classes of common stock as of November 15, 1997: Class A Common Stock, $.01 par value - 406,428 shares Common Stock, $.01 par value - 7,900,931 shares DOCUMENTS INCORPORATED BY REFERENCE Parts I, II and IV incorporate, by reference, portions of the Annual Report to Shareholders for the year ended September 30, 1997. Part III incorporates, by reference, portions of the Proxy Statement dated December 29, 1997. OSHKOSH TRUCK CORPORATION Index to Annual Report on Form 10-K Year ended September 30, 1997 Page PART I. ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 8 ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . 8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . 10 EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . 10 PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . 11 ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . 12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 12 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . 12 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . 12 PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . 12 ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . 12 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . 12 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 13 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . 13 INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 18 The following contains forward looking statements, including statements that include the words "believes" and "expects," or words of similar import with reference to the company. These statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those described in any such statement. PART I Item 1. BUSINESS General Oshkosh Truck Corporation (Oshkosh or the company) engineers, manufactures and markets a broad range of specialized trucks and proprietary parts under the "Oshkosh" trademark, and a broad line of specialty fire apparatus under the "Pierce" trademark. As a specialized vehicle producer, the company holds a unique position in the industry, having acquired the engineering, rapid product development and lean manufacturing expertise and flexibility to profitably build specialty vehicles in competition with companies both much larger and smaller than itself. Mass producers design a vehicle to serve many markets. In contrast, the company's vehicles, manufactured in low to medium production volumes, are engineered for market niches where a unique, innovative design will meet a purchaser's requirements for use in specific, often adverse operating conditions. Many of the company's products are found operating in snow, deserts and soft or rough terrain where there is a need for high performance or high mobility. Because of the quality of its specialized vehicles, the company believes its products perform at lower life cycle costs than those that are mass-produced. Markets served by the company domestically and internationally are categorized as defense and commercial. As a result of the acquisition of Pierce Manufacturing Inc. (Pierce) on September 18, 1996, the company's sales into the defense market decreased to 42% of the company's fiscal 1997 sales volume, after reaching a peak of 83% in fiscal 1987. The company primarily depends upon components made by suppliers for its products. The company has successfully managed its supply network, which consists of approximately 3,500 active vendors. Through its reliance on this supply network for the purchase of certain components, the company is able to avoid many of the preproduction and fixed costs associated with the manufacture of those components. While the company purchases many of the high dollar components for assembly, such as engines, transmissions and axles, it does have significant machining and fabricating capability for the manufacture of certain important proprietary components. This capability is used for the manufacture of certain axles, transfer cases, cabs, body structures, aerial ladders, independent suspension, and many smaller parts which add uniqueness and value to the company's products. Some of these proprietary components are marketed to other manufacturers. Products and Markets The company currently manufactures seven different series of commercial trucks, and eight specialty fire apparatus models, and during fiscal 1997, had four active contracts with the U.S. Government related to production of the Palletized Load System (PLS), Heavy Equipment Transport (HET), Heavy Expanded Mobility Tactical Truck (HEMTT), Logistic Vehicle System (LVS), and HEMTT Overhaul vehicles. Within each series there is a varying number of models. Models are usually distinguished by differences in engine, transmission, axle, body configuration, pump, and ladder combinations, among others. Vehicles produced generally range in price from $60,000 to $1 million; in horsepower from 210 to 1,025; and in gross vehicle weight from 33,000 to 150,000 pounds. The company has designed vehicles to operate in the environmental extremes of arctic cold or desert heat. Most vehicles are designed with the capability to operate in both highway and off-road conditions. The company aggressively supports its products with an aftermarket parts and service organization. Defense The company manufactures a broad range of wheeled vehicles for the U.S. Department of Defense and export markets. The company has performed major defense contracts for over 50 years, and in the year ended September 30, 1997 had defense sales of $288.6 million or 42% of its total sales. Contracts with the Department of Defense generally are multi-year contracts. Each contract typically provides that the government will purchase a base quantity of vehicles with options for additional purchases. All obligations of the government under the contracts are subject to receipt of government funding, and it is customary to expect purchases when Congress has funded the purchase through annual budget appropriations and after the government has committed the funds to the contractor. During fiscal year 1997, the company primarily produced the PLS, the HEMTT, the HET, the LVS, and the HEMTT Overhaul products for the U.S. Department of Defense. On November 21, 1996, the U.S. Army Tank Automotive and Armaments Command awarded each of the company and one other defense contractor, $6.9 million prototype contracts for Phase I competition of the Medium Tactical Truck Remanufacture Program (MTTR). The MTTR Program was initiated to update and modernize the 5-Ton tactical vehicle fleet of the U.S. Marine Corps and the U.S. Army. The goal of the U.S. Marine Corps portion of the program is to remanufacture the current configuration to a more robust design capable of carrying a much greater payload with substantially increased cross-country mobility. The current fleet of approximately 10,000 U.S. Marine Corps trucks are up to 20 years old. The new U.S. Marine Corps vehicle will have extraordinary performance and mobility exceeding that of any comparable truck in the world. The U.S. Army portion of the program is designed to increase the useful life and decrease operation and support costs of a portion of the U.S. Army's existing fleet of nearly 60,000 vehicles. It will include inserting current technologies, making the truck capable of performing its mission well into the next century. Phase I covers the design, development, and production of five prototype test vehicles for the U.S. Marine Corps and five additional prototype test vehicles for the U.S. Army. Testing of the ten prototype test vehicles commenced August 1997 and will be concluded in April 1998. Under Phase II of the program, up to a total of 11,500 U.S. Marine Corps and U.S. Army units will be awarded for production at a value of approximately $1.8 billion over several years. Competition for the Phase II production contract will be intense between the two Phase I contractors. Phase I testing along with the Phase II proposal will determine the single supplier of the production contract covering both the U.S. Marine Corps and U.S. Army vehicles. During fiscal year 1997, the U.S. Army purchased additional trucks under the HEMTT/LVS Family Contract that extends production into August 1998. Under the Family Contract, the U.S. Government plans to award sufficient sales to the company to ensure a minimum production rate of 20 trucks per month for the two truck models through September 1999. The existing U.S. Army contract for HET vehicles was modified during fiscal 1997 to add the PLS vehicles to that contract. This contract now becomes a family contract, very similar to the HEMTT/LVS Family Contract. The U.S. Army has the ability to order trucks under this contract through fiscal 2000 and plans to sustain production throughout that period. Additionally during fiscal year 1997, Oshkosh Truck Corporation and VSE Corporation of Alexandria, Virginia formed a joint venture. That joint venture submitted a proposal to the government and was subsequently awarded a contract valued at $12.3 million to produce a quantity of 130 Common Bridge Transporters (CBT). This CBT is basically a load handling system similar to that which is mounted on the PLS. This particular load handling system is mounted on the remanufactured M977 HEMTT chassis and is used for the transportation of various types of combat support and engineering bridges. Also during fiscal year 1997, the U.S. Government awarded Oshkosh a follow-on HEMTT Overhaul contract valued at $23.5 million. This is a requirements type contract that allows the government to send in several different HEMTT models for complete overhaul. Oshkosh is presently producing under this contract at the rate of approximately one unit per day. Commercial The company manufactures a wide variety of heavy-duty specialized trucks for vocational, airport, and municipal markets. Products are uniquely engineered for specific severe-duty requirements where innovative design provides superior performance. The fire apparatus business is conducted through the company's Pierce subsidiary headquartered in Appleton, Wisconsin. Pierce primarily serves municipal markets but also serves airports, universities and large industrial companies. The Pierce product line includes pumpers, aerials and heavy duty rescue vehicles on five different models of custom chassis and two models of commercial chassis. The company serves airport markets with products that include Aircraft Rescue and Firefighting (ARFF) and snow removal vehicles. ARFF vehicles are offered from 1,000 to 3,000 gallon capacities. Oshkosh also offers the innovative Snozzle/R/, an extendable turret with an integrated video camera and automated remote controls that can pierce into an aircraft interior and position the agent flow precisely at the location of the fire. Suppressant application is faster and uses up to 50% less agent than conventional mass application techniques. The all-wheel drive H- series snowblower keeps runways open by casting 4,000 tons of snow per hour. The H-series snowblower provides multi-purpose use with an interchangeable blower, blade plows and brooms. The all-wheel drive P- series with its heavy-duty frame has an unsurpassed reputation for durability. The construction business focuses on forward and rear discharge concrete carriers. The forward placement S-series design allows the driver to oversee faster, more accurate placement of concrete, with fewer support personnel. This leads to greater efficiency and superior customer service. A traditional rear discharge F-series is also offered as an integrated package allowing for one stop service and sales. The F-series is also sold in the utility and heavy haul transport markets. In addition, the company produces the J-series for desert oil field and extreme heavy hauling applications. The refuse business consists of two low entry, dual drive models, the NK and NL. The NK and NL feature eighteen inch step-in heights. Municipalities as well as commercial contractors look to the improved visibility and safety features a low entry, cab forward vehicle provides. Backlog The company's backlog at September 30, 1997 was $361 million, compared to $433 million at September 30, 1996. The backlog at fiscal year-end 1997 includes $205 million with respect to U.S. Government contracts, $120 million related to Pierce, and the remainder relates to other commercial products. The $72 million decrease in the backlog from year-end 1996 to year-end 1997 is primarily due to a $67 million decrease in the backlog related to U.S. Government contracts. Approximately 99% of the company's backlog pertains to fiscal 1998 business. Virtually all the company's revenues are derived from customer orders prior to commencing production. Government Contracts A significant portion of the company's sales are made to the U.S. Government under long-term contracts and programs in which there are significant risks, including the uncertainty of economic conditions and defense policy. The company's defense business is substantially dependent upon periodic awards of new contracts and the purchase of base vehicle quantities and the exercise of options under existing contracts. The company's existing contracts with the U.S. Government may be terminated at any time for the convenience of the government. Upon such termination, the company would be entitled to reimbursement of its incurred costs and, in general, to payment of a reasonable profit for work actually performed. There can be no assurance that the U.S. Government will continue to purchase the company's products at comparable levels. The termination of any of the company's significant contracts, failure of the government to purchase quantities under existing contracts or failure of the company to receive awards of new contracts could have a material adverse effect on the business operations of the company. The company expects fiscal 1998 sales to the U.S. Government to decrease $20 to $30 million from fiscal 1997 levels although actual sales could vary based on changes in the federal budget, international sales and other factors. Accordingly, it will be necessary for the company to reduce its fixed costs to maintain the profitability of its defense business at fiscal 1997 levels. Under firm fixed-price contracts with the government, the price paid the company is not subject to adjustment to reflect the company's actual costs, except costs incurred as a result of contract changes ordered by the government or for economic price adjustment clauses contained in certain contracts. The company generally attempts to negotiate with the government the amount of increased compensation to which the company is entitled for government-ordered changes which result in higher costs. In the event that the company is unable to negotiate a satisfactory agreement to provide such increased compensation, the company may file an appeal with the Armed Services Board of Contract Appeals or the U.S. Claims Court. The company has no such appeals pending. Marketing and Distribution All domestic defense products are sold direct and the company maintains a liaison office in Washington, D.C. The company also sells defense products to foreign governments direct, through representatives, or under the United States Foreign Military Sales program. The company's commercial vehicles and aftermarket parts are sold either direct to customers, or through dealers or distributors, depending upon geographic area and product line. Fire apparatus products are sold almost exclusively through a distributor network. Supplemental information relative to export shipments is incorporated by reference to Note 11 of the financial statements included in the company's Annual Report to Shareholders for the fiscal year ended September 30, 1997. Alliance On May 2, 1997, the company and Freightliner Corporation (Freightliner) formally terminated a strategic alliance formed on June 2, 1995. The company repurchased from Freightliner 350,000 shares of its Common Stock and 1,250,000 warrants for the purchase of additional shares of Common Stock for a total of $6.8 million. The company and Freightliner will continue to supply each other with parts and components. Competition In all the company's markets, the competitors include smaller, specialized manufacturers as well as the larger, mass producers. The company believes that its technical strength and production capability enable it to effectively compete with other specialized manufacturers. The company also believes that its manufacturing flexibility, engineering, product development and lean manufacturing expertise in the low to middle production volumes allow it to compete effectively in its markets against mass producers. The company's principal competitors for U.S. Department of Defense contracts include AM General Corporation and Stewart & Stevenson Services, Inc. Pierce's principal fire apparatus competitors include Emergency One, Inc. (a subsidiary of Federal Signal Corporation), FWD Corporation (a subsidiary of Corsta Corporation), Kovatch Mobile Equipment Corp., American La France (a subsidiary of Freightliner Corporation), and over 75 other manufacturers. The company's principal competitors in other commercial markets include Advance Mixer Inc., Crane Carrier Co., London Machinery Inc., Mack Trucks Inc., Maxim Truck Company Inc., McNeilus Companies, Inc., Monroe Truck Equipment Inc., Rexworks Inc., Stewart & Stevenson Services, Inc., and T.L. Smith Machine Co. Inc. The principal method of competition for the company in the defense and municipal markets, where there is intense competition, is generally on the basis of lowest qualified bid. In the non-governmental markets, the company competes on the basis of price, innovation, quality and product performance capabilities. Engineering, Test and Development For fiscal years 1997, 1996, and 1995, the company incurred engineering, research and development expenditures of $7.8 million, $6.3 million, and $5.4 million, respectively, portions of which were recoverable from customers, principally the U.S. Government. Intellectual Property The company holds 15 patents. Patents for all-wheel steer and independent suspension systems, which have remaining lives of 9 to 19 years, provide the company with a competitive advantage in the fire apparatus business and the sale of ARFF and snow vehicles. The independent suspension system was also added to the U.S. Marine Corps portion of the MTTR program which the company believes should be a competitive advantage in the competition for the Phase II production contract. None of the other patents individually are significant to the business. The company holds trademarks for "Oshkosh" and "Pierce". Both trademarks are considered to be important to the future success of the business. Employees As of September 30, 1997, the company had approximately 2,750 employees of which approximately 1,300 and 1,250 employees are located at its principal facilities in Oshkosh and Appleton, Wisconsin, respectively. Production workers totaling approximately 800 employees at the company's principal facilities in Oshkosh, Wisconsin are represented by the United Auto Workers union. The company's five-year contract with the United Auto Workers extends through September 30, 2001. The company believes its relationship with employees is satisfactory. Subsequent Event On December 8, 1997, the company announced that it had agreed to acquire McNeilus Companies, Inc. (McNeilus), a $300 million manufacturer and marketer of refuse and recycling truck bodies, rear discharge concrete mixers, and ready-mix batch plants. The total purchase cost for all McNeilus stock and related non-compete and ancillary agreements is $250 million in cash. The transaction is subject to the approval of the appropriate governmental authorities and is expected to close in the first quarter of calendar 1998. Under certain conditions, if the acquisition is not consummated, the company may be required to pay McNeilus a fee of $10 million and conversely McNeilus may be required to pay a $10 million fee to the company. Item 2. PROPERTIES. The company's principal offices and manufacturing facilities are located in Oshkosh, WI. Space occupied encompasses 688,000 square feet, 52,000 of which is leased and the remainder is owned. One-half of the space owned by the company has been constructed since 1970. The company owns approximately 50 acres of vacant land adjacent to its existing facilities. The company's Pierce subsidiary, located in Appleton, WI, occupies 608,000 square feet of office and manufacturing space, of which 19,000 square feet are leased and the remainder is owned. Additionally, the company owns a 28,000 square foot manufacturing facility located in Weyauwega, WI, and a 287,000 square foot manufacturing facility located in Bradenton, FL. In addition, the company has leased parts and service facilities in Hartford, CT and Salt Lake City, UT, and owns similar facilities in Oshkosh, WI and Houston, TX. The company's equipment and buildings are modern, well maintained and adequate for its present and anticipated needs. Item 3. LEGAL PROCEEDINGS. The company is engaged in litigation against Super Steel Products Corporation (SSPC), the company's former supplier of mixer systems for front discharge concrete mixer trucks under a long-term supply contract . SSPC sued the company in state court claiming the company breached the contract. The company counterclaimed for repudiation of contract. On July 26, 1996, a jury returned a verdict for SSPC awarding damages totaling $4.5 million. On October 10, 1996, the state court judge overturned the verdict against the company, granted judgment for the company on its counterclaim, and ordered a new trial for damages on the company's counterclaim. Both SSPC and the company have appealed the state court judge's decision. The Wisconsin Court of Appeals has agreed to hear the case and both the company and SSPC have filed briefs in this matter. The company currently is engaged in the arbitration of certain disputes between the Oshkosh Florida Division and O.V. Containers, Inc., which arose out of the performance of a contract to deliver 690 skeletal container chassis. The arbitration is being conducted before a three- member panel under the commercial dispute rules of the American Arbitration Association, and is not expected to conclude before April 1998. The company is vigorously contesting warranty and other claims made against it, and has asserted substantial claims against O.V. Containers, Inc. The outcome of these matters cannot be predicted at the present time. As part of its routine business operations, the company disposes of and recycles or reclaims certain industrial waste materials, chemicals and solvents at third party disposal and recycling facilities which are licensed by appropriate governmental agencies. In some instances, these facilities have been and may be designated by the United States Environmental Protection Agency (EPA) or a state environmental agency for remediation. Under the Comprehensive Environmental Response, Compensation, and Liability Act (the Superfund law) and similar state laws, each potentially responsible party (PRP) that contributed hazardous substances may be jointly and severally liable for the costs associated with cleaning up the site. Typically, PRPs negotiate a resolution with the EPA and/or the state environmental agencies. PRPs also negotiate with each other regarding allocation of the cleanup cost. As to one such Superfund site, Pierce is one of 414 PRPs participating in the costs of addressing the site and has been assigned an allocation share of approximately 0.04%. Currently a remedial investigation/feasibility study is being completed, and as such, an estimate for the total cost of the remediation of this site has not been made to date. However, based on estimates and the assigned allocations, the company believes its liability at the site will not be material and its share is adequately covered through reserves established by the company at September 30, 1997. Actual liability could vary based on results of the study, the resources of other PRPs and the company's final share of liability. The company is addressing a regional trichloroethylene (TCE) groundwater plume on the south side of Oshkosh, Wisconsin. The company believes there may be multiple sources in the area. TCE was detected at the company's North Plant facility with recent testing showing the highest concentrations in a monitoring well located on the upgradient property line. Because the investigation process is still ongoing, it is not possible for the company to estimate its long-term total liability associated with this issue at this time. Also, as part of the regional TCE groundwater investigation, the company conducted a groundwater investigation of a former landfill located on company property. The landfill, acquired by the company in 1972, is approximately 2.0 acres in size and is believed to have been used for the disposal of household waste. Based on the investigation, the company does not believe the landfill is one of the sources of the TCE contamination. Based upon current knowledge, the company believes its liability associated with the TCE issue will not be material and is adequately covered through reserves established by the company at September 30, 1997. However, this may change as investigations proceed by the company, other unrelated property owners, and government entities. The company is subject to other environmental matters and legal proceedings and claims which arise in the ordinary course of business. Although the final results of all such matters and claims cannot be predicted with certainty, management believes that the ultimate resolution of all such matters and claims, after taking into account the liabilities accrued with respect to such matters and claims, will not have a material adverse effect on the company's financial condition or results of operations. Actual results could vary, among other things, due to the uncertainties involved in litigation. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended September 30, 1997. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the company are as follows: Name Age* Title Robert G. Bohn 44 President and Chief Executive Officer Timothy M. Dempsey 57 Vice President, General Counsel, and Secretary Paul C. Hollowell 56 Executive Vice President and General Manager, Defense Business Charles L. Szews 41 Executive Vice President and Chief Financial Officer Matthew J. Zolnowski 44 Vice President, Administration J. David Brantingham 40 Vice President, Information Systems Fred C. Fielding 63 Vice President, Government Operations Washington, DC Office Dan J. Lanzdorf 49 Vice President and General Manager, Commercial Business Mark A. Meaders 39 Vice President, Corporate Purchasing and Logistics John W. Randjelovic 53 Vice President and General Manager, Pierce Manufacturing Inc. Donald H. Verhoff 51 Vice President, Technology *As of December 4, 1997 All of the company's officers serve at the pleasure of the Board of Directors. ROBERT G. BOHN - Mr. Bohn joined the company in 1992 as Vice President-Operations. He was appointed President and Chief Operating Officer in 1994, and President and Chief Executive Officer in October 1997. TIMOTHY M. DEMPSEY - Mr. Dempsey joined the company in October 1995 as Vice President, General Counsel, and Secretary. Mr. Dempsey has been and continues to be a partner in the law firm of Dempsey, Magnusen, Williamson and Lampe in Oshkosh, Wisconsin. PAUL C. HOLLOWELL - Mr. Hollowell joined the company in April 1989 as Vice President-Defense Products and assumed his present position in February 1994. CHARLES L. SZEWS - Mr. Szews joined the company in March 1996 as Vice President and Chief Financial Officer and assumed his present position in October 1997. Mr. Szews was previously employed by Fort Howard Corporation, a manufacturer of tissue products, from June 1988 until March 1996 in various positions, including Vice President and Controller from September 1994 until March 1996. MATTHEW J. ZOLNOWSKI - Mr. Zolnowski joined the company as Vice President-Human Resources in January 1992 and assumed his present position in February 1994. J. DAVID BRANTINGHAM - Mr. Brantingham joined the company in April 1995 as Manager of Technical Services and assumed his present position in November 1997. Mr. Brantingham was previously employed by Western Publishing Company, Inc., a printer and publisher of children's books and a manufacturer of adult games, in various positions including Director of Technical Services. FRED C. FIELDING - Mr. Fielding joined the company in October 1989 and was elected Vice President, Government Operations by the Board of Directors in January 1991. DAN J. LANZDORF - Mr. Lanzdorf joined the company in 1973 as a design engineer and has served in various assignments including Chief Engineer - Defense, Director of Defense Engineering, Director of the Defense Business unit, and Vice President of Manufacturing prior to assuming his current position in November 1997. MARK A. MEADERS - Mr. Meaders joined the company as Director of Purchasing -Pierce Manufacturing Inc. in September 1996 and assumed his present position in November 1997. Prior to joining the company, Mr. Meaders was Vice President-Purchasing for the CA Short Co., Inc., a provider of premium incentives, from 1995 until joining Pierce. Mr. Meaders began his career at the company's former Chassis Division as the plant manager from 1993-1995. He previously served 13 years in the U.S. Army and departed after attaining the rank of Major. JOHN W. RANDJELOVIC - Mr. Randjelovic joined the company in October 1992 as Vice President and General Manager in charge of the Bradenton, Florida Division. In September 1996, he was appointed Vice President of Manufacturing, Purchasing, and Materials for Pierce Manufacturing Inc. and assumed his present position in November 1997. DONALD H. VERHOFF - Mr. Verhoff joined the company in May 1973 as a development engineer. He has held positions as Manager of the Test Lab, and Director of New Product Development prior to assuming his present position in November 1997. PART II Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. The information under the captions Note 7 to the Consolidated Financial Statements, and "Financial Statistics" contained in the company's Annual Report to Shareholders for the fiscal year ended September 30, 1997, is hereby incorporated by reference in answer to this item. Stock Buyback In July 1995, the company's board of directors authorized the repurchase of up to 1,000,000 shares of Common Stock. As of December 11, 1997, the company has repurchased 461,535 shares under this program at a cost of $6.6 million. Item 6. SELECTED FINANCIAL DATA. The information under the caption "Financial Highlights" contained in the company's Annual Report to Shareholders for the fiscal year ended September 30, 1997, is hereby incorporated by reference in answer to this item. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information under the caption "Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations" contained in the company's Annual Report to Shareholders for the fiscal year ended September 30, 1997, is hereby incorporated by reference in answer to this item. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements set forth in the company's Annual Report to Shareholders for the fiscal year ended September 30, 1997, are hereby incorporated by reference in answer to this item. Data regarding quarterly results of operations included under the caption "Financial Statistics" in the company's Annual Report to Shareholders for the fiscal year ended September 30, 1997, is hereby incorporated by reference. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES. None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information under the captions "Election of Directors" and "Other Matters" of the company's definitive proxy statement for the annual meeting of shareholders on February 2, 1998, as filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this Item. Reference is also made to the information under the heading "Executive Officers of the Registrant" included under Part I of this report. Item 11. EXECUTIVE COMPENSATION. The information under the captions "Executive Compensation" contained in the company's definitive proxy statement for the annual meeting of shareholders on February 2, 1998, as filed with the Securities and Exchange Commission is hereby incorporated by reference in answer to this item. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information under the caption "Shareholdings of Nominees and Principal Shareholders" contained in the company's definitive proxy statement for the annual meeting of shareholders on February 2, 1998, as filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this item. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information contained under the captions "Election of Directors" and "Certain Transactions" contained in the company's definitive proxy statement for the annual meeting of shareholders on February 2, 1998, as filed with the Securities and Exchange Commission, is hereby incorporated by reference in answer to this item. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) 1. Financial Statements: The following consolidated financial statements of the company and the report of independent auditors included in the Annual Report to Shareholders for the fiscal year ended September 30, 1997, are incorporated by reference in Item 8: Consolidated Statements of Income (Loss) for the years ended September 30, 1997, 1996, and 1995 Consolidated Balance Sheets at September 30, 1997, and 1996 Consolidated Statements of Shareholders' Equity for the years ended September 30, 1997, 1996, and 1995. Consolidated Statements of Cash Flows for the years ended September 30, 1997, 1996, and 1995 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors 2. Financial Statement Schedules: Schedule II - Valuation & Qualifying Accounts All other schedules are omitted because they are not applicable, or the required information is shown in the consolidated financial statements or notes thereto. 3. Exhibits: 2.1 Stock Purchase Agreement by and among McNeilus Companies, Inc., the shareholders of McNeilus Companies, Inc., and Oshkosh Truck Corporation dated December 8, 1997. 3.1 Restated Articles of Incorporation ###### 3.2 Bylaws of the company, as amended ***** 4.1 Credit Agreement dated as of September 18, 1996 among Oshkosh Truck Corporation, and certain lenders with Firstar Bank Milwaukee, N.A., as Agent (incorporated by reference to Exhibit 4 to the company's Current Report on Form 8-K dated September 18, 1996 (Commission File No. 0- 13886)).####### 4.2 First Amendment to Credit Agreement dated as of November 27, 1996 among Oshkosh Truck Corporation, and certain lenders with Firstar Bank Milwaukee, N.A., as Agent.#### 4.3 Second Amendment to Credit Agreement dated as of April 25, 1997 among Oshkosh Truck Corporation, and certain lenders with Firstar Bank Milwaukee, N.A., as Agent. 10.1 Lease with Cadence Company (formerly Mosling Realty Company) and related documents * 10.2 1990 Incentive Stock Plan for Key Employees, as amended (through January 25, 1995) ### @ 10.3 Form of Key Employee Employment and Severance Agreement with R. E. Goodson, Chairman & CEO ** @ 10.4 Employment Agreement with R. E. Goodson, Chairman & CEO as of April 16, 1990 **** @ 10.5 Restricted stock grant to R. E. Goodson, Chairman & CEO**** @ 10.6 Incentive Stock Option Agreement to R. E. Goodson, Chairman & CEO **** @ 10.7 Employment Agreement with R. E. Goodson, Chairman & CEO as of April 16, 1992 ## @ 10.8 1994 Long-Term Incentive Compensation Plan dated March 29, 1994 ### @ 10.9 Form of Key Employees Employment and Severance Agreement with Messrs. R.G. Bohn, T.M. Dempsey, P.C. Hollowell, C.L. Szews, and M.J. Zolnowski ### @ 10.10 Employment Agreement with P.C. Hollowell, Executive Vice President @ 10.11 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as amended, Nonqualified Stock Option Agreement.##### @ 10.12 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as amended, Nonqualified Director Stock Option Agreement. ##### @ 10.13 Lease extension with Cadence Company (as referenced under 10.1) 10.14 Form of 1994 Long-Term Incentive Compensation Plan Award Agreement @ 10.15 Stock Purchase Agreement, dated April 26, 1996, among Oshkosh Truck Corporation, J. Peter Mosling, Jr. and Stephen P. Mosling, and consented to by R. Eugene Goodson. #### 10.16 Agreement to Terminate Strategic Alliance dated as of April 10, 1997, between Freightliner and Oshkosh. 11. Computation of per share earnings (contained in Note 1 of "Notes to Consolidated Financial Statements" of the company's Annual Report to Shareholders for the fiscal year ended September 30, 1997) 13. 1997 Annual Report to Shareholders, to the extent incorporated herein by reference 21. Subsidiaries of Registrant 23. Consent of Ernst & Young LLP 27. Financial Data Schedule *Previously filed and incorporated by reference to the company's Form S-1 registration statement filed August 22, 1985, and amended September 27, 1985, and October 2, 1985 (Reg. No. 2-99817). **Previously filed and incorporated by reference to the company's Form 10- K for the year ended September 30, 1987. ****Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1990. *****Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1991. ## Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1992. ### Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1994. #### Previously filed and incorporated by reference to the company's form 10-K for the year ended September 30, 1996. @Denotes a management contract or compensatory plan or arrangement. ##### Previously filed and incorporated by reference to the company's Form S-8 filing dated September 22, 1995. (Reg. No. 33-62687) ###### Previously filed and incorporated by reference to Exhibit A to the company's Proxy Statement for Annual Meeting of Shareholders held on February 3, 1997 filed on Schedule 14A. ####### Previously filed and incorporated by reference to the company's Form 10-Q for the quarter ended April 1, 1995. (b) The company was not required to file a report on Form 8-K during the quarter ended September 30, 1997. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OSHKOSH TRUCK CORPORATION December 23, 1997 By /S/ Robert G. Bohn Robert G. Bohn President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. December 23, 1997 /S/ R. G. Bohn R. G. Bohn President and Chief Executive Officer (Principal Executive Officer) December 23, 1997 /S/ C. L. Szews C. L. Szews Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) December 23, 1997 /S/ J. W. Andersen J. W. Andersen Director December 23, 1997 /S/ D. T. Carroll D. T. Carroll Chairman and Member of Executive Committee December 23, 1997 /S/ General F. M. Franks, Jr. General F. M. Franks, Jr. Director December 23, 1997 /S/ M. W. Grebe M. W. Grebe Director December 23, 1997 Kathleen J. Hempel Director December 23, 1997 /S/ S. P. Mosling S. P. Mosling Director and Member of Executive Committee December 23, 1997 /S/ J. P. Mosling, Jr. J. P. Mosling, Jr. Director and Member of Executive Committee December 23, 1997 /S/ R. G. Sim R. G. Sim Director SCHEDULE II OSHKOSH TRUCK CORPORATION VALUATION AND QUALIFYING ACCOUNTS Years Ended September 30, 1997, 1996, and 1995 (In Thousands) Balance Balance at Purchase Additions at Beginning of Charged to End of Classification of Year Pierce Expense Reductions* Year Receivables - Allowance for doubtful accounts: 1995 $431 --- $143 $(97) $477 ====== ====== ====== ====== ====== 1996 $477 $509 $182 $(102) $1,066 ====== ====== ====== ====== ====== 1997 $1,066 --- $881 $23 $1,970 ====== ====== ====== ====== ====== * Represents amounts written off to the reserve, net of recoveries. INDEX TO EXHIBITS 3. Exhibits: 2.1 Stock Purchase Agreement by and among McNeilus Companies, Inc., the shareholders of McNeilus Companies, Inc., and Oshkosh Truck Corporation dated December 8, 1997. 3.1 Restated Articles of Incorporation ###### 3.2 Bylaws of the company, as amended ***** 4.1 Credit Agreement dated as of September 18, 1996 among Oshkosh Truck Corporation, and certain lenders with Firstar Bank Milwaukee, N.A., as Agent (incorporated by reference to Exhibit 4 to the company's Current Report on Form 8-K dated September 18, 1996 (Commission File No. 0- 13886)).####### 4.2 First Amendment to Credit Agreement dated as of November 27, 1996 among Oshkosh Truck Corporation, and certain lenders with Firstar Bank Milwaukee, N.A., as Agent.#### 4.3 Second Amendment to Credit Agreement dated as of April 25, 1997 among Oshkosh Truck Corporation, and certain lenders with Firstar Bank Milwaukee, N.A., as Agent. 10.1 Lease with Cadence Company (formerly Mosling Realty Company) and related documents * 10.2 1990 Incentive Stock Plan for Key Employees, as amended (through January 25, 1995) ### @ 10.3 Form of Key Employee Employment and Severance Agreement with R. E. Goodson, Chairman & CEO ** @ 10.4 Employment Agreement with R. E. Goodson, Chairman & CEO as of April 16, 1990 **** @ 10.5 Restricted stock grant to R. E. Goodson, Chairman & CEO**** @ 10.6 Incentive Stock Option Agreement to R. E. Goodson, Chairman & CEO **** @ 10.7 Employment Agreement with R. E. Goodson, Chairman & CEO as of April 16, 1992 ## @ 10.8 1994 Long-Term Incentive Compensation Plan dated March 29, 1994 ### @ 10.9 Form of Key Employees Employment and Severance Agreement with Messrs. R.G. Bohn, T.M. Dempsey, P.C. Hollowell, C.L. Szews, and M.J. Zolnowski ### @ 10.10 Employment Agreement with P.C. Hollowell, Executive Vice President @ 10.11 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as amended, Nonqualified Stock Option Agreement.##### @ 10.12 Form of Oshkosh Truck Corporation 1990 Incentive Stock Plan, as amended, Nonqualified Director Stock Option Agreement. ##### @ 10.13 Lease extension with Cadence Company (as referenced under 10.1) 10.14 Form of 1994 Long-Term Incentive Compensation Plan Award Agreement @ 10.15 Stock Purchase Agreement, dated April 26, 1996, among Oshkosh Truck Corporation, J. Peter Mosling, Jr. and Stephen P. Mosling, and consented to by R. Eugene Goodson. #### 10.16 Agreement to Terminate Strategic Alliance dated as of April 10, 1997, between Freightliner and Oshkosh. 11. Computation of per share earnings (contained in Note 1 of "Notes to Consolidated Financial Statements" of the company's Annual Report to Shareholders for the fiscal year ended September 30, 1997) 13. 1997 Annual Report to Shareholders, to the extent incorporated herein by reference 21. Subsidiaries of Registrant 23. Consent of Ernst & Young LLP 27. Financial Data Schedule *Previously filed and incorporated by reference to the company's Form S-1 registration statement filed August 22, 1985, and amended September 27, 1985, and October 2, 1985 (Reg. No. 2-99817). **Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1987. ****Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1990. *****Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1991. ## Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1992. ### Previously filed and incorporated by reference to the company's Form 10-K for the year ended September 30, 1994. #### Previously filed and incorporated by reference to the company's form 10-K for the year ended September 30, 1996. @Denotes a management contract or compensatory plan or arrangement. ##### Previously filed and incorporated by reference to the company's Form S-8 filing dated September 22, 1995. (Reg. No. 33-62687) ###### Previously filed and incorporated by reference to Exhibit A to the company's Proxy Statement for Annual Meeting of Shareholders held on February 3, 1997 filed on Schedule 14A. ####### Previously filed and incorporated by reference to the company's Form 10-Q for the quarter ended April 1, 1995. EX-2.1 2 STOCK PURCHASE AGREEMENT By and among McNEILUS COMPANIES, INC., THE SHAREHOLDERS OF McNEILUS COMPANIES, INC., And OSHKOSH TRUCK CORPORATION Dated December 8, 1997 STOCK PURCHASE AGREEMENT TABLE OF CONTENTS 1. PURCHASE AND SALE OF SHARES . . . . . . . . . . . . . . . 1 2. PURCHASE PRICE - PAYMENT . . . . . . . . . . . . . . . . . 1 2.1. Purchase Price . . . . . . . . . . . . . . . . . . 1 2.2. Payment of Purchase Price . . . . . . . . . . . . 1 3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . 2 3.1. Corporate. . . . . . . . . . . . . . . . . . . . . 2 3.2. Shareholders. . . . . . . . . . . . . . . . . . . 3 3.3. No Violation . . . . . . . . . . . . . . . . . . . 4 3.4. Financial Statements . . . . . . . . . . . . . . . 4 3.5. Tax Matters. . . . . . . . . . . . . . . . . . . . 5 3.6. Receivables. . . . . . . . . . . . . . . . . . . . 6 3.7. Inventory . . . . . . . . . . . . . . . . . . . . 7 3.8. Absence of Certain Changes . . . . . . . . . . . . 8 3.9. Absence of Undisclosed Liabilities . . . . . . . . 9 3.10. No Litigation . . . . . . . . . . . . . . . . . . 9 3.11. Compliance With Laws and Orders. . . . . . . . . 10 3.12. Title to and Condition of Properties. . . . . . 10 3.13. Insurance . . . . . . . . . . . . . . . . . . . 12 3.14. Contracts and Commitments . . . . . . . . . . . 12 3.15. Labor Matters . . . . . . . . . . . . . . . . . 14 3.16. Employee Benefit Plans. . . . . . . . . . . . . 14 3.17. Environmental Matters. . . . . . . . . . . . . . 16 3.18. Trade Rights . . . . . . . . . . . . . . . . . . 17 3.19. Major Customers and Suppliers. . . . . . . . . . 18 3.20. Product Warranty and Product Liability . . . . . 18 3.21. Employment Compensation . . . . . . . . . . . . 19 3.22. Affiliates' Relationships to Company. . . . . . 19 3.23. Assets Necessary to Business . . . . . . . . . . 19 3.24. No Brokers or Finders . . . . . . . . . . . . . 19 3.25. Effect of Disclosure . . . . . . . . . . . . . . 19 4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . 20 4.1. Corporate. . . . . . . . . . . . . . . . . . . . 20 4.2. Authority . . . . . . . . . . . . . . . . . . . 20 4.3. No Brokers or Finders . . . . . . . . . . . . . 20 4.4. Investment Intent . . . . . . . . . . . . . . . 20 4.5. No Litigation . . . . . . . . . . . . . . . . . 21 4.6. Financial Information . . . . . . . . . . . . . 21 4.7. No Violations . . . . . . . . . . . . . . . . . 21 5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 21 5.1. Certain Matters. . . . . . . . . . . . . . . . . 21 5.2. Title Insurance . . . . . . . . . . . . . . . . 21 5.3. Surveys . . . . . . . . . . . . . . . . . . . . 22 5.4. Escrow Agreement . . . . . . . . . . . . . . . . 22 5.5. Employment Agreements. . . . . . . . . . . . . . 22 5.6. Noncompetition Agreements . . . . . . . . . . . 22 5.7. General Releases . . . . . . . . . . . . . . . . 22 5.8. Incentive Compensation Plan . . . . . . . . . . 23 5.9. HSR Act Filings . . . . . . . . . . . . . . . . 23 5.10. Assistance With Financing. . . . . . . . . . . . 23 5.11. Access to Information and Records . . . . . . . 24 5.12. Conduct of Business Pending the Closing . . . . 24 5.13. Consents . . . . . . . . . . . . . . . . . . . . 26 5.14. Opinion of Counsel . . . . . . . . . . . . . . . 26 5.15. Disclosure Schedule Updates . . . . . . . . . . 26 5.16. Environmental Matters . . . . . . . . . . . . . 26 6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS . . . . . . 27 6.1. Representations and Warranties True as of the Closing Date . . . . . . . . . . . . . . . . 27 6.2. Compliance With Agreement . . . . . . . . . . . 27 6.3. Absence of Litigation . . . . . . . . . . . . . 27 6.4. Consents and Approvals . . . . . . . . . . . . . 28 6.5. Hart-Scott-Rodino Waiting Period . . . . . . . . 28 6.6. Shareholders' Equity . . . . . . . . . . . . . . 28 7. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS . . . 28 7.1. Compliance With Agreement . . . . . . . . . . . 28 7.2. Absence of Litigation . . . . . . . . . . . . . 28 7.3. Hart-Scott-Rodino Waiting Period . . . . . . . . 29 8. INDEMNIFICATION AND RELATED MATTERS. . . . . . . . . . . 29 8.1. Indemnification By Indemnifying Shareholders . . 29 8.2. Indemnification By Buyer . . . . . . . . . . . . 29 8.3. Indemnification By Company . . . . . . . . . . . 30 8.4. Limitation on Indemnification Liabilities . . . 30 8.5. Survival Of Representations, Warranties And Covenants . . . . . . . . . . . . . . . . . 30 8.6. Notice of Indemnification . . . . . . . . . . . 31 8.7. Indemnification Procedure for Third-Party Claims 31 8.8. Exclusive Remedy . . . . . . . . . . . . . . . . 32 8.9. Computation of Claims for Damages Subject to Indemnification . . . . . . . . . . . . . . . 32 8.10. Minibasket . . . . . . . . . . . . . . . . . . . 32 8.11. Commencement of Arbitration . . . . . . . . . . 32 8.12. Waiver . . . . . . . . . . . . . . . . . . . . . 33 8.13. Payment . . . . . . . . . . . . . . . . . . . . 33 9. CLOSING . . . . . . . . . . . . . . . . . . . . . . . 33 10. TERMINATION . . . . . . . . . . . . . . . . . . . . . . 33 10.1. Right of Termination Without Breach . . . . . . 33 10.2. Termination for Breach. . . . . . . . . . . . . 33 10.3. Termination Fees. . . . . . . . . . . . . . . . 34 10.4. Confidentiality Upon Termination. . . . . . . . 34 11. RESOLUTION OF DISPUTES . . . . . . . . . . . . . . . . . 36 11.1. Arbitration . . . . . . . . . . . . . . . . . . 36 11.2. Arbitrators . . . . . . . . . . . . . . . . . . 36 11.3. No Appeal . . . . . . . . . . . . . . . . . . . 36 11.4. Authority . . . . . . . . . . . . . . . . . . . 36 11.5. Entry of Judgment . . . . . . . . . . . . . . . 36 11.6. Confidentiality . . . . . . . . . . . . . . . . 36 11.7. Continued Performance . . . . . . . . . . . . . 37 11.8. Discovery . . . . . . . . . . . . . . . . . . . 37 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 37 12.1. Knowledge . . . . . . . . . . . . . . . . . . . 37 12.2. Further Assurance . . . . . . . . . . . . . . . 37 12.3. Disclosures and Announcements . . . . . . . . . 37 12.4. Assignment; Parties in Interest. . . . . . . . . 37 12.5. Law Governing Agreement . . . . . . . . . . . . 38 12.6. Amendment and Modification . . . . . . . . . . . 38 12.7. Notice . . . . . . . . . . . . . . . . . . . . . 38 12.8. Expenses . . . . . . . . . . . . . . . . . . . . 40 12.9. Costs of Litigation or Arbitration . . . . . . . 41 12.10. Transfer Taxes . . . . . . . . . . . . . . . . . 41 12.11. Entire Agreement . . . . . . . . . . . . . . . . 41 12.12. Counterparts . . . . . . . . . . . . . . . . . . 41 12.13. Headings . . . . . . . . . . . . . . . . . . . . 41 12.14. No Negotiations by Buyer. . . . . . . . . . . . 41 [The following schedules and exhibits to this agreement are not filed herewith. The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request.] Schedules Schedule 3.1.(c) - Foreign Corporation Qualification Schedule 3.1.(d) - Subsidiaries Schedule 3.1.(e) - Directors and Officers Schedule 3.1.(f) - Shareholder List Schedule 3.3 - Violation, Conflict, Default Schedule 3.4 - Financial Statements Schedule 3.5.(b) - Tax Matters Schedule 3.6.(a) - Accounts Receivable (Aged Schedule) Schedule 3.6.(b) - Leases Schedule 3.7 - Inventory Off Premises Schedule 3.8 - Certain Changes Schedule 3.9 - Off-Balance Sheet Liabilities Schedule 3.10 - Litigation Matters Schedule 3.11.(a) - Non-Compliance with Laws Schedule 3.11.(b) - Licenses and Permits Schedule 3.12.(a) - Liens Schedule 3.12.(c) - Owned and Leased Real Property Schedule 3.12.(e) - Year 2000 Compliance Schedule 3.13 - Insurance Schedule 3.14.(b) - Personal Property Leases Schedule 3.14.(c) - Purchase Commitments Schedule 3.14.(d) - Sales Contracts Schedule 3.14.(h) - Loan Agreements, etc. Schedule 3.14.(i) - Guarantees Schedule 3.14.(l) - Material Contracts Schedule 3.15 - Labor Matters Schedule 3.16 - Employee Matters Schedule 3.17 - Environmental Matters Schedule 3.18 - Trade Rights Schedule 3.19.(a) - Major Customers Schedule 3.19.(b) - Major Suppliers Schedule 3.19.(c) - Dealers and Distributors Schedule 3.20 - Product Warranty, Warranty Expense and Liability Claims Schedule 3.21 - Compensation Schedule 3.22.(a) - Contracts with Affiliates Schedule 3.22.(b) - Obligations of and to Affiliates Schedule 4.7 - Violation, Conflict, Default Schedule 5.1. - Disposition of Certain Assets and Matters Schedule 5.5.(b) - Employees Subject to Form Employment Agreements Schedule 5.8 - Key Executives Schedule 5.12.(e) - Approved Corporate Changes Schedule 6.4 - Material Consents, Approvals or Waivers Schedule 8.1 - Indemnification Obligations Exhibits A - Form of Escrow Agreement B - Form of Employment Agreements C - Form of Noncompetition Agreement D - Form of Shareholders' Counsel Opinion STOCK PURCHASE AGREEMENT THIS AGREEMENT is made and entered into as of December 8, 1997, by and among McNeilus Companies, Inc., a Minnesota corporation (the "Company"), all of the Shareholders of the Company listed on the signature page (individually a "Shareholder"; collectively, the "Shareholders") and Oshkosh Truck Corporation, a Wisconsin corporation (the "Buyer"). RECITALS A. Company is engaged in, among other things, the design, manufacture, distribution and sale of refuse packer systems, rear- discharge concrete mixer systems and ready-mix concrete batch plants, including the arrangement of financing for such sales (the "Business"). Shareholders own all of the issued and outstanding shares (the "Shares") of capital stock of Company. B. Buyer desires to purchase the Shares from Shareholders and Shareholders desire to sell the Shares to Buyer, upon the terms and conditions herein set forth. NOW THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows. 1. PURCHASE AND SALE OF SHARES Subject to the terms and conditions of this Agreement, on the Closing Date (as hereinafter defined) Shareholders shall sell to Buyer and Buyer shall purchase from Shareholders all the Shares. 2. PURCHASE PRICE - PAYMENT 2.1. Purchase Price. The purchase price (the "Purchase Price") payable for the Shares shall be Two Hundred Twelve Million Dollars ($212,000,000). 2.2. Payment of Purchase Price. The Purchase Price shall be paid by Buyer as follows: 2.2.(a) Cash to Escrow Agent. At the Closing, Buyer shall deliver to the Escrow Agent, under the Escrow Agreement (as defined in Section 5.5), the sum of Seven Million Dollars ($7,000,000). 2.2.(b) Cash to Shareholders. At the Closing, Buyer shall deliver to the Shareholders the sum of Two Hundred Twelve Million Dollars ($212,000,000), less the amount paid to the Escrow Agent pursuant to Subsection 2.2.(a) above. 2.2.(c) Method of Payment. All payments under this Section 2.2 shall be made by wire transfer of immediately available funds to an account designated by the Shareholders, which account shall be designated not less than 48 hours prior to the time for payment specified herein. 3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS Company and Shareholders make the following representations and warranties to Buyer, each of which is true and correct on the date hereof, shall remain true and correct to and including the Closing Date, and shall survive the Closing of the transactions provided for herein. Regardless of the foregoing the Church (defined hereinafter) only makes the representations and warranties set forth in Section 3.2. 3.1. Corporate. 3.1.(a) Organization. Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota. 3.1.(b) Corporate Power. Company has all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as and where such is now being conducted. 3.1.(c) Qualification. Except as set forth on Schedule 3.1.(c), Company is duly licensed or qualified to do business as a foreign corporation, and is in good standing, in each jurisdiction wherein the character of the properties owned or leased by it, or the nature of its business, makes such licensing or qualification necessary. The states in which Company is licensed or qualified to do business and states in which it is not qualified or licensed but is doing business are listed in Schedule 3.1.(c). 3.1.(d) Subsidiaries. Schedule 3.1.(d) sets forth the name, jurisdiction of incorporation, capitalization, ownership and officers and directors of each corporation in which the Company has a direct or indirect equity interest ("Subsidiary") and the jurisdictions in which each Subsidiary is qualified or licensed to do business as a foreign corporation. Except as listed in Schedule 3.1.(d), the Company does not own, directly or indirectly, any capital stock or other equity securities of any corporation or have any direct or indirect equity or other ownership interest in any entity or business. All of the outstanding shares of capital stock of each Subsidiary owned by the Company are free and clear of any security interest, restriction, option, voting trust or agreement, proxy, encumbrance, claim or charge of any kind whatsoever, and are validly issued, fully paid and nonassessable. Each Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, has full corporate power and authority to carry on its business as it is now being conducted and to own and lease the properties and assets it now owns and leases, and, except as set forth on Schedule 3.1.(d), is in good standing and is duly qualified or licensed to do business as a foreign corporation in each of the jurisdictions listed opposite the name of such Subsidiary in Schedule 3.1.(d). The states in which each subsidiary is licensed and/or qualified to do business and states in which each is not qualified and/or licensed but is doing business, are listed on Schedule 3.1.(d). 3.1(e) The term "Company" as used hereinafter means the Company and each Subsidiary, except where the specific provisions provide otherwise. 3.1(f) Corporate Documents, etc. The copies of the Articles of Incorporation and By-Laws of the Company, including any amendments thereto, which have been delivered by Shareholders to Buyer are true, correct and complete copies of such instruments as presently in effect. The corporate minute book and stock records of the Company which have been furnished to Buyer for inspection are true, correct and complete. The directors and officers of the Company are listed in Schedule 3.1.(e). 3.1(g) Capitalization of the Company. The authorized capital stock of the Company (not including Subsidiaries) consists entirely of 10,000,000 shares of common stock, no par value, of which 100,000 shares are designated as Class A voting common stock and 9,900,000 shares are designated as Class B nonvoting common stock. No shares of such capital stock are issued or outstanding except for 76,061 shares of Class A voting common stock and 7,380,264 shares of Class B nonvoting common stock of the Company (not including Subsidiaries) which are owned of record and beneficially by Shareholders in the respective numbers set forth in Schedule 3.1.(f). All such shares of capital stock of the Company are validly issued, fully paid and nonassessable. There are no (a) securities convertible into or exchangeable for any of the Company's capital stock or other securities, (b) options, warrants or other rights to purchase or subscribe to capital stock or other securities of the Company or securities which are convertible into or exchangeable for capital stock or other securities of the Company, or (c) contracts, commitments, agreements, understandings or arrangements of any kind relating to the issuance, sale or transfer of any capital stock or other equity securities of the Company, any such convertible or exchangeable securities or any such options, warrants or other rights. 3.2. Shareholders. 3.2.(a) Power. Each Shareholder has full power, legal right and authority to enter into, execute and deliver this Agreement and the other agreements, instruments and documents to be executed and delivered pursuant to this Agreement (such other documents sometimes referred to herein as "Ancillary Instruments") and to carry out the transactions contemplated hereby. 3.2.(b) Authorization. The execution and delivery of this Agreement and the Ancillary Instruments, and full performance thereunder, have been duly authorized by the respective boards of directors and the shareholders of each Shareholder which is a corporation, and no other or further corporate act on the part of any such Shareholder is necessary therefor. 3.2.(c) Validity. This Agreement has been duly and validly executed and delivered by each Shareholder and when executed by each other party thereto is, and when executed and delivered the other documents and instruments to be executed and delivered by Company and Shareholders pursuant hereto, will constitute valid and binding agreements of Company and Shareholders, enforceable in accordance with their respective terms, except as such may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors' rights generally, and by general equitable principles. 3.2.(d) Title. At Closing Buyer will receive, good and marketable title to the Shares to be sold by such Shareholder hereunder, free and clear of all Liens (as defined in Section 3.12) including, without limitation, voting trusts or agreements, proxies, marital or community property interests. 3.3. No Violation. Except as set forth on Schedule 3.3, neither the execution and delivery of this Agreement or the Ancillary Instruments nor the consummation by Company and Shareholders of the transactions contemplated hereby and thereby (a) will violate any statute, law, ordinance, rule or regulation (collectively, "Laws") or any order, writ, injunction, judgment, plan or decree (collectively, "Orders") of any court, arbitrator, department, commission, board, bureau, agency, authority, instrumentality or other body, whether federal, state, municipal, foreign or other (collectively, "Government Entities"), (b) except for applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), will require any authorization, consent, approval, exemption or other action by or notice to any Government Entity (including, without limitation, under any "plant- closing" or similar law), or (c) subject to obtaining the consents referred to in Schedule 3.3, will violate or conflict with, or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or will result in the termination of, or accelerate the performance required by, or result in the creation of any Lien upon any of the assets of Company (or the Shares) under, any term or provision of the Articles of Incorporation or By-Laws of Company or of any contract, commitment, understanding, arrangement, agreement or restriction of any kind or character to which Company or any Shareholder is a party or by which Company or any Shareholder or any of its or their assets or properties may be bound or affected. 3.4. Financial Statements. Included as Schedule 3.4 are complete and correct copies of the audited consolidated financial statements of the Company consisting of (i) consolidated balance sheets as of February 28, 1993, 1994, 1995, 1996 and 1997, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years then ended (including the accompanying notes), which financial statements are accompanied by unqualified opinions of Larson Allen Weishair & Co., LLP, independent auditors for the Company for such years, and (ii) a consolidated unaudited balance sheet of the Company as of August 31, 1997 (the "Recent Balance Sheet"), and the related unaudited consolidated statement of income for the six (6) months then ended and for the corresponding period of the prior year, and (iii) unaudited consolidated statements of income and balance sheets for the eight (8) months ended October 31, 1997. With the exception of those financial statements referred to in Section 3.4.(ii), all of such consolidated financial statements, along with the unaudited interim consolidated financial statements or other financial data provided or to be provided pursuant to Section 5.10, have been or shall have been prepared in accordance with generally accepted accounting principles ("GAAP") (except, in the case of unaudited interim financial statements, for the absence of footnote disclosure and statements of cash flows) applied on a consistent basis and Regulation S-X for financial statements required under Section 5.10, have been or shall have been prepared from and agree with the books and records of Company, and fairly present or shall fairly present, in accordance with GAAP, the financial position, results of operations and cash flows of the Company as of the dates and for the years and interim periods indicated. Schedule 3.4 sets forth the comparative backlog of Company sales by product line as of November 17, 1997 and November 30, 1996. 3.5. Tax Matters. 3.5.(a) The term "Tax" shall mean any federal, state, local or foreign income, alternative, minimum, accumulated earnings, personal holding company, franchise, capital stock, profits, windfall profits, gross receipts, sales, use, value added, transfer, registration, stamp, premium, excise, customs duties, severance, environmental (including taxes under section 59A of the Internal Revenue Code of 1986, as amended ("Code")), real property, personal property, ad valorem, occupancy, license, occupation, employment, payroll, social security, disability, unemployment, workers' compensation, withholding, estimated or other similar tax, duty, fee, assessment or other governmental charge or deficiencies thereof (including all interest and penalties thereon and additions thereto). The term "Tax Return" shall mean any tax return, report, information, return, schedule or other document (including any related or supporting information) filed or required to be filed with respect to Taxes. 3.5.(b) Except as set forth on Schedule 3.5.(b): (i) (A) all Tax Returns relating to the Company and the business or assets thereof that were required to be filed on or before the Closing Date have been filed, (B) the Company has paid or made adequate provision for all Taxes that are due or claimed to be due by any taxing authority and (C) the Company is not currently the beneficiary of any extension of time within which to file any Tax Return; (ii) to the knowledge of the Company, there has been no claim or issue (other than a claim or issue that has been finally settled) concerning any liability for Taxes of the Company asserted, raised or threatened by any taxing authority and no written notice of such claim or issue has been received; (iii) the Company has not (A) waived any statute of limitations or (B) agreed to any extension of the period for assessment or collection; (iv) there are no liens for Taxes upon any assets of the Company except for statutory liens for current Taxes not yet due; (v) except as set forth on Schedule 3.5.(b), no power of attorney has been executed by the Company with respect to any matter relating to Taxes that is currently in force; (vi) the Company is not a party to any agreement, contract, or other arrangement that would result, separately or in the aggregate, in the requirement to pay any "excess parachute payment" within the meaning of Section 280G of the Code; and (vii) all Taxes that the Company is required by law to withhold or to collect for payment have been duly withheld and collected, and have been paid or accrued, reserved against and entered on the books of the Company. 3.6 Receivables. 3.6.(a) Accounts. Except as set forth on Schedule 3.6.(a), all accounts receivable of Company reflected on the Recent Balance Sheet, and as incurred in the normal course of business since the date thereof, represent arm's length sales actually made in the ordinary course of business; are collectible (net of the reserve shown on the Recent Balance Sheet for doubtful accounts) in the ordinary course of business are subject to no valid counterclaim or setoff; and to the knowledge of the Company are not in dispute. Schedule 3.6.(a) contains an aged schedule of accounts receivable included in the Recent Balance Sheet. All accounts receivable of Company incurred prior to the Closing Date will represent arm's length sales actually made in the ordinary course of business and will be collected (net of the reserve shown on the balance sheet as of the Closing Date for doubtful accounts) in the ordinary course of business and will be subject to no valid counterclaim or set-off. 3.6.(b) Leases. Set forth in Schedule 3.6.(b)(i) is a complete and accurate list of each lease entered by McNeilus Financial Services, Inc. ("MFSI") (the "Lease Agreements"), including a description of the lessee, principal amount, implicit interest rate, and payment schedule. Each Lease Agreement and any credit, financing, title and security documents, including related exhibits, associated with each Lease Agreement are collectively referred to herein as the "Lease Documents". Each Lease Document represents the valid and binding obligations of the parties thereto; was entered into by such parties in the normal course of their respective business (and are complete and accurate in all material respects); and represents an arm's length transaction between or among such parties. Each Lease Agreement is enforceable against the lessee thereunder in accordance with its terms and any amounts due thereunder are collectible (net of the reserve shown on the Recent Balance Sheet for doubtful accounts) in the ordinary course of business without the necessity of commencing legal proceedings, are not subject to counterclaim or set off and are not in dispute. No Lease Document has had its payment terms restructured, extended or modified; no amounts due thereunder are past due; and to the knowledge of the Company, lessee is not in default under any of the Lease Documents except for defaults of non-payments. Company has no knowledge that any lessee under a Lease Agreement is insolvent or otherwise unable to pay its debts as they become due. In each case, the lessee under each Lease Agreement has accepted the goods leased under such Lease Agreement. Company has performed all of its obligations and is not in default under any of the Lease Documents. Company has good and marketable title to, or a valid and perfected security interest in, the goods leased under any of the Lease Agreements and such goods are free and clear of any Liens other than the interests of the lessees under the Lease Agreements and the Liens set forth in Schedule 3.6.(b)(ii). Neither Company nor any of its agents or dealers has participated in any fraudulent act or omission in connection with entering into any Lease Document. Each Lease Document conforms with all applicable Laws and Company has full power, right and authority under and, except as otherwise disclosed in Schedule 3.1.(c) and 3.1.(d), is fully licensed under all applicable Laws to enter into and enforce each of the Lease Documents. Any and all Tax(es) which are incurred, assessed or imposed prior to Closing with respect to the Lease Documents shall have been paid to the proper taxing authority or accrued properly prior to Closing, and all such Lease Documents have been accounted for on the books and records of Company in accordance with GAAP. The execution, delivery and performance of this Agreement by Company and the consummation of the transactions contemplated thereby will not violate any of the Lease Documents and will not cause any default or event of default thereunder. Schedule 3.6.(b)(iii) sets forth any support or guaranty letters or documents in favor of MFSI issued by Company or an Affiliate. Except as set forth on Schedule 3.6.(b)(iii), Company has not guaranteed the payment or performance of any of MFSI's obligations under the Lease Documents. 3.7. Inventory. Except as set forth on Schedule 3.7 of slow moving inventory, all inventory of Company reflected on the Recent Balance Sheet consists of a quality and quantity useable and saleable in the ordinary course of business and is valued in accordance with GAAP at the lower of cost (on a LIFO basis) or market. All inventory purchased since the date of such balance sheet consists of a quality and quantity useable and saleable in the ordinary course of business. Except as set forth in Schedule 3.7, all inventory of Company is located on premises owned or leased by Company as reflected in this Agreement. 3.8. Absence of Certain Changes. Except as and to the extent set forth in Schedule 3.8, since the date of the Recent Balance Sheet there has not been: 3.8.(a) No Adverse Change. Any material adverse change in the financial condition, assets, liabilities, business, prospects or operations of Company; 3.8.(b) No Damage. Any loss, damage or destruction, whether covered by insurance or not, materially affecting Company's business or properties on Schedule 3.8.(b); 3.8.(c) No Increase in Compensation. Any increase in the compensation, salaries or wages payable or to become payable to any employee or agent of Company (including, without limitation, any increase or change pursuant to any bonus, pension, profit sharing, retirement or other plan or commitment), or any bonus or other employee benefit granted, made or accrued, except such increases made in the ordinary course of business; 3.8.(d) No Labor Disputes. Any labor dispute or disturbance, other than routine individual grievances which are not material to the business. 3.8.(e) No Commitments. Any commitment or transaction by Company (including, without limitation, any borrowing or capital expenditure) for consideration in excess of $100,000 or obligating the Company to perform over a 12 month period other than in the ordinary course of business consistent with past practice; 3.8.(f) No Dividends. Except as may be required to comply with Section 5.1., any declaration, setting aside, or payment of any dividend or any other distribution in respect of Company's capital stock; any redemption, purchase or other acquisition by Company of any capital stock of Company, or any security relating thereto; or any other payment to any shareholder of Company as such a shareholder; 3.8.(g) No Disposition of Property. Any sale, lease or other transfer or disposition of any properties or assets of Company, except as may be required to comply with Section 5.1 and except for the sale of inventory items and other assets in the ordinary course of business; 3.8.(h) No Indebtedness. Any indebtedness for borrowed money incurred, assumed or guaranteed by Company, other than in the ordinary course of business; 3.8.(i) No Liens. Any mortgage, pledge, lien or encumbrance made on any of the properties or assets of Company except for liens on inventory acquired in the ordinary course; 3.8.(j) No Amendment of Contracts. Any entering into, amendment or termination by Company of any contract, or any waiver of material rights thereunder, other than in the ordinary course of business; 3.8.(k) Loans and Advances. Any loan or advance (other than advances to employees in the ordinary course of business for travel and entertainment in accordance with past practice) to any person including, but not limited to, any Affiliate (for purposes of this Agreement, the term "Affiliate" shall mean and include all Shareholders, directors and officers of Company; the spouse of any such person; any person who would be the heir or descendant of any such person if he or she were not living; and any entity in which any of the foregoing has a direct or indirect interest, except through ownership of less than 5% of the outstanding shares of any entity whose securities are listed on a national securities exchange or traded in the national over-the-counter market); or 3.8.(l) Credit. Any grant of credit to any customer or distributor on terms or in amounts not in compliance with Company's policies or practices with respect to the granting of credit, nor any change in any practices or policies. 3.9. Absence of Undisclosed Liabilities. Except as and to the extent specifically disclosed in the Recent Balance Sheet, or in Schedule 3.9, Company does not have any liabilities, commitments or obligations (secured or unsecured, and whether accrued, absolute, contingent, direct, indirect or otherwise), other than commercial liabilities and obligations incurred since the date of the Recent Balance Sheet in the ordinary course of business and consistent with past practice and none of which has or will have a material adverse effect on the business, financial condition or results of operations of Company. Except as and to the extent described in the Recent Balance Sheet or in Schedule 3.9, the Company has no knowledge of any basis for the assertion against Company of any liability and there are no circumstances, conditions, happenings, events or arrangements, contractual or otherwise, which may give rise to liabilities, except commercial liabilities and obligations incurred in the ordinary course of Company's business and consistent with past practice. 3.10. No Litigation. Except as set forth in Schedule 3.10 there is no action, suit, arbitration, proceeding, investigation or inquiry, whether civil, criminal or administrative ("Litigation") pending or, to the knowledge of the Company, threatened against Company, its directors (in such capacity), its business or any of its assets, nor does Company know, or have grounds to know, of any basis for any Litigation. Schedule 3.10 also identifies all Litigation to which Company or any of its directors (in such capacity) have been parties since 1992, except for product liability suits which shall be set forth on Schedule 3.20. Except as set forth in Schedule 3.10, neither Company nor its business or assets is subject to any Order of any Government Entity. Company has disclosed to Buyer all matters that have been the subject of Litigation against the Company and that were settled or compromised within the last six years upon payment by the Company of a sum in excess of $25,000. 3.11. Compliance With Laws and Orders. 3.11.(a) Compliance. Except as set forth in Schedule 3.11.(a), to the best of Company's knowledge (including each and all of its operations, practices, properties and assets) it is in compliance in all material respects with all applicable Laws and Orders, including, without limitation, those applicable to discrimination in employment, occupational safety and health, trade practices, competition and pricing, product warranties, zoning, building and sanitation, employment, retirement and labor relations, product advertising and the Environmental Laws as hereinafter defined. Except as set forth in Schedule 3.11.(a), to the knowledge of the Company, Company has not received notice of any violation or alleged violation of, and is subject to no liability for past or continuing violation of, any Laws or Orders. All reports and returns required to be filed by Company with any Government Entity have been filed, and were accurate and complete when filed. Shareholders shall not be liable for any assertion by Governmental Entity that this transaction gives rise to a right to apply regulations or ordinances to the assets or business which were not previously applied because of a "grandfather" right applied to the Company. 3.11.(b) Licenses and Permits. To the knowledge of the Company and except as disclosed in Schedule 3.1.(c) and 3.1.(d), it has all licenses, permits, approvals, authorizations and consents of all Government Entities and all certification organizations required for the conduct of the Business (as presently conducted and as proposed to be conducted) and operation of its facilities. To the knowledge of the Company, all such licenses, permits, approvals, authorizations and consents are described in Schedule 3.11.(b), are in full force and effect. Except as set forth in Schedule 3.11.(b), Company (including its operations, properties and assets) is and has been in material compliance with all such permits and licenses, approvals, authorizations and consents. 3.12. Title to and Condition of Properties. 3.12.(a) Marketable Title. At Closing, Company shall have good and marketable title to all of Company's assets, business and properties, free and clear of all mortgages, liens, (statutory or otherwise) security interests, claims, pledges, licenses, equities, options, conditional sales contracts, assessments, levies, easements, covenants, reservations, restrictions, rights-of-way, exceptions, limitations, charges or encumbrances of any nature whatsoever (collectively, "Liens") except (i) those described in Schedule 3.12.(a), (ii) in the case of real property, Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings (and which have been sufficiently accrued or reserved against in the Recent Balance Sheet), (iii) municipal and zoning ordinances and easements for public utilities, and (iv) Liens or imperfections in title which individually or in the aggregate do not materially detract from the value, or impair in any significant manner the use, of the property subject thereto or the operations of the Company. None of Company's assets, business or properties are subject to any restrictions with respect to the transferability thereof; and the Company's title thereto will not be affected in any way by the transactions contemplated hereby. 3.12.(b) Condition. All property and assets owned or utilized by Company are in adequate operating condition and repair, free from any material defects (except such minor defects as do not interfere with the use thereof in the conduct of the normal operations of Company). All buildings, plants and other structures owned or otherwise utilized by Company are in good condition and repair (except such minor defects as do not interfere with the use thereof in the conduct of the normal operations of Company) and, to the knowledge of the Company, have no structural defects or defects affecting the plumbing, electrical, sewerage, or heating, ventilating or air conditioning systems which would interfere with the use thereof in the conduct of the normal operations. 3.12.(c) Real Property. Schedule 3.12.(c) sets forth all real property owned, used or occupied by Company (the "Real Property"), including a description of all land (or, if not of record, of which Company has notice or knowledge). Schedule 3.12.(c) also sets forth, with respect to each parcel of Real Property which is leased, the material terms of such lease. To the knowledge of the Company, all of the Real Property has permanent rights of access to dedicated public highways; no fact or condition exists which would prohibit or adversely affect the ordinary rights of access to and from the Real Property from and to the existing highways and roads and there is no pending or threatened restriction or denial, governmental or otherwise, upon such ingress and egress. To the knowledge of the Company, there is not (i) any claim of adverse possession or prescriptive rights involving any of the Real Property, (ii) any structure located on any Real Property which encroaches on or over the boundaries of neighboring or adjacent properties or (iii) any structure of any other party which encroaches on or over the boundaries of any of such Real Property. None of the Real Property is located in a flood plain, flood hazard area, wetland or lakeshore erosion area within the meaning of any Law, regulation or ordinance. To the knowledge of the Company, no public improvements have been commenced and none are planned which in either case may result in special assessments against or otherwise materially adversely affect any Real Property. Except as set forth on Schedule 3.12.(c), no portion of any of the Real Property has been used as a landfill or for storage or landfill of hazardous or toxic materials. 3.12.(d) No Condemnation or Expropriation. Neither the whole nor any portion of the property or any other assets of Company is subject to any Order to be sold or is being condemned, expropriated or otherwise taken by any Government Entity with or without payment of compensation therefor. 3.12.(e) Year 2000 Compliance. Except as identified on Schedule 3.12.(e), none of the personal property, equipment or assets owned or utilized by the Company, including but not limited to computer software, databases, hardware, controls and peripherals, contains any defect related to the occurrence of the year 2000 or the use of any date after December 31, 1999 in connection with such property or asset (a "Year 2000 Defect"). Except as identified on Schedule 3.12.(e), none of the property or assets owned or utilized by the Company will fail to perform in any material respect or require any repair, rewrite, conversion or other adaptation because of, or due in any way to, a Year 2000 Defect. 3.13. Insurance. Set forth in Schedule 3.13 is a complete and accurate list and description of all policies of fire, liability, product liability, workers compensation, health and other forms of insurance presently in effect with respect to the business and properties of Company, true and correct copies of which have heretofore been delivered to Buyer. No notice of cancellation or termination has been received with respect to any such policy currently in effect, and Company has no knowledge of any act or omission of Company which could result in cancellation of any such policy currently in effect prior to its scheduled expiration date. There is no claim by Company pending under any such policies as to which coverage has been questioned, denied or disputed by the underwriters of such policies, and Company knows of no basis for denial of any claim under any such policy. 3.14. Contracts and Commitments. Except as otherwise previously disclosed in the Disclosure Schedules: 3.14.(a) Real Property Leases. Except as set forth in Schedule 3.12.(c), Company has no leases of real property. 3.14.(b) Personal Property Leases. Except as set forth in Schedule 3.14.(b), Company has no leases of personal property as Lessee involving consideration or other expenditure in excess of $75,000 or involving performance over a period of more than 12 months. 3.14.(c) Purchase Commitments. Except as set forth on Schedule 3.14.(c), Company has no purchase commitments for inventory items or supplies which aggregate in excess of $1,000,000 from any one supplier, or together with amounts on hand, constitute in excess of 12 months' normal usage. 3.14.(d) Sales Commitments. Except as set forth on Schedule 3.14.(c), Company has no sales contracts or commitments to customers or distributors which aggregate in excess of $1,000,000 to any one customer or distributor (or group of affiliated customers or distributors). Company has no sales contracts or commitments except those made in the ordinary course of business, at arm's length, and no such contracts or commitments are for a sales price which would result in a loss to the Company. 3.14.(e) Contracts With Affiliates and Certain Others. Except as set forth on Schedule 3.22.(a), Company has no agreement, understanding, contract or commitment (written or oral) with any Affiliate that is not cancelable by Company on notice of not longer than 30 days without liability, penalty or premium of any nature or kind whatsoever. 3.14.(f) Powers of Attorney. The Company has not given a power of attorney, which is currently in effect, to any person, firm or corporation for any purpose whatsoever, except such powers granted to lessees of the Leases for purposes of registering vehicle title and for tax matters disclosed on Schedule 3.5.(b). 3.14.(g)Collective Bargaining Agreements. Company is not a party to any collective bargaining agreements with any unions, guilds, shop committees or other collective bargaining groups. 3.14.(h) Loan Agreements. Except as set forth in Schedule 3.14.(h), Company is not obligated under any loan agreement, promissory note, letter of credit, or other evidence of indebtedness as a signatory, guarantor or otherwise for an amount in excess of $75,000. 3.14.(i) Guarantees. Except for the guarantees and other support documents set forth in Schedule 3.14.(i), which amount of guarantees and support documents shall not exceed Seventy Million Dollars ($70,000,000), Company has not guaranteed the payment or performance of any person, firm or corporation, agreed to indemnify any person or act as a surety, or otherwise agreed to be contingently or secondarily liable for the obligations of any person. 3.14.(j) Contracts Subject to Renegotiation. Company is not a party to any contract with any governmental body which is subject to renegotiation. 3.14.(k) Restrictive Agreements. Company is not a party to nor is it bound by any agreement requiring Company to assign any interest in any trade secret or proprietary information, or prohibiting or restricting Company from competing in any business or geographical area or soliciting customers or otherwise restricting it from carrying on its business anywhere in the world. 3.14.(l) Other Material Contracts. Company has no lease, contract or commitment of any nature involving consideration or other expenditure in excess of $100,000, or involving performance over a period of more than 12 months, or which is otherwise individually material to the operations of Company, except as explicitly described in Schedule 3.14.(l) or in any other Schedule. 3.14.(m) No Default. Company is not in default under any lease, contract or commitment, nor has any event or omission occurred which through the passage of time or the giving of notice, or both, would constitute a default thereunder or cause the acceleration of any of Company's obligations or result in the creation of any Lien on any of the assets owned, used or occupied by Company. To the knowledge of the Company, no third party is in default under any lease, contract or commitment to which Company is a party, nor has any event or omission occurred which, through the passage of time or the giving of notice, or both, would constitute a default thereunder or give rise to an automatic termination, or the right of discretionary termination, thereof. 3.15. Labor Matters. Except as set forth in Schedule 3.15, within the last two (2) years Company has not experienced any labor disputes, union organization attempts or any work stoppage due to labor disagreements in connection with its business. Except to the extent set forth in Schedule 3.15, (a) Company is in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and is not engaged in any unfair labor practice; (b) Company has not received written notice, nor does the Company have knowledge of an unfair labor practice charge or complaint against Company pending or threatened; (c) Company has not received written notice, nor does the Company have knowledge of a labor strike, dispute, request for representation, slowdown or stoppage actually pending or threatened against or affecting Company nor any secondary boycott with respect to products of Company; (d) no question concerning representation has been raised or, to the Company's knowledge, is threatened respecting the employees of Company; (e) no grievance which might have a material adverse effect on Company, nor any arbitration proceeding arising out of or under collective bargaining agreements, is pending and no such claim therefor exists; and (f) Company has not received written notice, nor does the Company have knowledge of any administrative charges or court complaints against Company concerning alleged employment discrimination or other employment related matters pending or threatened before the U.S. Equal Employment Opportunity Commission or any Government Entity. 3.16. Employee Benefit Plans. 3.16.(a) Schedule 3.16.(a) contains a complete list of each pension, retirement, profit-sharing, deferred compensation, bonus or other incentive, medical, health, life insurance, disability or other welfare or severance plan, agreement or arrangement sponsored or contributed to by the Company or by any trade or business, whether or not incorporated (an "ERISA Affiliate"), that together with the Company would be deemed a "single employer within the meaning of section 4001 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), for the benefit of any employee or terminated employee of the Company or any ERISA Affiliate (individually a "Plan" and collectively, the "Plans"). All Plans comply with the applicable requirements of law, including but not limited to ERISA and the Code, except for failures to comply that, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. No Plan which is subject to Part 3 of Subtitle B of Title I of ERISA has incurred any "accumulated funding deficiency," whether or not waived, within the meaning of section 302 of ERISA or section 412 of the Code and all contributions required to be made with respect thereto on or prior to the Closing Date have been timely made. Neither the Company nor any ERISA Affiliate has incurred any material liability pursuant to Title IV of ERISA with respect to any Plan and no condition exists that presents a material risk to the Company or any ERISA Affiliate of incurring liability under such Title. Neither the Company nor any ERISA Affiliate, nor any Plan, trust created thereunder or trustee or administrator thereof has engaged in a transaction in connection with which the Company or any ERISA Affiliate, any Plan, any such trust, or any trustee or administrator thereof, or any party dealing with any Plan or any such trust could be subject to either a material civil penalty assessed pursuant to section 409 or 502(i) or ERISA or a material tax imposed pursuant to section 4975 or 4976 of the Code. 3.16.9(b) Except as provided on Schedule 3.16.(b), no plan is a "multiemployer pension plan," as defined in section 3(37) of ERISA, nor is any Plan a plan described in section 4063(a) of ERISA. With respect to any ERISA Plan that is a "multiemployer pension plan," as such term is defined in section 3(37) of ERISA, covering employees of the Company or any ERISA Affiliate, (i) neither the Company nor any ERISA Affiliate has, since September 26, 1980, made or suffered a "complete withdrawal" or a "partial withdrawal," as such terms are respectively defined in sections 4203 and 4205 of ERISA, (ii) no event has occurred that presents a material risk of a partial withdrawal, (iii) neither the Company nor any ERISA Affiliate has any contingent liability under section 4204 of ERISA, and (iv) the aggregate withdrawal liability of the Company and the ERISA Affiliates, computed as if a complete withdrawal by the Company and the ERISA Affiliates had occurred under each such Plan on the date hereof, would not exceed $25,000. Each Plan intended to be "qualified" within the meaning of section 401(a) of the Code is so qualified and the trusts maintained thereunder are exempt from taxation under section 501(a) of the Code. No amounts payable under the Plans or under any employment, severance or other agreements or arrangements maintained by the Company will fail to be deductible for federal income tax purposes by virtue of section 280G of the Code. 3.16.(c) Except as provided on Schedule 3.16.(c), no plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees of the Company or any ERISA Affiliate beyond their retirement or other termination of service (other than (i) coverage mandated by applicable law or (ii) death benefits or retirement benefits under any "employee pension plan," as that term is defined in section 3(2) of ERISA). To the Knowledge of the Company, there are no pending, threatened or anticipated claims by or on behalf of any Plan, by any employee or beneficiary covered under any such Plan, or otherwise involving any such Plan (other than routine claims for benefits). 3.17. Environmental Matters. 3.17.(a) Definitions. For purposes of this Paragraph 3.17 the following terms shall have the following meanings: "Environmental Claim" shall mean any investigation, notice, violation, demand, suit, injunction, order, consent decree, penalty, fine, lien, proceeding, or claim (whether administrative, judicial, or private in nature) arising (a) pursuant to, or in connection with, a violation by the Company of any Environmental Law, (b) in connection with any Hazardous Material, (c) from any abatement, removal, remedial, corrective, or other response action by the Companies or any of their Subsidiaries in connection with a Hazardous Material, Environmental Law or order of a Governmental Authority or (d) from any damage, injury, threat, or harm to the environment by the Companies or any of their Subsidiaries. "Environmental Law" shall mean any past or current Legal Requirement pertaining to the protection of the environment, including without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USC 9601 et seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 USC 6901 et seq. ("RCRA"), and any implementing law, and any amendment, rule, or regulation issued thereunder. "Hazardous Material" shall mean any material which is hazardous or toxic to the environment and/or which is subject to regulation, control or remediation under Environmental Law, including, without limitation, asbestos, polychlorinated biphenyl ("PCBs") and petroleum (including crude oil and any fraction thereof). "Legal Requirement" shall mean any treaty, convention, statute, law, regulation, ordinance, Governmental Approval, injunction, judgment, order, consent decree, or other requirement of any Governmental Authority relating to health, safety, natural resources and the environment. "Release" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injection, escaping, leaching, dumping, or disposing into the indoor or outdoor environment including, without limitation, the abandonment or discarding of barrels, drums, containers, tanks, and other receptacles containing or previously containing any Hazardous Material. 3.17.(b) Warranties and Representations. Except as described in Schedule 3.17, to the knowledge of the Company: (i) The Company and each of the Facilities of the Company (the "Facilities") comply in all material respects with any and all applicable Environmental Laws. (ii) The Company has obtained all necessary Governmental Approvals necessary for the operations of their businesses and properties. (iii) The Company (a) has not caused any Release or disposal of any Hazardous Material at the Real Property or (b) caused any Release of any Hazardous Material at any third party property. (iv) The Company has not received any written notification of, nor does it have knowledge of, any actual or potential responsibility for any Release at any third party property. (v) The Real Property does not contain any: (a) underground storage tank, (b) asbestos containing building material, PCBS, radon, or urea formaldehyde foam, (c) landfill or dump, or (d) hazardous waste management facility as defined pursuant to RCRA or any comparable state law. (vi) There is no Environmental Claim involving the Real Property or other property formerly owned, leased or operated by the Company or to the knowledge of the Company threatened against the Company. (vii) There are no conditions on, under or in any way affecting the Real Property which would impose liability to the Company under any Environmental Law. 3.18. Trade Rights. Schedule 3.18 lists all Trade Rights (as defined below) in which Company now has any interest, specifying whether such Trade Rights are owned, controlled, used or held (under license or otherwise) by Company, and also indicating which of such Trade Rights are registered. All Trade Rights shown as registered in Schedule 3.18 have been properly registered, all pending registrations and applications have been properly made and filed and all annuity, maintenance, renewal and other fees relating to registrations or applications are current. In order to conduct the business of Company, as such is currently being conducted or proposed to be conducted, Company does not require any Trade Rights that it does not already have. Except as set forth on Schedule 3.18, Company has received no written notice, nor does it have knowledge, that it is infringing and has infringed any Trade Rights of another in the operation of the business of Company, nor, to the Company's knowledge, is any other person infringing the Trade Rights of Company. Company has not granted any license or made any assignment of any Trade Right listed on Schedule 3.18, nor does Company pay any royalties or other consideration for the right to use any Trade Rights of others. There is no Litigation pending or, to the knowledge of the Company, threatened to challenge Company's right, title and interest with respect to its continued use and right to preclude others from using any Trade Rights of Company. All Trade Rights of Company are valid, enforceable and in good standing, and there are no equitable defenses to enforcement based on any act or omission of Company. As used herein, the term "Trade Rights" shall mean and include: (i) all trademark rights, business identifiers, trade dress, service marks, trade names and brand names, all registrations thereof and applications therefor and all goodwill associated with the foregoing; (ii) all copyrights, copyright registrations and copyright applications, and all other rights associated with the foregoing and the underlying works of authorship; (iii) all patents and patent applications, and all international proprietary rights associated therewith; (iv) all contracts or agreements granting any right, title, license or privilege under the intellectual property rights of any third party; (v) all inventions, mask works and mask work registrations, know-how, discoveries, improvements, designs, trade secrets, shop and royalty rights, employee covenants and agreements respecting intellectual property and non-competition and all other types of intellectual property; and (vi) all claims for infringement or breach of any of the foregoing. 3.19. Major Customers and Suppliers. 3.19.(a) Major Customers. Schedule 3.19.(a) contains a list of the 20 largest customers, including distributors, of Company for each of the two (2) most recent fiscal years (determined on the basis of the total dollar amount of net sales) showing the total dollar amount of net sales to each such customer during each such year. Company has no knowledge or information of any facts indicating, nor any other reason to believe, that any of the customers listed on Schedule 3.19.(a) will not continue to be customers of the business of Company after the Closing. 3.19.(b) Major Suppliers. Schedule 3.19.(b) contains a list of the 20 largest suppliers to Company for each of the two (2) most recent fiscal years (determined on the basis of the total dollar amount of purchases) showing the total dollar amount of purchases from each such supplier during each such year. Company has no knowledge or information of any facts indicating, nor any other reason to believe, that any of the suppliers listed on Schedule 3.19.(b) will not continue to be suppliers to the business of Company after the Closing. 3.19.(c) Dealers and Distributors. Schedule 3.19.(c) contains a list of all sales representatives, dealers and/or distributors of Company, together with representative copies of all sales representative, dealer and/or distributor contracts and policy statements, and a description of all substantial modifications or exceptions. 3.20. Product Warranty and Product Liability. Schedule 3.20 contains a true, correct and complete copy of Company's standard warranty or warranties for sales of Products (as defined below) and, except as stated therein, there are no warranties, commitments or obligations with respect to the return, repair or replacement of Products. Schedule 3.20 contains a description of all product liability claims and similar Litigation relating to products manufactured or sold, or services rendered, which are presently pending or which to Company's knowledge are threatened, or which have been asserted or commenced against Company within the last three (3) years, in which a party thereto either requests injunctive relief or alleges damages in excess of $25,000 (whether or not covered by insurance). Since 1985, there has been no adverse judgment or other final adjudicated claim or suit against the Company alleging a defect in design, construction or manufacture of Products. Schedule 3.20 contains a description of all campaigns and programs of replacement, field fix, retrofit, modification or recall by Company currently pending and, to Company's knowledge, no facts or conditions exist which could reasonably be expected to result in such a campaign or program. The Products have been designed and manufactured so as to meet and comply with all applicable governmental standards and specifications in effect when the Products were sold, (or in the case of chasis, in effect when manufactured) including all National Highway Safety and Traffic Administration acts, rules or regulations. Such products have received all applicable governmental approvals necessary to allow their sale and use. As used in this Section 3.20, the term "Products" means any and all products currently or at any time previously manufactured, distributed or sold by Company, or by any predecessor of Company under any brand name or mark under which products are or have been manufactured, distributed or sold by Company, specifically excluding products similar to current Products that have not been manufactured, distributed or sold by the Company. 3.21. Employment Compensation. Schedule 3.21 contains a true and correct list of all employees to whom Company is paying compensation, including bonuses and incentives, at an annual rate in excess of One Hundred Thousand Dollars ($100,000) for services rendered or otherwise, and such list identifies the current annual rate of compensation for each employee. 3.22. Affiliates' Relationships to Company. 3.22.(a). No Adverse Interests. Except as set forth on Schedule 3.22.(a), no Affiliate has any direct or indirect interest in (i) any entity which does business with Company or is competitive with Company's business, or (ii) any property, asset or right which is used by Company in the conduct of its business. 3.22.(b). Obligations. All obligations of any Affiliate to Company, and all obligations of Company to any Affiliate, are listed on Schedule 3.22.(b). 3.23. Assets Necessary to Business. To the knowledge of the Company, Company presently has and at the Closing will have good, valid and marketable title to all property and assets, tangible and intangible, and all leases, licenses and other agreements, necessary to permit Buyer to carry on the business of Company as presently conducted. 3.24. No Brokers or Finders. Neither Company nor any of its directors, officers, employees, Shareholders or agents have retained, employed or used any broker or finder in connection with the transaction provided for herein or in connection with the negotiation thereof. 3.25. Effect of Disclosure. For purposes of this Agreement any information contained on any Disclosure Schedule shall be deemed a disclosure for all purposes and on any other Disclosure Schedule relevant thereto. 4. REPRESENTATIONS AND WARRANTIES OF BUYER Buyer makes the following representations and warranties to the Shareholders, each of which is true and correct on the date hereof, shall remain true and correct to and including the Closing Date, and shall survive the Closing of the transactions provided for herein. 4.1. Corporate. 4.1.(a) Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Wisconsin. 4.1.(b) Corporate Power. Buyer has all requisite corporate power to enter into this Agreement and the other documents and instruments to be executed and delivered by Buyer and to carry out the transactions contemplated hereby and thereby. 4.2. Authority. The execution and delivery of this Agreement and the other documents and instruments to be executed and delivered by Buyer pursuant hereto and the consummation of the transactions contemplated hereby and thereby have been duly authorized by the Board of Directors of Buyer. No other corporate act or proceeding on the part of Buyer or its shareholders is necessary to authorize this Agreement or the other documents and instruments to be executed and delivered by Buyer pursuant hereto or the consummation of the transactions contemplated hereby and thereby. This Agreement constitutes, and when executed and delivered, the other documents and instruments to be executed and delivered by Buyer pursuant hereto will constitute, valid and binding agreements of Buyer, enforceable in accordance with their respective terms, except as such may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors' rights generally, and by general equitable principles. 4.3. No Brokers or Finders. Except for Credit Suisse First Boston, neither Buyer nor any of its directors, officers, employees or agents have retained, employed or used any broker or finder in connection with the transaction provided for herein or in connection with the negotiation thereof. 4.4. Investment Intent. The Shares are being acquired by Buyer for investment only and not with the view to resale or other distribution. 4.5. No Litigation. There is no action, suit, arbitration, proceeding, investigation or inquiry, whether civil, criminal or administrative ("Litigation") pending, or to the knowledge of the Buyer, threatened against Buyer, its directors (in such capacity), its business or any of its assets, nor does Buyer know, or have grounds to know, of any basis for any Litigation which would have a material adverse impact on the Buyer or Buyer's ability to obtain the financing necessary to complete the transactions contemplated by this Agreement. 4.6. Financial Information. Buyer has delivered to the Company a copy of its financial statements for the year ending September 30, 1996 which fairly presents the financial condition and assets and liabilities of the Buyer as of said date. Buyer is not aware, other than reasonable underwriting risks beyond Buyer's reasonable control, of any material financial reason to believe that Buyer is not able to secure the financing necessary to effectuate the consummation of the transactions contemplated by this Agreement. 4.7. No Violations. Except as set forth on Schedule 4.7, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement violates or conflicts or constitutes a default under any term or provision of its articles of incorporation or by-laws or of any contract, or indenture to which it is a party. 5. COVENANTS 5.1. Certain Matters. 5.1.(a) Disposition of Certain Subsidiaries and Assets. At or prior to the Closing, the Company shall dispose of the subsidiaries or assets identified in Schedule 5.1 in the manner and as provided in such schedule, provided Shareholders (and the buyers of such assets) shall be responsible for, and shall indemnify Buyer and the Company against, any and all Tax(es) imposed on the Company or Buyer with respect to such transactions, including any interest or penalties related thereto. 5.1.(b) Termination of Certain Matters. At or prior to Closing, the Company shall terminate, release or discharge the obligations or matters described in Schedule 5.1 in the manner and as provided in such Schedule. 5.2 Title Insurance. Not less than five (5) days prior to the Closing, Company, at its expense, shall provide to Buyer title insurance commitments, issued by a title insurance company reasonably satisfactory to Buyer, agreeing to issue to Company standard form owner's (or lessee's, as the case may be) policies of title insurance with respect to all Real Property, together with a copy of each document to which reference is made in such commitments. In the case of owned Real Property, such policies shall be standard ALTA Form 1990 owner's policies in the full fair market value thereof, insuring good and marketable title thereto (expressly including all easements and other appurtenances). In the case of leased Real Property, such policies shall be upon standard ALTA Form 1990 leasehold owner's policies and in such amounts as such shall be reasonably acceptable to Buyer. 5.3. Surveys. At Buyer's option, Buyer may obtain prior to Closing at its expense surveys of all Real Property, prepared in accordance with ALTA/ASCM standards, provided such shall not delay the Closing under Article 9 of this Agreement. 5.4. Escrow Agreement. At the Closing, Shareholders and Buyer (other than the Church) shall execute and deliver an Escrow Agreement (the "Escrow Agreement") in the form of Exhibit A hereto. 5.5. Employment Agreements. 5.5.(a) At or prior to the Closing, Shareholders shall cause to be delivered to Buyer an Employment Agreement, substantially in the form of Exhibit B hereto, duly executed by each of Garwin McNeilus, Denzil McNeilus, Brandon McNeilus and Thomas Winkels and the Company. 5.5.(b) At or prior to Closing, Shareholders shall cause to be delivered to Buyer employment and non-competition agreements currently in effect at the Company as of the date of this Agreement duly executed by Company and the employees listed on Schedule 5.5.(b). 5.6. Noncompetition Agreements. At the Closing, Shareholders shall cause to be delivered to Company a Noncompetition Agreement, substantially in the form of Exhibit C hereto, duly executed by Thomas Winkels and each Shareholder other than the General Conference of the Seventh Day Adventist Church (the "Church"). In addition to the consideration paid under this Agreement, Buyer shall cause the Company or Buyer to pay Sixteen Million Dollars ($16,000,000) each to Denzil and Brandon McNeilus, Three Million Dollars ($3,000,000) to Garwin McNeilus, and Three Million Dollars ($3,000,000) to Thomas Winkels in consideration for the non-competition agreements. Denzil and Brandon McNeilus' non-competition period shall be fifteen (15) years. Garwin McNeilus' non-competition period shall be ten (10) years. Thomas Winkels' non-competition period shall be fifteen (15) years. 5.7. General Releases. At the Closing, each Shareholder shall deliver, and shall cause Thomas Winkels, to deliver, general releases to Buyer, in form and substance reasonably satisfactory to Buyer and its counsel (and containing appropriate waiver procedures), releasing Company and the directors, officers, agents and employees of Company from all claims to the Closing Date, except (i) as may be described in written contracts disclosed in the Disclosure Schedule and expressly described and excepted from such releases, (ii) in the case of persons who are employees of the Company, compensation for current periods expressly described and excepted from such releases, (iii) workers' compensation claims and (iv) this Agreement and Ancillary Documents. Such releases shall also contain waivers of any right of contribution or other recourse against Company with respect to representations, warranties or covenants made herein by Company. 5.8. Incentive Compensation Plan. Within sixty (60) days of Closing, Buyer shall cause Company to implement an incentive compensation plan pursuant to which the key employees listed on Schedule 5.8 shall be eligible for incentive compensation in the form of actual or phantom stock of the Company or Buyer (or such other form of consideration as Buyer deems appropriate), such compensation not to exceed Two Million Dollars ($2,000,000), of which fifty percent (50%) shall be provided by Garwin McNeilus through contribution or other payment to the Company. 5.9. HSR Act Filings. Each party shall, in cooperation with the other parties, file or cause to be filed any reports or notifications that may be required to be filed by it under the HSR Act, with the Federal Trade Commission and the Antitrust Division of the Department of Justice, and shall furnish to the others all such information in its possession as may be necessary for the completion of the reports or notifications to be filed by the other and as requested by a Government Authority. 5.10. Assistance With Financing. 5.10.(a) From the date hereof until the Closing, Shareholders (except for the Church) shall cause Company and/or the Company's financial, accounting or legal advisors to (i) provide such information to Buyer for its preparation of information memoranda and financial materials required to complete the documentation associated with financing this transaction, (ii) assist in discussions to finance this transaction and finance or refinance the lease debt and retitle (if necessary) the leased assets associated with the Lease Agreements; and (iii) permit the inclusion of audited consolidated financial statements and unaudited interim financial statements, and opinions and comfort letters of Company's independent auditors in a bank financing offering or an offering memorandum for the placement of debt securities. 5.10.(b) Shareholders (except for the Church) and Company shall provide to Buyer by no later than January 15, 1998: (i) audited consolidated financial statements of the Company consisting of consolidated balance sheets as of February 28, 1995, 1996 and 1997 and the related consolidated statements of income, stockholders' equity and cash flows for each of the years then ended prepared in accordance with GAAP and in accordance with Regulation S-X of the Securities and Exchange Commission; (ii) unaudited interim, comparative, consolidated balance sheets as of November 30, 1996 and 1997 and the related consolidated statements of income, stockholders' equity and cash flows for the nine-month periods then ended in accordance with GAAP and in accordance with Regulation S-X of the Securities and Exchange Commission applied on a consistent basis with that of the preceding year; and (iii) interim financial data and other data needed to prepare pro forma disclosures in accordance with Regulation S-X and GAAP with respect to the financing of this transaction. In the event the Closing has not occurred by February 28, 1998, at the request of Buyer, Shareholders and Company shall cause its independent auditors to provide, on an expedited basis, audited consolidated financial statements at and for the year ended February 28, 1998 in accordance with Regulations S-X and GAAP and other appropriate pro forma data. Company shall also provide interim financial statements and other management reports as and when they are available and as may be required to complete this transaction and the financing thereof. 5.11. Access to Information and Records. During the period prior to the Closing, Shareholders shall cause Company to give Buyer, its counsel, accountants, bankers, investment bankers and other representatives (i) access during normal business hours to all of the facilities, properties, books, records, contracts and documents of Company for the purpose of such inspection, investigation and testing as Buyer deems appropriate (and Company shall furnish or cause to be furnished to Buyer and its representatives all information with respect to the business and affairs of Company as Buyer may request); (ii) with the prior consent of the Company in each instance, which consent Company shall not unreasonable withhold or delay access to employees, agents and representatives for the purposes of such meetings and communications as Buyer reasonably desires; and (iii) with the prior consent of Company in each instance (which consent shall not be unreasonably withheld), access to vendors, customers, manufacturers of its machinery and equipment, and others having business dealings with Company. 5.12. Conduct of Business Pending the Closing. From the date hereof until the Closing, and except as otherwise expressly provided for herein or approved in writing by the Buyer, Company covenants as follows, and Shareholders shall cause each of the following to occur: 5.12.(a). No Changes. Company will carry on its business diligently and in the same manner as heretofore and will not make or institute any changes in its methods of purchase, sale, management, accounting or operation. 5.12.(b). Maintain Organization. Company will take such action as may be necessary to maintain, preserve, renew and keep in favor and effect the existence, rights and franchises of Company and will use its best efforts to preserve the business organization of Company intact, to keep available to Company the present officers and employees, and to preserve for Company its present relationships with suppliers and customers and others having business relationships with Company. 5.12.(c) No Breach. Company and Shareholders will not do or omit any act, or permit any omission to act, which may cause a breach of any material contract, commitment or obligation, or any breach of any representation, warranty, covenant or agreement made by Company and/or the Shareholders herein, or which would have required disclosure on Schedule 3.8 had it occurred after the date of the Recent Balance Sheet and prior to the date of this Agreement. 5.12.(d) No Material Contracts. No contract or commitment will be entered into, and no purchase of raw materials or supplies and no sale of goods or services (real, personal, or mixed, tangible or intangible) will be made, by or on behalf of Company, except contracts, commitments, purchases or sales which are in the ordinary course of business and consistent with past practice, are not material to the Company (individually or in the aggregate), and would not have been required to be disclosed in the Disclosure Schedule had they been in existence on the date of this Agreement, provided however, no contract or commitment will be entered into on behalf of the Company for trucks except in the ordinary course of business. 5.12.(e) No Corporate Changes. Except as set forth on Schedule 5.12.(e), Company shall not amend its Articles of Incorporation or By-Laws or make any changes in authorized or issued capital stock. 5.12.(f) Maintenance of Insurance. Company shall maintain all of the insurance in effect as of the date hereof. 5.12.(g) Maintenance of Property. Company shall use, operate, maintain and repair all property of Company in a normal business manner. 5.12.(h) No Negotiations. Neither Company nor any Shareholder will directly or indirectly (through a representative or otherwise) solicit or furnish any information to any prospective buyer, commence, or conduct presently ongoing, negotiations with any other party or enter into any agreement with any other party concerning the sale of Company, Company's assets or business or any part thereof or any equity securities of Company (an "acquisition proposal"), and Company and Shareholders shall immediately advise Buyer of the receipt of any acquisition proposal. 5.12.(i) No Transfer of Shares. No Shareholder shall transfer or attempt to transfer any of the Shares except to Buyer pursuant hereto; and Company shall refuse to accept any certificates for Shares to be transferred or otherwise to allow such transfers to occur upon its books, provided, however, Shareholders may transfer Shares to another Shareholder or to a public charity, private foundation, or an immediate member of Shareholder's family or trust for the benefit of the same so long as such transferee executes a power of attorney in form and substance reasonably satisfactory to Buyer's counsel appointing the transferor his/her/its agent and attorney-in-fact with authority to act on their behalf in connection with the transaction contemplated hereby, including transferring the Shares to Buyer pursuant to the terms of this Agreement. 5.12.(j) No Dividends. Except as provided in this Agreement, Company shall not declare, set aside or pay any dividend or make any other distribution in respect of Company's or any Subsidiary's capital stock other than inter-company dividends to entities other than those entities described in Section 5.1 and neither Company nor any Subsidiary shall redeem, purchase or otherwise acquire any capital stock of Company or any Subsidiary. 5.13. Consents. Company and Shareholders will use their best efforts prior to Closing to obtain all consents necessary for the consummation of the transactions contemplated hereby. 5.14. Opinion of Counsel. At Closing, Company shall cause its counsel to deliver to Buyer an opinion of counsel in a form substantially similar to Exhibit D hereto, duly executed by such counsel. 5.15. Disclosure Schedule Updates. After the delivery on the date hereof of the Disclosure Schedules required by this Agreement by Company and Shareholders to Buyer, Company and Shareholders shall have a continuing obligation to promptly notify Buyer, in writing, and Buyer shall have the continuing obligation to promptly notify the Company and Shareholders of any matter hereafter arising or hereafter discovered which if known by Company on the date hereof would have been required to be set forth or described in the Disclosure Schedules. Any such Disclosure Schedule updates shall not constitute a breach of Company and Shareholders representation and warranties subject to indemnification pursuant to Article 8 hereof but can be considered by Buyer as claims for damages for purposes of Section 6.1. However, no such disclosure subsequent to the date hereof shall be allowed to cure a breach by Company or Shareholders of any representation or warranty contained in the Disclosure Schedules on the date hereof. 5.16. Environmental Matters. The Company will investigate, comply, remove, close and clean up the environmental matters disclosed in Schedule 3.17.(b). Following the Closing, Buyer shall cause the Company to investigate, comply, remove, close and/or clean up the environmental matters disclosed in Schedule 3.17.(b) that have not been investigated or remediated before Closing, and all such matters discovered during the investigation or remediation of the same, but shall consult with Shareholders as investigation and remediation plans or reports are developed. Buyer agrees to obtain competitive bids for any investigation and remediation. The Escrow Funds (as defined in the Escrow Agreement) shall be available to reimburse Buyer and Company for such investigations and remediations occurring after Closing, upon presentation to the Escrow Agent of proper documentation. The limitations of Sections 8.4 and 8.10 shall not apply to the post-closing obligations under this Section 5.16. 6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS Each and every obligation of Buyer to be performed on the Closing Date shall be subject to the satisfaction prior to or at the Closing of each of the following conditions: 6.1 Representations and Warranties True as of the Closing Date. No breach of any of the representations and warranties made by Shareholders and Company in this Agreement (including supplemental disclosures of matters arising after the date of this Agreement) shall have occurred or be alleged, which, in the reasonable judgment of Buyer, would result in Claims (as defined in Article 8) in excess of $5,000,000. If any such breaches shall occur, the parties to this Agreement shall meet and confer regarding such breaches. After such meeting, Buyer shall have the option of terminating this Agreement as provided in Article 10. If Buyer elects to waive this condition and close, any such Claims (other than Claims resulting from the supplemental disclosure of matters arising after the date hereof pursuant to Section 5.15 for which Buyer shall not be entitled to indemnification) shall be subject to indemnification in accordance with Article 8. 6.2. Compliance With Agreement. Shareholders and Company shall have in all material respects performed and complied with all of their agreements and obligations under Sections 5.1, 5.4, 5.5.(a), 5.6, 5.9- 5.12, 5.14 and 5.15 of this Agreement which are to be performed or complied with by them prior to or on the Closing Date, including the delivery of the closing documents specified in such Sections. If Buyer, in its reasonable belief determines that Shareholders or Company are in breach of their obligations under this Section 6.2, Buyer shall promptly notify Shareholders and Company of their alleged breach in writing, specifying with particularity, the nature of the alleged breach and the steps Buyer believes must be taken to cure the breach. Thereafter, Shareholders and Company shall have thirty (30) days to cure the breach, or to set forth in writing an explanation of why they believe that no such breach has occurred. If Buyer rejects Shareholders' or Company's explanation and a breach then exists, Buyer may declare a condition precedent to closing has not occurred or, if Buyer elects to waive this condition and close, any Claim (other than Claims resulting from the supplementary disclosure of matters arising after the date hereof pursuant to Section 5.15 for which Buyer shall not be entitled to indemnification) shall be subject to indemnification in accordance with Article 8. 6.3. Absence of Litigation. No Litigation or investigation shall have been commenced or threatened by any Government Entity, against Buyer, Company or any of the affiliates, officers or directors of any of them, with respect to the transactions contemplated hereby. 6.4. Consents and Approvals. All material approvals, consents and waivers set forth on Schedule 6.4 that are required to effect the transactions contemplated hereby shall have been received, and executed counterparts thereof shall have been delivered to Buyer not less than two business days prior to the Closing. 6.5. Hart-Scott-Rodino Waiting Period. All applicable waiting periods related to the HSR Act shall have expired. 6.6. Shareholders' Equity. Combined Shareholders' Equity as of the last day of the month not more than 45 days immediately preceding the Closing Date after giving effect to the transactions in Section 5.1 shall be not less than Eighty-Three Million Two Hundred Thousand Dollars ($83,200,000), determined in accordance with GAAP, applied on a consistent basis and prepared in accordance with the books and records of the Company. 7. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS Each and every obligation of Shareholders to be performed on the Closing Date shall be subject to the satisfaction prior to or at the Closing of the following conditions: 7.1. Compliance With Agreement. Buyer shall have in all material respects performed and complied with all of Buyer's agreements and obligations under this Agreement which are to be performed or complied with by Buyer prior to or on the Closing Date. If Shareholders in their reasonable belief determine that Buyer is in breach of its obligations under this Section 7.1, Shareholders shall promptly notify Buyer of its alleged breach in writing, specifying with particularity, the nature of the alleged breach and the steps Shareholders believe must be taken to cure the breach. Thereafter, Buyer shall have thirty (30) days to cure the breach, or to set forth in writing, an explanation of why it believes that no such breach has occurred. If Shareholders reject Buyer's explanation, and a breach then exists, Shareholders may declare a condition precedent to closing has not occurred or, if Shareholders elect to waive this condition and close, any Claims for damages resulting from the supplementary disclosure of matters arising after the date hereof pursuant to shall be subject to indemnification in accordance with Article 8. 7.2. Absence of Litigation. No Litigation or investigation shall have been commenced or threatened by any Government Entity, against Buyer, Company or any of the affiliates, officers or directors of any of them, with respect to the transactions contemplated hereby. 7.3. Hart-Scott-Rodino Waiting Period. All applicable waiting periods related to the HSR Act shall have expired. 8. INDEMNIFICATION AND RELATED MATTERS. 8.1. Indemnification By Indemnifying Shareholders. Subject to the provisions of this Article 8 and after the Closing, each of Brandon McNeilus, Denzil McNeilus and Garwin McNeilus (the "Indemnifying Shareholders"), severally in accordance with the percentages listed on Schedule 8.1 hereby agrees to indemnify and hold the Buyer, its directors, officers, employees and controlled and controlling persons (hereinafter "Buyer's Affiliates") and the Company harmless from and against all Claims asserted against, resulting to or imposed upon, or incurred by Buyer, Buyer's Affiliates or the Company including without limitation, those arising from third-party claims, which result from or arise out of: 8.1.(a) The breach of any of the representations or warranties contained in Article 3 of this Agreement, it being understood that to the extent that any of such representations and warranties were made as of a specified date the same shall apply only to the breach of such representations or warranties as of such specified date; or 8.1.(b) The failure of the Company or Shareholders to comply with any of the covenants and agreements contained in this Agreement which were required to be performed by the Company or any Shareholder; 8.1.(c) Any Tax or other liability incurred, assessed or imposed on Company or Buyer arising out of the sale or disposition of assets pursuant to Section 5.1 hereto, or the remediations set forth pursuant to Section 5.16. 8.2. Indemnification By Buyer. Subject to the terms and conditions of this Article 8, Buyer agrees to indemnify and hold the Shareholders harmless from and against all Claims asserted against, resulting to or imposed upon or incurred by Shareholders including, without limitation, those arising from third-party claims, which result from or arise out of: 8.2.(a) The breach of any of the representations or warranties contained in Article 4 of this Agreement, it being understood that to the extent that any of such representations and warranties were made as of a specified date the same shall apply only to the breach of such representations or warranties as of such specified date; 8.2.(b) The failure of the Buyer to comply with any of the covenants and agreements contained in this Agreement which are required to be performed by the Buyer; 8.2.(c) The operation of the Company on or after the date of closing; or 8.2.(d) The Buyer agrees to indemnify and hold the Company and the Shareholders (including the Church) harmless from and against any Claims arising out of the Buyer's actions in seeking financing for or equity investment in Buyer and/or Company, excluding advisory fees and expenses (which shall be subject to Section 12.8), save and except for any claims or damages arising out of the breach by Company or Shareholders of any representation, warranty or covenant contained in this Agreement or any fraud or misrepresentation by Company or any Shareholder. 8.3. Indemnification By Company. Subject to the terms and conditions of this Article 8 and until the Closing, the Company hereby agrees to indemnify, defend and hold harmless Buyer and Buyer's Affiliates from and against all Claims asserted against, resulting to, imposed upon or incurred by Buyer or Buyer's Affiliates, arising out of or resulting from (a) the breach of any of the representations or warranties contained in Article 3 of this Agreement, it being understood that to the extent that any of such representations and warranties were made as of a specified date the same shall apply only to the breach of such representations or warranties as of such specified, or (b) the failure of the Company or Shareholders to comply with any of the covenants and agreements contained in this Agreement which were required to be performed by the Company or any Shareholder. 8.4. Limitation on Indemnification Liabilities. Notwithstanding any of the provisions herein contained, the Indemnifying Shareholders and Company shall not have any indemnification obligation with respect to Claims unless and until such Claims shall total Four Million Dollars ($4,000,000.00) in the aggregate and then only to the extent such claims exceed Four Million Dollars ($4,000,000.00) in the aggregate, and (ii) the cumulative indemnification obligation of the Indemnifying Shareholders and Company shall terminate once the dollar amount of all such Claims indemnified against under Article 8 hereof aggregates Twenty-Four Million ($24,000,000); provided, however, that the limitations contained in clauses (i) and (ii) above shall not apply to indemnification obligations relating to: 8.4.(a) any breach of the Shareholders' representations and warranties regarding ownership of Shares under Section 3.2.; 8.4.(b) any claims under Section 8.1.(c); and 8.4.(c) any break-up fee under Article 10. 8.5 Survival Of Representations, Warranties And Covenants. Notwithstanding anything herein to the contrary, the Indemnifying Shareholders shall have no obligation to the Buyer or Company under Section 8.1 with respect to any Claim for which Buyer gives notice to the Indemnifying Shareholders later than eighteen (18) months following the Closing, except with respect to (i) a breach of a representation or warranty with respect to Taxes in Section 3.5 where the applicable statute of limitation extends beyond such date, in which case notice must be given not later than sixty (60) days following the expiration of the relevant statute of limitations, (ii) Claims relating to the ownership of the shares, with respect to which notice of such claims must be given not later than sixty (60) days following the expiration of relevant statute of limitations, (iii) breaches of the Shareholders' and Company's representations and warranties regarding environmental matters, with respect to which notice of claims must be given not later than sixty (60) days following the fifth (5th) anniversary of the Closing. 8.6. Notice of Indemnification. In the event any legal proceeding shall be threatened or instituted or any claim or demand shall be asserted by any person in respect of which payment may be sought by one party hereto from the other party under the provisions of this Article 8 or upon the discovery of any facts which one party believes may give rise to a claim for indemnification under this Article 8, the party seeking indemnification (the "Indemnitee") shall promptly cause written notice of such claims which it reasonably believes to be covered by this indemnity to be forwarded to the other party (the "Indemnitor"); provided, however, that except for the notice required by Section 8.6, the failure to give such notice shall not effect the indemnification provided hereunder except to the extent the Indemnitor has actually been prejudiced as a result of such failure. Any notice of a Claim by reason of any of the representations, warranties or covenants contained in this Agreement shall state specifically the representation, warranty or covenant with respect to which the claim is made, the facts giving rise to an alleged basis for the claim, and the amount of liability asserted against the Indemnitor by reason of the claim. 8.7. Indemnification Procedure for Third-Party Claims. Except as otherwise provided herein, in the event of the initiation of any legal proceedings against an Indemnitee by a third-party, the Indemnitor shall have the absolute right after the receipt of notice, at its option and at its own expense, to be represented by counsel, which counsel shall be reasonably satisfactory to the Indemnitee and to defend against, negotiate, settle or otherwise deal with any proceeding, claim, or demand which relates to any Claims indemnified against hereunder; provided, however, (i) that the Indemnitor exercises such option in writing within thirty (30) days of receipt of notice; (ii) that the Indemnitee may participate in any such proceeding with counsel of its choice and at its expense; (iii) that in the case of any Claims seeking equitable relief or requiring remedial action in respect of the Shares, the Buyer shall have the right to defend (using counsel reasonably satisfactory to the Indemnifying Shareholders) or settle such claim, regardless of whether the Buyer is the Indemnitor or the Indemnitee; and (iv) that the Indemnitor shall not settle any proceeding, claim or demand which imposes any liability or obligation on the Indemnitee without the Indemnitor's consent, which consent shall not be unreasonably withheld. The parties hereto agree to cooperate fully with each other in connection with the defense, negotiation or settlement of any such legal proceeding, claim or demand. To the extent the Indemnitor elects not to defend such proceeding, claim or demand, and the Indemnitee defends against or otherwise deals with any such proceeding, claim or demand, the Indemnitee may retain counsel (reasonably satisfactory to the Indemnitor), at the expense of the Indemnitor, the Indemnitor shall nevertheless indemnify the Indemnitee for the full amount of the Claims relating to such proceeding, claim or demand and the Indemnitee shall control the defense in settlement of such proceedings; provided, that the Indemnitee shall give the Indemnitor ten (10) days written notice prior to entering into any such settlement and shall not settle any such claim without the consent of the Indemnitor, which consent shall not be unreasonably withheld or delayed. 8.8. Exclusive Remedy. The exclusive remedy available to any party to this Agreement in respect of the transactions contemplated hereby shall be to proceed in the manner and subject to the limitations contained in this Article 8. 8.9. Computation of Claims for Damages Subject to Indemnification. As used in this Article 8, the term "Claims" shall include (i) all valid debts, liabilities and obligations; (ii) all losses, damages, judgments, awards, settlements, costs and expenses (including, without limitation, interest (including prejudgment interest in any litigation matter), penalties, court costs and attorney fees and expenses); and (iii) all demands, claims, suits, actions, costs of investigation, causes of action, proceeding and assessments, provided, further however, that the amount of any Claims for which indemnification is provided under this Article 8 shall (i) be computed net of any insurance proceeds from insurance companies, (ii) there shall be disregarded any tax liabilities arising by reason of (A) any reduction or disallowance of deductions from taxable income in one taxable year, to the extent such reduction or disallowance would result in a corresponding increase in allowable deductions from income in another taxable year, (B) the shifting of items of income from one taxable year to another, or (C) the capitalization of amounts which were expensed, but only if such capitalized amounts are subject to amortization or depreciation or recovery in costs of goods sold, inventory or materials, except insofar as such reduction, disallowance, shifting or capitalization would only result in the increase of any unutilized net operating loss, capital loss or credit carryover, and (iii) exclude lost profits and lost business opportunities. 8.10. Minibasket. Except with respect to Claims under Section 8.1.(c) and for breaches of representations or warranties contained in Section 3.2, any inaccuracy or breach of a representation or warranty shall not constitute a Claim unless the amount for a particular inaccuracy or breach of a representation or warranty exceeds Ten Thousand Dollars ($10,000.00), and in such event, the Indemnitee shall be entitled to indemnification in full for such breach. 8.11. Commencement of Arbitration. Any claim made by a party hereunder by a demand for arbitration in accordance with Article 11 hereof for breach of a representation or warranty prior to the termination of the survival period for such claim shall be preserved despite the subsequent termination of such survival. 8.12. Waiver. The Closing of the transaction contemplated by this Agreement shall not constitute a waiver by any party of its right to indemnification hereunder. 8.13. Payment. The Indemnitor shall promptly pay the Indemnitee any amount due under this Article 8. 9. CLOSING The closing of this transaction ("the Closing") shall take place within two (2) days following Buyer's ability to obtain the financing necessary to complete this transaction and all other conditions of Articles 6 and 7 have been fulfilled or at such other time as the parties hereto shall agree upon. Such date is referred to in this Agreement as the "Closing Date". The Closing shall take place in a city and offices to be agreed upon by the parties. 10. TERMINATION 10.1. Right of Termination Without Breach. This Agreement may be terminated without further liability of any party at any time prior to the Closing: 10.1.(a) by mutual written agreement of Buyer and Shareholders, or 10.1.(b) by either Buyer or Shareholders if the Closing shall not have occurred on or before June 1, 1998, provided the terminating party has not, through breach of a representation, warranty or covenant, prevented the Closing from occurring on or before such date. 10.1.(c) by either Buyer or Shareholders if Buyer is unable after reasonable efforts to obtain financing for this transaction within 60 days after the later of (i) delivery of financials statements required by Section 5.10.(b); and (ii) the expiration of the applicable waiting periods related to HSR. 10.2. Termination for Breach. 10.2.(a) Termination by Buyer. If (i) there has been a material violation or breach by any Shareholder or Company of any of the agreements or representations or warranties contained in Section 3.2 or Section 3.3 (as it relates to Shareholders) of this Agreement which has not been waived in writing by Buyer, or (ii) there has been a failure of satisfaction of a condition to the obligations of Buyer which has not been so waived, or (iii) Company or any Shareholder shall have attempted to terminate this Agreement for any reason other than those specified in Sections 10.1 and 10.2.(b), then Buyer may, by written notice to Shareholder at any time prior to the Closing that such violation, breach, failure or wrongful termination attempt is continuing, terminate this Agreement with the effect set forth in Section 10.3 hereof. 10.2.(b) Termination by Shareholders. If (i) there has been a material violation or breach by Buyer of any of the agreements, representations or warranties contained in this Agreement which has not been waived in writing by Shareholders, or (ii) there has been a failure of satisfaction of a condition to the obligations of Shareholders which has not been so waived, or (iii) Buyer shall have attempted to terminate this Agreement for any reason other than those specified in Sections 10.1 and 10.2.(a), then Shareholders may, by written notice to Buyer at any time prior to the Closing that such violation, breach, failure or wrongful termination attempt is continuing, terminate this Agreement with the effect set forth in Section 10.3 hereof. 10.3. Termination Fees. 10.3.(a) If this Agreement is terminated by Buyer pursuant to Section 10.2.(a) (other than for a failure of the satisfaction of closing conditions in Sections 6.1, 6.3, 6.4, 6.5 and 6.6), then Company shall pay Buyer a fee of Ten Million Dollars ($10,000,000) upon such termination; payable in immediately available funds on the third business day following termination under Section 10.2.(a). In such event, there shall be no further liability on the part of Company or Shareholders to Buyer. 10.3.(b) If this Agreement is terminated by Shareholders or Buyer pursuant to Section 10.1.(c) (provided all other closing conditions have been met) or by Shareholders pursuant to Section 10.2.(b) (other than for a failure of satisfaction of closing conditions set forth in Sections 7.2 and 7.3) then Buyer shall pay to Company a fee of Ten Million Dollars ($10,000,000), upon such termination; payable in immediately available funds on the third business day following termination under Section 10.1.(c) or Section 10.2.(b). In such event, there shall be no further liability on the part of Buyer to Company or Shareholders. 10.3.(c) In the event this Agreement is terminated by any party for any reason other than those set forth in Sections 10.3.(a) or (b) above, there shall be no further liability on the part of the Company or Shareholders to Buyer or Buyer to the Company or Shareholders. 10.4. Confidentiality Upon Termination. 10.4.(a) In the event this Agreement is terminated by any party for any reason, each party agrees to treat confidentially any information received from another party, its representatives or agents, whether furnished before or after the date of this Agreement, and whether disclosed in writing or orally or obtained through observation of facilities, and all notes, analysis, compilations, studies and other documents which contain or otherwise reflect such information disclosed ("Confidential Information"). The term "Confidential Information" does not include information which (i) becomes generally available to the public other than as a result of a disclosure by the recipient, its affiliates, or their directors, officers, employees, agents or representatives; (ii) was rightfully available and disclosed to the recipient on a non-confidential basis prior to its disclosure to the recipient by the disclosing party, or (iii) prior to disclosure by a disclosing party became rightfully available and disclosed to recipient on a non-confidential basis from a source other than the disclosing party, provided that such source is not to recipient's knowledge, after reasonable inquiry, bound by a confidentiality agreement with the disclosing party or otherwise prohibited from transmitting the information to recipient by a contractual, legal or fiduciary obligation. 10.4.(b) Without the prior written consent of the disclosing party, the recipient will not, and will direct its affiliates and their directors, agents, representatives and employees who have knowledge of any circumstances concerning the transactions contemplated hereby not to disclose or divulge to any third person any Confidential Information or use any of the Confidential Information for any reason or purpose. 10.4.(c) In the event that the recipient, any affiliates or their directors, officers, employees, agents or representatives are requested or required (by oral questions, interrogatories, requests for information or documents, subpeona, civil investigative demand or similar process) to disclose the transactions contemplated by this Agreement or any Confidential Information supplied to recipient prior to or after the execution of this Agreement, the recipient agrees to provide the disclosing party with prompt notice of such request(s) so that the disclosing party may seek an appropriate protective order and/or waive compliance with the provisions of this Section, except that approval of the Shareholders or Company shall not be required as to any statements and other information which Buyer may be required to make pursuant to any rule or regulation of the Securities and Exchange Commission or The Nasdaq Stock Market, Inc. If failing the entry of a protective order or the receipt of a waiver hereunder, the recipient is, in the opinion of its counsel, compelled to disclose Confidential Information or otherwise be liable for contempt or other censure or penalty, recipient may disclose that portion of the Confidential Information which its counsel shall have advised it is compelled to disclose. In any event, recipient will not oppose action by the disclosing party to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information, and will take all reasonable efforts to cooperate in the same and to maintain confidentiality of the transactions contemplated by this Agreement and Confidential Information. 10.4.(d) In the event of termination, each party will promptly upon request deliver to the requesting party all documents or other matters furnished to it by another party constituting Confidential Information, without retaining any copy thereof. 11. RESOLUTION OF DISPUTES 11.1. Arbitration. Any dispute, controversy or claim arising out of or relating to this Agreement or any contract or agreement entered into pursuant hereto or the performance by the parties of its or their terms shall be settled by binding arbitration held in Chicago, Illinois in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect, except as specifically otherwise provided in this Article 11. Notwithstanding the foregoing, Buyer may, in its discretion, apply to a court of competent jurisdiction for equitable relief from any violation or threatened violation of the covenants or any covenants not to compete contained in any Employment Agreement or Non- Competition Agreement delivered pursuant to Section 5.5 or Section 5.6 hereof. 11.2. Arbitrators. If the matter in controversy (exclusive of attorney fees and expenses) shall appear, as at the time of the demand for arbitration, to exceed $200,000, then the panel to be appointed shall consist of three neutral arbitrators; otherwise, one neutral arbitrator. 11.3. No Appeal. The decision of the arbitrator(s) shall be final, binding, and nonappealable with respect to all persons, including (without limitation) persons who have failed or refused to participate in the arbitration process. 11.4. Authority. The arbitrator(s) shall have authority to award relief under legal or equitable principles, including interim or preliminary relief, and to allocate responsibility for the costs of the arbitration and to award recovery of attorneys fees and expenses in such manner as is determined to be appropriate by the arbitrator(s). 11.5. Entry of Judgment. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having in personam and subject matter jurisdiction. Buyer and each Shareholder hereby submit to the in personam jurisdiction of the Federal and State courts in the Northern District of Illinois, for the purpose of confirming any such award and entering judgment thereon. 11.6. Confidentiality. All proceedings under this Article 11, and all evidence given or discovered pursuant hereto, shall be maintained in confidence by all parties. 11.7. Continued Performance. The fact that the dispute resolution procedures specified in this Article 11 shall have been or may be invoked shall not excuse any party from performing its obligations under this Agreement and during the pendency of any such procedure all parties shall continue to perform their respective obligations in good faith, subject to any rights to terminate this Agreement that may be available to any party. 11.8. Discovery. In any arbitration, either party shall be entitled to conduct discovery in accordance with applicable rules of civil procedure during the course of such arbitration. 12. MISCELLANEOUS 12.1. Knowledge. For each of those warranties and representations made in Article 3 that are subject to the qualification of Company "to the knowledge of the Company," "to the best of Company's knowledge," "to the Company's knowledge," or similar words or phrases, such warranties and representations shall be deemed limited to those matters of which any of the following officers of the Company has actual knowledge: Garwin McNeilus, Denzil McNeilus, Brandon McNeilus, and Thomas Winkels. 12.2. Further Assurance. From time to time, at Buyer's request and without further consideration, Company and Shareholders will execute and deliver to Buyer such documents and take such other action as Buyer may reasonably request in order to consummate more effectively the transactions contemplated hereby. 12.3. Disclosures and Announcements. Announcements concerning the transactions provided for in this Agreement by Buyer, Company or Shareholders shall be subject to the approval of the other parties in all essential respects or that is otherwise required by law. Following execution of this Agreement and the filing of a Hart-Scott-Rodino notice, the Shareholders and Buyer agree to jointly prepare a statement regarding this transaction for public disclosure. 12.4. Assignment; Parties in Interest. 12.4.(a) Assignment. Except as expressly provided herein, the rights and obligations of a party hereunder may not be assigned, transferred or encumbered without the prior written consent of the other parties. Notwithstanding the foregoing, Buyer may, without consent of any other party, cause one or more subsidiaries of Buyer to carry out all or part of the transactions contemplated hereby; provided, however, that Buyer shall, nevertheless, remain liable for all of its obligations, and those of any such subsidiary, to Shareholders hereunder. 12.4.(b) Parties in Interest. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by the respective successors and permitted assigns of the parties hereto. Nothing contained herein shall be deemed to confer upon any other person any right or remedy under or by reason of this Agreement. 12.5. Law Governing Agreement. This Agreement may not be modified or terminated orally, and shall be construed and interpreted according to the internal laws of the State of Minnesota, excluding any choice of law rules that may direct the application of the laws of another jurisdiction. 12.6. Amendment and Modification. Buyer and Shareholders may amend, modify and supplement this Agreement in such manner as may be agreed upon in writing between Buyer and Shareholders. 12.7. Notice. All notices, requests, demands and other communications hereunder shall be given in writing and shall be: (a) personally delivered; (b) sent by telecopier, facsimile transmission or other electronic means of transmitting written documents; or (c) sent to the parties at their respective addresses indicated herein by registered or certified U.S. mail, return receipt requested and postage prepaid, or by private overnight mail courier service. The respective addresses to be used for all such notices, demands or requests are as follows: (a) If to Buyer, to: Oshkosh Truck Corporation 2307 Oregon Street P.O. Box 2566 Oshkosh, WI 54903-2566 Attention: Robert Bohn Chief Executive Officer Facsimile: (920) 233-9624 (with a copy to) Timothy M. Dempsey, Esq. Oshkosh Truck Corporation 2307 Oregon Street P.O. Box 2566 Oshkosh, WI 54903-2566 Facsimile: (920) 233-9669 (and an additional copy to) Benjamin F. Garmer, III Foley & Lardner 777 East Wisconsin Avenue Milwaukee, WI 53202 Facsimile: (414) 297-4900 or to such other person or address as Buyer shall furnish to Shareholders in writing. (b) If to Shareholders: Garwin McNeilus Route 3, Box 321 Dodge Center, MN 55927 (507) 374-6761 (with a copy to) Denzil McNeilus Route 1, Box 59 Dodge Center, MN 55927 (507) 374-6701 (with a copy to) Brandon McNeilus Route 1, Box 64 Dodge Center, MN 55927 (507) 374-2802 (with a copy to) Gerald S. Duffy SIEGEL, BRILL, GREUPNER, DUFFY & FOSTER, P.A. 1300 Washington Square 100 Washington Avenue South, Suite 1300 Minneapolis, MN 55401 (612) 339-7131 Facsimile: (612) 339-6591 or to such other person or address as Shareholders shall designate in accordance with this Agreement. (c) If to Company, to: McNeilus Companies, Inc. P.O. Box 70, 518 Highway Street N.E. Dodge Center, MN 55927 Attention: President Facsimile: (507) 374-8000 (with a copy to) Gerald S. Duffy SIEGEL, BRILL, GREUPNER, DUFFY & FOSTER, P.A. 1300 Washington Square 100 Washington Avenue South, Suite 1300 Minneapolis, MN 55401 (612) 339-7131 Facsimile: (612) 339-6591 In addition, any notice to Company given prior to Closing shall also be given in the same manner to Shareholders; and any notice to Company given after Closing shall also be given in the same manner to Buyer. If personally delivered, such communication shall be deemed delivered upon actual receipt; if electronically transmitted pursuant to this paragraph, such communication shall be deemed delivered the next business day after transmission (and sender shall bear the burden of proof of delivery); if sent by overnight courier pursuant to this paragraph, such communication shall be deemed delivered upon receipt; and if sent by U.S. mail pursuant to this paragraph, such communication shall be deemed delivered as of the date of delivery indicated on the receipt issued by the relevant postal service, or, if the addressee fails or refuses to accept delivery, as of the date of such failure or refusal. Any party to this Agreement may change its address for the purposes of this Agreement by giving notice thereof in accordance with this Section. 12.8. Expenses. Except as may otherwise be specifically provided herein, the parties hereto shall pay their own legal fees and expenses incurred in connection with the negotiation and consummation of the transactions contemplated by this Agreement, provided that the Company shall pay the reasonable and verifiable fees and expenses incurred by the Company or Shareholders, including the fees and expenses of Siegel, Brill, Greupner, Duffy & Foster, P.A. ("SBGD&F") and Larson Allen Weishair & Co., LLP ("LAW"), related to this transaction. Set forth on Schedule 12.8 are the actual fees and expenses to date and good faith estimates of fees and expenses to complete the transaction contemplated hereby of SBGD&F and LAW. Buyer shall be furnished with copies of itemized statements for all such fees in such form as Buyer may request and upon Buyer's request, SBGD&F and LAW shall provide information to support the reasonableness and accuracy of such fees and expenses. The Buyer shall be responsible for any fees paid to any brokers, consultants, or other agents retained by Buyer in connection with the transactions contemplated hereby. 12.9. Costs of Litigation or Arbitration. The parties agree that (subject to the discretion, in an arbitration proceeding, of the arbitrator as set forth in Section 11.4) the prevailing party in any action brought with respect to or to enforce any right or remedy under this Agreement shall be entitled to recover from the other party or parties all reasonable costs and expenses of any nature whatsoever incurred by the prevailing party in connection with such action, including without limitation attorneys' fees and prejudgment interest. 12.10. Transfer Taxes. Any sales, use, excise, transfer or other similar tax imposed with respect to the transactions provided for in this Agreement, any interest or penalties related thereto, shall be paid by the party who customarily bears such expenses under Minnesota law customer practice. 12.11. Entire Agreement. This instrument embodies the entire agreement between the parties hereto with respect to the transactions contemplated herein, and there have been and are no agreements, representations or warranties between the parties other than those set forth or provided for herein. 12.12. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 12.13. Headings. The headings in this Agreement are inserted for convenience only and shall not constitute a part hereof. 12.14. No Negotiations by Buyer. From the date hereof to the date of closing, Buyer will not directly or indirectly (through a representative or otherwise) solicit or furnish any information about Company to any prospective buyer, commence or conduct presently ongoing negotiations with any other party or enter into any agreement with any other party concerning the sale of Company, Company's assets or business or any part thereof or any equity securities of Company (an "acquisition proposal"). IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. OSHKOSH TRUCK CORPORATION McNEILUS COMPANIES, INC. ("Buyer") ("Company") By: /s/ Robert Bohn By: /s/ Denzil McNeilus Robert Bohn Denzil McNeilus Chief Executive Officer President SHAREHOLDERS /s/ Garwin McNeilus Garwin McNeilus /s/ Marilee McNeilus Marilee McNeilus /s/ Denzil McNeilus Denzil McNeilus /s/ Brandon McNeilus Brandon McNeilus General Conference of the Seventh Day Adventist Church By: /s/ Name: Title: EX-4.3 3 SECOND AMENDMENT TO CREDIT AGREEMENT THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Second Amendment"), dated as of April 25, 1997, amends the Credit Agreement dated as of September 18, 1996, as previously amended by the First Amendment to Credit Agreement dated as of November 27, 1996 but with retroactive effect to September 28, 1996, by and among OSHKOSH TRUCK CORPORATION, a Wisconsin corporation (the "Borrower"), those Subsidiaries identified as a "Guarantor" on the signature pages hereto and such other Subsidiaries as may from time to time become a party hereto (the "Guarantors"), the several lenders identified on the signature pages hereto and such other lenders as may from time to time become a party hereto (the "Lenders"), FIRSTAR BANK MILWAUKEE, N.A., as agent for the Lenders (in such capacity, the "Agent") and BANK ONE, MILWAUKEE, NA, NATIONSBANK, N.A. and HARRIS TRUST AND SAVINGS BANK, as co-agents (as so amended, the "Credit Agreement"). 1. Definitions. Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement. 2. Amendment. The parties hereby agree to amend the Credit Agreement as follows: 2.1 Section 1.1. The definition of "Permitted Investments" in Section 1.1 of the Credit Agreement is deleted in its entirety and replaced by the following new definition: "Permitted Investments" means (i) cash and Cash Equivalents, (ii) receivables owing to the Borrower or any of its Subsidiaries for trade credit, in each case if created, acquired or made in the ordinary course of business, (iii) advances to vendors of the Borrower and its Subsidiaries (which may include Steeltech Manufacturing, Inc.), or suppliers to such vendors, to enable such vendors and suppliers to purchase goods or parts to be processed and sold to the Borrower and its Subsidiaries, provided, however, that the aggregate of such advances and the liability of the Borrower and its Subsidiaries under Guarantee Obligations of the Borrower and its Subsidiaries permitted by clause (ii) of the definition of Permitted Guarantee Obligations shall not exceed $15,000,000 outstanding at any one time, (iv) investments in and advances to a domestic Credit Party, (v) loans and advances to officers, directors, employees and Affiliates in an aggregate amount not to exceed $1,000,000 at any time outstanding, (vi) investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business, (vii) investments, acquisitions or transactions permitted under Section 8.4(b), (viii) with respect to any pension trust maintained for the benefit of any present or former employees of the Borrower or any Subsidiary, such loans, advances and/or investments as the trustee or administrator of the trust shall deem advisable pursuant to the terms of such trust, (ix) investments of a nature not contemplated by the foregoing clauses hereof that are outstanding as of the Closing Date and set forth on Schedule 1.1(b), (x) the Borrower's repurchase from Freightliner Corporation of all shares of the Borrower's capital stock and all warrants for the purchase of additional shares of the Borrower's capital stock owned by Freightliner Corporation, up to a maximum aggregate repurchase price of $6,750,000, and (xi) additional loans, advances and/or investments of a nature not contemplated by the foregoing clauses hereof provided that such loans, advances and/or investments made pursuant to this clause (xi) shall not exceed an aggregate amount of $5,000,000 outstanding at any one time and further provided that no such loans, advances and/or investments shall be used to acquire all or substantially all of the voting stock of any corporation the board of directors of which has not approved such acquisition. As used herein, "investment" means all investments, in cash or by delivery of property made, directly or indirectly in, to or from any Person, whether by acquisition of shares of capital stock, property, assets, indebtedness or other obligations or securities or by loan advance, capital contribution or otherwise. 2.2 Section 3.15. Section 3.15 of the Credit Agreement is deleted in its entirety and replaced by the following new Section 3.15: Cleanup Period. Notwithstanding any provision to the contrary contained herein, Borrower agrees that for at least sixty (60) consecutive days during each fiscal year ending on the dates specified below the aggregate amount of outstanding Revolving Loans, Swing Line Loans and Term Loans shall not exceed the amount specified for such fiscal year: Fiscal Year Ending Amount September 30, 1997 $ 160,000,000 September 30, 1998 $ 145,000,000 September 30, 1999 $ 130,000,000 2.3 Section 7.9(a). Section 7.9(a) of the Credit Agreement is deleted in its entirety and replaced by the following new Section 7.9(a): (a) Consolidated Funded Debt Ratio. There shall be maintained as of the end of each fiscal quarter to occur during the periods shown below a Consolidated Funded Debt Ratio of not greater than: Period From Closing Date through December 27, 1996 4.75:1.0 December 28, 1996 through March 28, 1997 4.50:1.0 March 29, 1997 through June 29, 1997 4.25:1.0 June 30, 1997 through September 29, 1997 4.00:1.0 September 30, 1997 through September 29, 1998 3.25:1.0 September 30, 1998 through September 29, 1999 3.00:1.0 September 30, 1999 though September 29, 2000 2.50:1.0 September 30, 2000 through September 29, 2001 2.25:1.0 September 30, 2001 through September 29, 2002 2.00:1.0 September 30, 2002 and thereafter 1.75:1.0 2.4 Section 7.9(c). Section 7.9(c) of the Credit Agreement is deleted in its entirety and replaced by the following new Section 7.9(c): (c) Interest Coverage Ratio. There shall be maintained as of the end of each fiscal quarter to occur during the periods shown below an Interest Coverage Ratio of at least: Period From Closing Date through March 28, 1997 0.85:1.0 March 29, 1997 through June 29, 1997 1.00:1.0 June 30, 1997 through September 29, 1997 1.25:1.0 September 30, 1997 through December 30, 1997 1.75:1.0 December 31, 1997 through March 30, 1998 2.00:1.0 March 31, 1998 through September 29, 1998 2.25:1.0 September 30, 1998 through September 29, 2000 2.50:1.0 September 30, 2000 and thereafter 3.00:1.0 2.5 Section 8.11. The word "The" at the beginning of Section 8.11 of the Credit Agreement is deleted and replaced by the following: Except as permitted in subsection (x) of the definition of Permitted Investments, the 3. Conditions Precedent. This Second Amendment shall become effective on the date that the Agent (for the benefit of the Lenders) shall have received this Second Amendment, duly executed by an authorized representative of each of the Credit Parties and the Lenders. 4. Representations and Warranties. To induce the Lenders to enter into this Second Amendment, each of the Credit Parties hereby represents and warrants to the Agent and to each Lender that: (a) the representations and warranties contained in the Credit Agreement are true and correct as of the date of this Second Amendment; and (b) no Default or Event of Default has occurred and is continuing as of the date of this Second Amendment. 5. Full Force and Effect. Except as provided herein, all of the terms and conditions set forth in the Credit Agreement, and all additional documents entered into in connection with the Credit Agreement, shall remain unchanged and shall continue in full force and effect as originally set forth, and each of the foregoing is hereby ratified and confirmed in all respects. 6. Binding Effect. This Second Amendment shall be binding upon the parties hereto and their respective successors and assigns. [REMAINDER OF PAGE DELIBERATELY BLANK] IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Second Agreement to be duly executed and delivered as of the date first above written. BORROWER: OSHKOSH TRUCK CORPORATION, a Wisconsin corporation By: /s/ Title:_____________________________ GUARANTORS: PIERCE MANUFACTURING INC., a Wisconsin corporation By: /s/ Title:_____________________________ SUMMIT PERFORMANCE SYSTEMS, INC., a Wisconsin corporation By: /s/ Title:_____________________________ LENDERS: FIRSTAR BANK MILWAUKEE, N.A., in its capacity as Agent and as a Lender By: /s/ Title:_____________________________ BANK ONE, MILWAUKEE, NA, in its capacity as a Co-Agent and as a Lender By: /s/ Title:_____________________________ NATIONSBANK, N.A., in its capacity as a Co-Agent and as a Lender By: /s/ Title:_____________________________ HARRIS TRUST AND SAVINGS BANK, in its capacity as a Co-Agent and as a Lender By: /s/ Title:_____________________________ BANK OF AMERICA ILLINOIS, as Lender By: /s/ Title:_____________________________ LASALLE NATIONAL BANK, as Lender By: /s/ Title:_____________________________ FIRST BANK (N.A.), as Lender By: /s/ Title:_____________________________ THE NORTHERN TRUST COMPANY, as Lender By: /s/ Title:_____________________________ NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Lender By: /s/ Title:_____________________________ COMERICA BANK, as Lender By: /s/ Title:_____________________________ EX-10.10 4 EMPLOYMENT AGREEMENT AN AGREEMENT made as of the 31st day of August, 1995, by and between OSHKOSH TRUCK CORPORATION, a Wisconsin corporation (the "Company"), and PAUL C. HOLLOWELL (the "Executive"). W I T N E S S E T H : WHEREAS, the Executive has been serving as Executive Vice President of the Company and as President of Oshkosh Truck International Inc., a subsidiary of the Company ("Oshkosh International"); WHEREAS, the Company desires to continue to retain the services of the Executive, and the Executive desires to continue to be employed by the Company, on the terms and conditions set forth in this Agreement; and WHEREAS, in consideration of the Company's commitment to employ the Executive during the term of this Agreement, the Executive is willing to agree to the provisions respecting noncompetition and protection of Confidential Information (as defined below) set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Employment and Duties. The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to continue to be employed by the Company. The Executive's current responsibilities include leadership of the Company's defense business strategy; marketing and planning for both domestic and foreign sales of military products; and responsibility for all international strategy, marketing and sales. The Executive also serves as a member of the Chairman's Council, the primary executive advisory council to the Company's Chairman and Chief Executive Officer. 2. Term. The employment of the Executive will continue until the occurrence of the first of the following events: (a) The last day of the Company's 1997 fiscal year, subject to extension as described below; or (b) The Executive's death; or (c) The Executive shall have become totally disabled within the meaning of the Oshkosh Truck Corporation Long Term Disability Program for Salaried Employees (the "LTD Program") such that the Executive is entitled to receive benefits under the LTD Program; or (d) Termination of this Agreement under Section 8 hereof. If the Executive's employment continues following the date and extension identified in clause (a) above and a Renewal Notice is not provided, then for so long as the Executive is employed by the Company the Executive shall be an at-will employee. The provisions of Sections 6, 7 and 10 shall survive the expiration of the term of this Agreement. The last date on which the Executive's employment hereunder may terminate pursuant to paragraph (a) may be extended at successive one-year intervals if the Company has provided a written notice of renewal (a "Renewal Notice") to the Executive on or before June 30 in the year prior to the year in which the Executive's employment hereunder would terminate but for the application of this sentence. As an example, if the Company gives a Renewal Notice to the Executive on or before June 30, 1996, the date set forth in Section 2(a) shall be changed from the last day of the Company's 1997 fiscal year to the last day of the Company's 1998 fiscal year. If a Renewal Notice is not given within the prescribed time and unless otherwise agreed in writing by the parties, then the Executive's employment hereunder may terminate in accordance with the provisions of this Section 2 (as paragraph (a) may have been previously extended by the parties) and Section 9. In addition, the Executive may terminate his employment hereunder at any time upon thirty (30) days' written notice to the Company. 3. Compensation. During the term of this Agreement, the Executive shall be entitled to the following compensation for services rendered to the Company and Oshkosh International: (a) Base Salary. The Executive shall receive a base salary, payable not less frequently than monthly in arrears, at the annual rate of $170,000. The Board of Directors of the Company shall review the Executive's base salary annually to determine whether such salary should be increased based upon the Company's performance and/or the Executive's performance and upon such other criteria as the directors shall consider in their sole discretion. (In this Agreement, the term "Base Salary" shall mean the amount established and adjusted from time to time pursuant to this paragraph (a).) (b) Annual Bonus. The Executive shall be entitled to participate in the bonus plan for senior management personnel of the Company, subject to all of the terms and conditions of the plan. In the bonus plan, the Executive will have a bonus potential of 50% of his Base Salary unless modified by the Board of Directors in accord with an overall bonus modification for all senior executives. (c) Vacations and Holidays. The Executive shall be entitled to receive 20 days of paid vacation per year together with the paid holidays available to all other senior management personnel. (d) Fringe Benefits. The Executive shall be entitled to participate in all fringe benefit plans and programs in effect from time to time for, and on the same basis as, all other senior executives of the Company, including medical and dental insurance, expense reimbursements, pension and retirement benefits and other similar benefits. 4. Reimbursements. The Company shall reimburse the Executive for actual out-of-pocket costs incurred by him in the course of carrying out his duties hereunder, such reimbursements to be made in accordance with the policies and procedures of the Company in effect from time to time. 5. Withholding. All payments under this Agreement shall be subject to withholding or deduction by reason of the Federal Insurance Contributions Act, the federal income tax and state or local income tax and similar laws, to the extent such laws apply to such payments. 6. Noncompetition. In consideration of the Company's commitment to employ the Executive during the term of this Agreement, the Executive agrees that, except in the event of a material breach of this Agreement by the Company, for a period of one year after the termination of the Executive's active employment with the Company (whether such termination occurs before or after the expiration of the term of this Agreement), he shall not, except as permitted by the Company's prior written consent, engage in, be employed by, or in any way advise or act for, or have any financial interest in, any business that, as of the date of such termination, is engaged directly or indirectly in a business that is similar or identical to any business engaged in by the Company or any of its subsidiaries that was within the scope of the Executive's duties, activities or knowledge. The geographic scope of the Executive's agreement not to compete shall extend to all of the United States and to any other country if the Company has directly or indirectly (i) sold product for delivery to a customer in that country during the 36 months preceding the date of termination, (ii) actively sought to sell product for delivery to any customer in that country during such period or (iii) made plans, in which the Executive participated, to sell product for delivery to any customer in that country during such period, whether or not the Company pursued or abandoned such plans prior to the date of termination. The ownership of minority and noncontrolling shares of any corporation whose shares are listed on a recognized stock exchange or traded in an over-the-counter market, even though such corporation may be a competitor of the Company or any subsidiary specified above, shall not be deemed as constituting a financial interest in such competitor. This covenant shall survive the termination of this Agreement. 7. Confidential Information. (a) Defined. "Confidential Information" shall mean ideas, information, knowledge and discoveries, whether or not patentable, that are not generally known in the trade or industry and about which the Executive has knowledge as a result of his employment with the Company, including without limitation defense product engineering information, marketing, sales, distribution, pricing and bid process information, product specifications, manufacturing procedures, methods, business plans, marketing plans, internal memoranda, formulae, trade secrets, know-how, research and development and other confidential technical or business information and data. Confidential Information shall not include any information that the Executive can demonstrate is in the public domain by means other than disclosure by the Executive. (b) Nondisclosure. For a period of five years after the termination of the Executive's active employment with the Company (whether such termination occurs before or after the expiration of the term of this Agreement) and indefinitely thereafter in respect of any Confidential Information that constitutes a trade secret or other information protected by law, the Executive will keep confidential and protect all Confidential Information known to or in the possession of the Executive, will not disclose any Confidential Information to any other person and will not use any Confidential Information, except for use or disclosure of Confidential Information for the exclusive benefit of the Company as it may direct or as necessary to fulfill the Executive's continuing duties as an employee of the Company. (c) Return of Property. All memoranda, notes, records, papers, tapes, disks, programs or other documents or forms of documents and all copies thereof relating to the operations or business of the Company or any of its subsidiaries that contain Confidential Information, some of which may be prepared by the Executive, and all objects associated therewith in any way obtained by him shall be the property of the Company. The Executive shall not, except for the use of the Company or any of its subsidiaries, use or duplicate any such documents or objects, nor remove them from facilities and premises of the Company or any subsidiary, nor use any information concerning them except for the benefit of the Company or any subsidiary, at any time. The Executive will deliver all of the aforementioned documents and objects, if any, that may be in his possession to the Company at any time at the request of the Company. 8. Termination for Cause. (a) By the Company. The Executive agrees that this agreement may be terminated by the Company at any time for theft, dishonesty, fraudulent conduct, disclosure of trade secrets, gross dereliction of duty or other grave misconduct on the part of the Executive which is substantially injurious to the Company. (b) By the Executive. The Executive may terminate this Agreement at any time in the event of a material breach by the Company of the terms and conditions of this Agreement. 9. Continuing Liability. Unless this Agreement is terminated by the Company as provided in Section 8 and except in the event of the voluntary resignation (other than pursuant to Section 8), retirement, disability, or death of the Executive, the Company shall have no right to terminate the Agreement without the continuing liability to the Executive for the unexpired term for the Base Salary and fringe benefits provided in this Agreement, in which event: (a) An amount equal to the largest bonus paid or payable to the Executive by the Company with respect to any 12 consecutive month period during the three years ending with the date of termination of this Agreement shall be considered an increase in Base Salary as of January 1 of the year in which such termination occurs for the purpose of determining continued liability to the Executive; and (b) The Company shall provide the Executive with fringe benefits, but in no event shall fringe benefits be reduced in type or amount from the level of fringe benefits being received by the Executive as of the date of termination of this Agreement. The Company shall have a continuing liability to the Executive in the event the Executive terminates this Agreement pursuant to the provisions of Section 8(b) unless the Board of Directors of the Company shall determine in good faith that there has not been such a material breach by the Company as to constitute good cause for termination by the Executive pursuant to Section 8(b). In the event of such determination, the Executive shall be deemed to have voluntarily resigned without cause; provided, however, that any such determination by the Board of Directors shall be subject to judicial review. 10. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. 11. Miscellaneous. (a) Severability. This Agreement is to be governed by and construed according to the laws of the State of Wisconsin. If any provision of this Agreement shall be held invalid and unenforceable for any reason whatsoever, such provision shall be deemed deleted and the remainder of the Agreement shall be valid and enforceable without such provision. (b) Amendments. This Agreement may be modified only in writing signed by the parties hereto. (c) Notices. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (i) If to the Executive: Paul C. Hollowell 1004 Washington Avenue Oshkosh, WI 54901 or, in person, by hand to the Executive at the Executive's place of employment (ii) If to the Company: Oshkosh Truck Corporation 2307 Oregon Street P.O. Box 2566 Oshkosh, WI 54903-2566 Attn: Corporate Secretary or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notices and communications shall be effective when personally delivered or on the second business day following the day on which such item was mailed. (d) Entire Agreement. This Agreement contains the entire understanding between the Company and the Executive with respect to the subject matter hereof, except for the following additional agreements between the Company and the Executive: (i) Key Executive Employment and Severance Agreement (the "KEESA"); (ii) Any stock option agreement under the Company's 1990 Incentive Stock Plan, as amended; and (iii) Any award agreement under the Company's 1994 Long-Term Incentive Compensation Plan. Anything in this Agreement to the contrary notwithstanding, in the event of a Change in Control of the Company (as defined in the KEESA) at a time that the KEESA is in effect, then the rights and obligations of the Company and the Executive in respect of the Executive's employment shall be determined in accordance with the KEESA rather than under this Agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. OSHKOSH TRUCK CORPORATION By: /s/ R. Eugene Goodson R. Eugene Goodson Title: Chairman and Chief Executive Officer Date: September 18, 1995 Attest: /s/ Connie S. Stellmacher AGREED TO: By: /s/ Paul C. Hollowell Paul C. Hollowell Title: Executive Vice President and President - Oshkosh Truck International Date: August 21, 1995 Attest: /s/ Connie S. Stellmacher EX-10.16 5 AGREEMENT TO TERMINATE STRATEGIC ALLIANCE I. The Parties The Parties to this Agreement are: 1.01 Freightliner Corporation, a Delaware corporation located at Portland, Oregon ("Freightliner"). 1.02 Oshkosh Truck Corporation, a Wisconsin corporation located at Oshkosh, Wisconsin ("Oshkosh"). II. The Recitals 2.01 The Date of this Agreement is April 10, 1997. 2.02 The Parties entered into a Strategic Alliance Agreement on June 5, 1995, pursuant to the terms of which Freightliner purchased 350,000 shares of unregistered Class B Common Stock of Oshkosh and 1,250,000 Warrants for the purchase of that number of unregistered Class B Common Shares of Oshkosh, and each Party entered into certain performance covenants. 2.03 Pursuant to the Strategic Alliance Agreement the Parties also entered into a Distribution Agreement on December 13, 1995, pursuant to the terms of which each Party entered into certain performance covenants. 2.04 The Parties now wish to terminate the Strategic Alliance Agreement and the Distribution Agreement, and release each other from their respective performance covenants under those Agreements and other liabilities with respect thereto, as set forth below. III. The Agreement Therefore, the Parties agree as follows: 3.01 The Recitals. The Recitals are a part of this Agreement. 3.02 Termination of Alliance. Effective upon completion of the payments and deliveries described below, the Strategic Alliance Agreement dated June 5, 1995, shall be terminated in all respects. 3.03 Purchase and Sale of Shares and Warrants. On June 9, 1997, or such earlier date as Oshkosh may designate in writing, Oshkosh shall purchase, and Freightliner shall sell all of its 350,000 shares of Class B Common Stock and its 1,250,000 Warrants for the purchase of that number of Class B Common Stock of Oshkosh, for the aggregate sum of $6,750,000.00. 3.031 Freightliner shall deliver to Oshkosh its stock certificate evidencing the 350,000 shares of Class B Common Stock of Oshkosh which were purchased from Oshkosh on June 5, 1995, duly endorsed to the order of Oshkosh, together with its Warrant certificate evidencing the Warrants to purchase 1,250,000 Warrant Shares of Class B Common Stock of Oshkosh which were purchased from Oshkosh on June 5, 1995, duly endorsed to the order of Oshkosh. 3.032 Oshkosh shall deliver to Freightliner a wire transfer of immediately available funds in the amount of $6,750,000.00 to any Bank in the United States designated in writing by Freightliner with accompanying wiring instructions at least two business days prior to the scheduled closing date. 3.033 The Parties each shall deliver such other agreements and payments as are described below in this Agreement. 3.04 Settlement of Accounts. Except as set forth in this Section 3.04, accounts relating to, or arising out of the normal course of business between the Parties shall be settled in the normal course of business. Amounts which either Party has claimed, or could have claimed from the other arising out of disagreements about contribution sharing or costs reimbursements under the Distribution Agreement, or arising out of the transfer to Oshkosh and subsequent return to Freightliner of the manufacture and assembly of the M-915 family of vehicles, shall be settled in full by the payment of the sum of $180,000.00 by Freightliner to Oshkosh. This sum shall be offset against the sum payable to Freightliner by Oshkosh under Sec. 3.03, above. 3.05 Sales of FLD Cabs. Freightliner will sell to Oshkosh its FLD cab requirements in accordance with the Cab Purchase Agreement attached as Exhibit "B" and incorporated here by reference. Customers of Oshkosh who purchase trucks incorporating FLD cabs shall obtain aftermarket service and support for such cabs through authorized Freightliner dealers. 3.06 Sales of Front Drive Axles and Transfer Cases. Oshkosh will sell to Freightliner front drive axles and transfer cases for the Freightliner M-915 family of vehicles in volumes, and upon prices and other terms and conditions that the Parties may agree upon from time to time. 3.07 Termination of Distribution Agreement. The Distribution Agreement between the Parties, dated December 13, 1995, is rescinded as of the Date of this Agreement, except that the obligations of confidentiality, indemnity, warranty, and for continuing support of Oshkosh products sold under that Agreement shall survive, including the termination of this Agreement. 3.08 Mutual Release. Each Party, for itself, its successors and assigns, hereby releases the other Party and any other person, firm or corporation charged with responsibility or liability, their successors, assigns, heirs and legal representatives, from any and all claims, demands, damages, costs, expenses, loss of services or profits, actions and causes of action arising out of the Strategic Alliance Agreement, the Distribution Agreement, and activities of each Party under the said Agreements, except as provided above in this Agreement. Executed by the Parties on the Date of this Agreement. OSHKOSH TRUCK CORPORATION FREIGHTLINER CORPORATION By:____________________________ By:______________________________ Its:___________________________ Its:______________________________ EXHIBIT A INTEROFFICE CORRESPONDENCE 4/23/97 TO: Tim Dempsey FROM: Bruce Herrmann SUBJECT: Freightliner Parts Following is a revision of the 9/17/96 letter showing Oshkosh part numbers, descriptions and prices. Freightliner Parts: Cabs: 2218460 - Cab - 2230530 & 2282130 & 2286800 - Cab spec, L10 - 2281850 - Cab - 15-14555 010 Plate, cab mountt - 2218580 - 1.36 A16-13606-000- Value cab leveling - 2218610 - 38.68 17-10425-002 - Pivot, hood hinge - 2218740 - 3.16 22-29646-003 - Bracker, mirror brace - 2231990 - 1.12 07-10367-000 - Retainer, shift lever boot - 2232010 - 2.35 03-21750-000 - Plate, air cleaner mounting - 2233120 - 21.37 *Supplier Parts - Freightliner Tooling: STNOZX0615 - Behr HUN68d885 - Buckhorn - Shift lever boot - 2232000 - 6.42 DNPVH001906 - Donaldson - Pre-cleaner - 2233090 - 155.06 EBA-11-2080 - Donaldson - Air cleaner - 2233070 - 124.80 GYRIS5-040 - Goodyear - Air bag for cab mount - 2218600 - 10.50 GYR566209131 - Goodyear - Air bag for cab mount - 2232220 17-12178-000 - Specialty Stamping - Classic hood bezel - 2270630 - 121.92 22-23512-000 - Griffith Rubber A06-23321-000 - Delphi Packard - Engine harness 681-890-00-01 - Clevite - Cab mounting isolator - 2218570 - 3.89 18-29846-000 - Arvin - Cab mount shock absorber - 9.81 A15-13788-000 - Clevite - Cab mount tie rod - 2218660 - 13.27 681-810-0106 - Grote - Mirror head - 2219560 - 7.39 18-10960-020 - Con met - Grab handle brkt - 2219860 - 2.53 LOR/J17700-5 - Lord - Hood support - 2229360 - 2.01 22-21853-001 - Grote - Mirror - 2231970 - 2.50 22-21853-002 - Grote - Mirror - 2231980 - 4.79 681-891-00-01 - Clevite - Cab Mount - 2232200 - 1.76 A03-21474 - Custom Aluminum - Air intake duct - 2233100 - 55.60 22-38052-000 - Custom Aluminum/Elixir - Intake duct - 2233110 - 16.79 18-10960-021 - Con Met - Grab handle brkt - 2233350 - 2.53 18-28171-537 - Anodizing - Grab handle 18-15887-000 - Boyd Rubber - Grab handle gasket - 2233370 - .04 680-501-08-01 - Garrett/Allied - Charge air cooler - 2259200 - 351.00 05-16397-001 - Behr - Radiator - 2259210 - 399.19 2270390 - Betts - Spring, torsion - 3.09 2270400 - Betts - Spring, torsion - 2.75 * Vendor prices shown are current prices. Oshkosh will negotiate future prices directly with vendors. EXHIBIT B CAB REQUIREMENTS AGREEMENT BETWEEN FREIGHTLINER CORPORATION AND OSHKOSH TRUCK CORPORATION I. The Parties The Parties to this Agreement are: 1.01 Freightliner Corporation, a Delaware corporation having its principal place of business at 4747 North Channel Avenue, Portland, Oregon 97208 ("Freightliner"). 1.02 Oshkosh Truck Corporation, a Wisconsin corporation located at 2307 Oregon Street, Oshkosh, WI 54901 ("Oshkosh"). II. The Recitals 2.01 The Date of this Agreement is April 10, 1997. 2.02 Freightliner manufactures and sells vocational and other vehicles and components and parts under the trade name of Freightliner, and 2.03 Oshkosh manufactures and sells heavy duty on/off highway trucks and rear discharge concrete mixer systems for a wide variety of applications under the trade name of Oshkosh. 2.04 Freightliner and Oshkosh entered into a Strategic Alliance Agreement on June 5, 1995. 2.05 On the same Date of this Agreement the parties also entered into an Agreement to Terminate Strategic Alliance. III. The Agreement 3.01 The Recitals are a part of this Agreement. 3.02 Freightliner shall manufacture and sell to Oshkosh, and Oshkosh shall purchase from Freightliner up to one hundred fifty (150) Freightliner FLD truck cabs ("Cabs") per year during the term of this Agreement, for installation on Oshkosh "FF" vehicles only. None of the Cabs may be installed on or used with any Pierce products or models or re-sold to any third party. Aftermarket parts for such Cabs shall be available from and purchased through Freightliner dealers. 3.03 The prices of "FF" cab componentry which are presently available are set forth on Attachment "A," attached to this Agreement and incorporated herein by reference. These prices shall apply with respect to any and all standard configuration products ordered by Oshkosh from Freightliner for delivery through the end of the 1997 model year. Thereafter, such prices may be adjusted reasonably from time to time by Freightliner subject, however, to the following: 3.031. A price shall not be increased except upon at least ninety (90) days' prior written notice from Freightliner to Oshkosh of the increase, including the anticipated amount thereof; 3.032. A price increase shall not be retroactive in effect, and under no circumstances shall any price increase be allowed with respect to any accepted order; and 3.033. A price shall be adjusted only one (1) time per calendar year, beginning with the 1998 model year. 3.04 Freightliner shall give purchase orders of Oshkosh under Sections 3.02, above, the highest priority for completion of manufacture and delivery. Freightliner promptly shall notify Oshkosh at any time that it determines that it is reasonably probable that an Oshkosh delivery date cannot be met. Such notice also shall indicate the date(s) on which such delivery(s) will be met, so that Oshkosh can determine whether such delay is acceptable. 3.05 Periodically, Oshkosh may issue a blanket purchase order for FF cab componentry required by Oshkosh for the period designated in such order. All such blanket purchase orders shall be subject to the terms and conditions of this Agreement and, unless the Parties otherwise agree in writing, to the standard terms and conditions of sale used generally from time to time by Freightliner for sale to third parties, but in the event of any conflict between (A) the terms and conditions of this Agreement (or other terms agreed upon in writing by the Parties) and (B) said standard terms and conditions, the terms and conditions referred to in this Agreement shall control. Freightliner shall receive and process each blanket purchase order in a timely manner and shall notify Oshkosh promptly of its order acceptance(s). 3.06 Pursuant to blanket purchase orders issued by Oshkosh under Paragraph 3.08, Oshkosh shall issue individual releases against such orders for shipments of Freightliner products as specified in each release. Freightliner shall make timely shipments under all individual releases. 3.07 Payment terms shall be net thirty (30) days after delivery. Delivery shall be F.O.B. Portland. 3.08 Warranty 3.081. Freightliner warrants to Oshkosh that each Cab component supplied under this Agreement (i) shall be new; (ii) shall meet Freightliner's specifications, drawings and/or other descriptive materials pertaining to it; (iii) shall conform to applicable federal, state and/or local statutes, laws, rules, regulations, codes and ordinances; (iv) shall be free from liens and encumbrances; and (v) shall not infringe any patent, trade secret or other proprietary right of any third party. 3.082. In addition to the warranties set forth in Subparagraph 3.111, each Freightliner cab component supplied under this Agreement shall be warranted by Freightliner as more particularly set forth on Attachment "B" attached hereto and incorporated herein (the "Freightliner Limited Warranty"). Freightliner may at any time or from time to time amend the Freightliner Limited Warranty, but no such amendment shall be effective except upon ninety (90) days' prior written notice from Freightliner to Oshkosh of such amendment and of Freightliner's intention to make the same, and no such amendment shall be retroactive in effect or, under any circumstances, applicable to any accepted offer. A claim for breach of the Freightliner Limited Warranty shall be handled in accordance with the Freightliner Limited Warranty. 3.083. Freightliner shall not be liable for incidental or consequential damages, including lost profits or production downtime, incurred by Oshkosh as a result of a breach of the warranties set forth in this Paragraph 3.11. Said warranties shall be the sole and exclusive warranties and are in lieu of all other warranties, express or implied, and exclude the warranties of merchantability and fitness for a particular purpose. 3.09 Oshkosh shall provide all engineering, including application engineering, necessary for the proper and safe installation of the Cab components and parts in its vocational trucks. Freightliner shall provide all necessary product labeling with each Cab together with Operator, Service, and Parts Manuals ("Operator Materials") for each installation. Freightliner's recommended product labeling shall include but not be limited to, warning labels to be affixed to the vehicle and system in accordance with Freightliner's customary procedures. 3.10 Except as provided below, this Agreement shall have an initial term which begins on the date of this Agreement and ends on December 31, 2000. 3.101. Freightliner may terminate this Agreement upon one hundred eighty (180) days' prior written notice to Oshkosh, in the event that Freightliner substantially replaces and discontinues production of its FLD cabs. Oshkosh may terminate this Agreement upon ninety (90) days' prior written notice of Freightliner. 3.102. A Party may terminate this Agreement immediately upon written notice to the other Party if said other Party ceases to do business or is declared by a court having jurisdiction to be insolvent or bankrupt, or makes an assignment or other arrangement for the benefit of creditors, or sells, assigns or transfers all or substantially all of its assets to another party outside of the ordinary course of business. 3.103. Notwithstanding any provision of this Agreement to the contrary, neither the expiration of the term nor the termination or non-renewal of this Agreement shall affect any of a Party's rights or obligations arising under this Agreement prior to the effective date of the expiration of the term or the termination or non-renewal of this Agreement with respect to products sold and delivered at or prior to the time of such expiration of the term or the termination or non-renewal of this Agreement. This Agreement shall continue to apply with respect to any purchase order submitted by Oshkosh to Freightliner under this Agreement prior to the effective date of the expiration of the term or the termination or non-renewal of this Agreement. 3.104. Neither Party shall be liable to the other by reason of termination, non-renewal or breach of this Agreement for compensation, reimbursement or damages for: (i) loss of present or prospective profits on sales or anticipated sales; (ii) consequential, special, or incidental damages or production downtime; (iii) goodwill or loss thereof; or (iv) expenditures, investment or any other type of commitment, financial or otherwise, made in connection with the business of such Party or in reliance upon the existence of this Agreement. 3.11 Oshkosh may not use or advertise the name "Freightliner/TM/," in connection with its marketing and sale of its "FF" vehicles incorporating Freightliner products. Oshkosh shall not publicly use or advertise the Freightliner/TM/ trademark without the prior written approval of Freightliner. 3.12 General Provisions 3.121. Freightliner shall, at Freightliner's expense, furnish Oshkosh with all information necessary to enable Oshkosh to support aftermarket service of installed Freightliner cab components and parts. 3.122. All notices under this Agreement shall be in writing and shall be delivered personally or sent by certified mail, return receipt requested, postage prepaid, by telex (acknowledged by answer back), or by telecopy of telefax (confirmed by certified mail, return receipt requested, postage prepaid) addressed to the Parties at the addresses immediately below, or to such other address of which either Party may advise the other by notice under this Subparagraph 3.132. Notices will be deemed given when personally delivered or sent as specified above. Freightliner Corporation Oshkosh Truck Corporation 4747 North Channel Avenue 2307 Oregon Street P.O. Box 3849 P.O. Box 2566 Portland, OR 97208-3849 Oshkosh, WI 54903-2566 Fax No. Fax No. 414-233-9669 Atten: Atten: Vice President & General Counsel 3.123. Any claim or dispute arising under or out of this Agreement shall first be presented to the other Party in a concise written statement of the claim or dispute, accompanied by supporting facts or data and by a designation of a reasonable time period [but not more than thirty (30) days] for resolution. If the matter has not been resolved within the designated time period, the matter shall be referred to the CEO of each of the Parties for resolution. If the CEOs are unable to agree upon a resolution within fourteen (14) days after the matter is referred to them, then this issue is at impasse and either party may pursue any remedy legally available to them. Neither Party shall initiate arbitration proceedings or litigation without first (i) following the procedure described above and (ii) giving the other Party at least ten (10) days' prior written notice of its intention to do so. 3.124. Any headings used herein are for convenience and reference only and are not part of this Agreement, nor shall they in any way affect the interpretation hereof. 3.125. Any action or the breach of this Agreement, except for actions for any breach of warranty, shall be brought within three (3) years from the date of the accrual of the cause of action. The construction and interpretation of this Agreement shall be governed by the laws of the State of Oregon. 3.126. Each Party shall use its best efforts and act in good faith in carrying out this Agreement. 3.127. This Agreement shall be amended only in writing signed by the Parties to this Agreement. 3.128. Neither Party shall, voluntarily or involuntarily, by operation of law or otherwise, assign or otherwise transfer this Agreement, in whole or in part, without the prior, express written consent of the other Party, which consent shall not be unreasonably withheld. 3.129. This Agreement contains the entire understanding and agreement of the Parties with respect to the subject matter of this Agreement, and this Agreement shall supersede all prior communications, representations, understandings, promises or agreements between the Parties, whether verbal or written, with respect to the subject matter of this Agreement. 3.1210. This Agreement shall bind and benefit the Parties and their respective legal representatives, successors and permitted assigns. 3.1211. The warranties and representations made by a Party in this Agreement shall survive the execution and delivery of this Agreement. 3.13 Indemnification 3.131 Freightliner shall, upon Oshkosh's written request, defend, indemnify, and hold Oshkosh harmless of and from any claim, demand, suit, damage, liability, cost or expense, including attorney fees and expenses, final judgments and settlements, that may be asserted, commenced or arise against Oshkosh by reason of alleged breach of warranty, defects in material, design (except Oshkosh designs and parts), assembly, or manufacture of Products sold by Freightliner to Oshkosh under this Agreement. Freightliner shall not be required to indemnify Oshkosh if the basis of the liability asserted would have been precluded by the inclusion of the Freightliner warranty in the contract with the end user, in the event Oshkosh has any liability for incidental or consequential damages arising out of the sale of Products in the event Oshkosh has assumed liability independent of the Freightliner warranty. 3.132. Oshkosh shall indemnify, defend and hold Freightliner harmless from and against any and all claims or actions by third parties, damages, losses, costs and expenses (including, without limitation, reasonable attorneys' fees and other legal costs and expenses) for injury to or death of any person or persons or damage to or destruction of any property to the extent that such personal injury, death or property damage is caused by (i) any negligent act or omission of Oshkosh or Oshkosh's employees or agents, (ii) any alteration made by Oshkosh or Oshkosh employees or agents to Operator Materials, or to Freightliner's recommended product labeling, without Freightliner's prior consent or concurrence, or (iii) any allegations relating to Oshkosh designs. Freightliner shall promptly notify Oshkosh of any claim or action for which indemnification will be sought by Freightliner under this Subparagraph 3.162, and Oshkosh shall have the right, at its expense, to assume the defense or the settlement thereof using counsel reasonably acceptable to Freightliner , provided, however, that Freightliner shall have the right to participate, at its own expense, with respect to any such claim, action or proceeding, and no such claim, action or proceeding shall be settled without the prior written consent of Freightliner, which consent shall not be unreasonably withhold, and in connection with any such claim, action or proceeding, the Parties shall cooperate with each other and provide each other with access to relevant books and records in each Party's possession or control. 3.14 Proprietary and Confidential Information 3.141 Proprietary Information. Oshkosh and Freightliner will use their best efforts to keep confidential any proprietary or secret information developed by the other party. This obligation shall not apply to information received by either party which : (a) is or becomes publicly known through no fault of the recipient party; (b) is already known to the best efforts to keep confidential any proprietary or secret information recipient party at the time of disclosure; (c) has been rightfully received by the recipient party from a third party; (d) is independently developed by the recipient party; (e) is disclosed to a court or government agency pursuant to a subpoena or administrative order; or (f) is expressly released in writing by the other party. 3.142 Confidential and Third Parties. The parties' obligations under this Paragraph 7 are not violated by dealings with consultant, suppliers, or authorized dealers. However, in such dealings each party will undertake to maintain the proprietary nature of proprietary or secret information via confidential agreements or other appropriate measures. 3.173. The covenants set forth in this Paragraph 3.14 shall survive termination or expiration of this Agreement for any reason, for a period of five (5) years, and shall bind the parties, their successors and assigns. 3.15 Oshkosh agrees further that it shall not disassemble, decompile or otherwise reverse engineer, directly or indirectly, any or all of the proprietary parts or of Freightliner, except that Oshkosh may, with prior authorization from Freightliner (which authorization shall not be unreasonably withheld), disassemble any proprietary part of Freightliner incident to the manufacture of any Oshkosh FF truck incorporating a Freightliner cab components or parts under this Agreement. 3.16 Force Majeure 3.161 Neither Party shall be liable to the other for any delay in or impairment of performance under this Agreement which results in whole or in part from: fire, floods or other catastrophes; strikes, lockouts or labor disruption; acts of God; wars, riots or embargo delays; government allocations or priorities; shortages of transportation, fuel, labor or materials; inability to procure supplies or raw materials; severe weather conditions; or any other circumstances or cause beyond the control of such Party in the reasonable conduct of its business. Executed by the Parties on the Date of this Agreement. FREIGHTLINER CORPORATION OSHKOSH TRUCK CORPORATION By By Name/Title Name/Title Date Date EX-13 6 Consolidated Financial Statements Oshkosh Truck Corporation Three years ended September 30, 1997 FINANCIAL HIGHLIGHTS
Years ended September 30, (In thousands, except per share amounts) 1997 1996 1995 1994 1993 Net Sales $683,234 $413,455 $438,557 $581,275 $537,065 Income (Loss) From Continuing Operations 10,006 (241) 11,637 13,558 1,596(1) Per Share 1.18 (.03) 1.32 1.56 .18(1) Discontinued Operations --- (2,859) (2,421) (504) (533) Per Share --- (.32) (.28) (.06) (.06) Net Income (Loss) 10,006 (3,100) 9,216 13,054 1,063(1) Per Share 1.18 (.35) 1.04 1.50 .12(1) Dividends Per Share Class A Common Stock .435 .435 .435 .435 .435 Common Stock .500 .500 .500 .500 .500 Total Assets 420,394 435,161 200,916 198,678 235,386 Expenditures for Property, Plant and Equipment 6,263 5,355 5,347 5,178 7,697 Depreciation 9,382 8,621 8,409 9,278 8,292 Amortization of Goodwill and Other Intangible Assets 4,470 171 --- --- --- Net Working Capital 50,113 67,469 91,777 82,010 100,967 Long-Term Debt (Including Current Maturities) 135,000 157,882 --- 610 40,338 Shareholders' Equity 120,900 121,602 113,413 121,558 112,004 Book Value Per Share 14.55 14.08 14.82 13.96 12.89 Backlog 361,000 433,000 350,000 498,000 437,000 (1) After a charge of $4.1 million, or $.47 per share, to reflect the cumulative effect of change in method of accounting for postretirement benefits.
FINANCIAL STATISTICS
Cash Dividends Quarterly (Payable February, May, August, November) (In thousands, except per share amounts) Fiscal 1997 Fiscal 1996 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. Class A Common Stock Declared $ 44 $ 44 $ 45 $ 44 $ 45 $ 45 $ 44 $ 43 Per Share .10875 .10875 .10875 .10875 .10875 .10875 .10875 .10875 Common Stock Declared $ 988 $ 943 $1,029 $1,030 $1,019 $1,040 $1,054 $1,061 Per Share .125 .125 .125 .125 .125 .125 .125 .125
Oshkosh Truck Corporation Common Stock Price* The company's Common Stock is quoted on the National Association of Securities Dealers Automated Quotation System (NASDAQ) National Market System. The following table sets forth prices reflecting actual sales as reported on the NASDAQ National Market System. Quarter Ended Fiscal 1997 Fiscal 1996 High Low High Low September $17-1/2 $13-1/4 $14-1/2 $11-1/4 June 15-7/8 10-5/8 15-3/8 13-7/8 March 12-7/8 10-1/8 15-3/4 13-3/8 December 12-1/4 10-1/8 15-3/4 14-1/4 Quarterly Financial Data (Unaudited) (In thousands, except per share amounts)
Fiscal 1997 Fiscal 1996 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. Net Sales $185,853 $176,596 $170,465 $150,320 $117,983 $111,950 $103,139 $80,383 Gross Income 24,496 21,897 22,868 19,583 4,256 7,647 12,725 10,451 Income (Loss) From Continuing Operations 3,116 2,792 2,474 1,624 (1,645) (2,398) 2,230 1,572 Per Share .38 .33 .28 .19 (.19) (.27) .25 .18 Discontinued Operations --- --- --- --- (648) (2,211) --- --- Per Share --- --- --- --- (.07) (.25) --- --- Net Income (Loss) 3,116 2,792 2,474 1,624 (2,293) (4,609) 2,230 1,572 Per Share .38 .33 .28 .19 (.26) (.52) .25 .18
For the fourth quarter of 1996, continuing operations includes, on an after-tax basis, approximately $2.4 million related to the IPF subcontract and additional warranty provisions partially offset by reversal of $2.0 million of income tax provisions and related accrued interest. Discontinued operations for the fourth quarter of 1996 includes $0.6 million of after-tax charges related to adjustments of estimated warranty expenses. OSHKOSH TRUCK CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Fiscal Year 1997 Compared to Fiscal Year 1996 Oshkosh Truck Corporation (the company) reported net income of $10.0 million, or $1.18 per share, on sales of $683.2 million for the year ended September 30, 1997, compared to a net loss of $3.1 million, or $0.35 per share, on sales of $413.5 million for the year ended September 30, 1996. The fiscal 1997 results include a full year of sales and earnings of Pierce Manufacturing Inc. (Pierce), a leading manufacturer and marketer of fire trucks and other fire apparatus in the U.S., which was acquired on September 18, 1996 (see Acquisitions). The fiscal 1996 results were adversely affected by after-tax charges of $11.3 million, including $3.2 million related to a defense subcontract to Steeltech Manufacturing, Inc. (Steeltech), $3.4 million associated with the company's Mexican bus affiliates, and warranty and other related costs of $4.7 million. In fiscal 1996, the company also recognized after-tax benefits of $2.0 million on the reversal of income tax provisions and related accrued interest. Sales of both commercial and defense products increased in fiscal 1997 compared to fiscal 1996. Commercial sales in fiscal 1997 were $394.6 million, an increase of $232.6 million, or 143.6% from 1996, principally due to inclusion of a full year of Pierce sales in fiscal 1997. Commercial export sales totaled $20.7 million and $20.4 million, respectively, in fiscal 1997 and fiscal 1996. Sales of defense products totaled $288.6 million in fiscal 1997, an increase of $37.2 million, or 14.8%, compared to fiscal 1996. The increase in defense sales is primarily due to an increase in sales of ISO-Compatible Palletized Flatracks (IPF), which are being produced by Steeltech, from $8.7 million in fiscal 1996 to $41.4 million in fiscal 1997. Defense export sales also increased to $16.6 million in fiscal 1997 compared to $2.1 million in fiscal 1996. Gross income in fiscal 1997 totaled $88.8 million, or 13.0% of sales, compared to $35.1 million, or 8.5% of sales, in fiscal 1996. The increase in gross income in fiscal 1997 was principally due to increased sales volume as a result of the acquisition of Pierce. In addition, fiscal 1996 gross income was reduced by pre-tax charges of $5.1 million related to production delays and cost overruns associated with the IPF subcontract to Steeltech and increased warranty and other related costs of $5.5 million (pre-tax). Operating expenses totaled $60.1 million, or 8.8% of sales, in fiscal 1997 compared to $38.7 million, or 9.4% of sales, in fiscal 1996. The increase in operating expenses in fiscal 1997 related principally to the operating expenses of Pierce and amortization of goodwill and other intangible assets associated with the acquisition of Pierce. The company recognized pre-tax charges of $3.2 million in fiscal 1996 to write off its investment in Steeltech and to write off its remaining investments and advances associated with its Mexican bus affiliates due to prolonged weakness in the Mexican economy and continuing high losses and high leverage reported by the Mexican affiliates. Interest expense increased to $12.7 million in fiscal 1997 compared to $0.9 million in fiscal 1996 as a result of the financing for the Pierce acquisition (see Liquidity and Capital Resources). Miscellaneous expense was $0.3 million in fiscal 1997 compared to miscellaneous income of $1.5 million in fiscal 1996. The miscellaneous income in fiscal 1996 arose primarily from the reversal of accrued interest related to income taxes. The provision for income taxes in fiscal 1997 was $6.5 million, or 39.4% of pre-tax income, compared to a credit for income taxes of $1.7 million in fiscal 1996. Fiscal 1997 and fiscal 1996 benefited from the reversal of $0.9 million and $1.0 million, respectively, of income tax provisions recognized in earlier periods. In addition, the effective income tax rate in fiscal 1997 was adversely affected by non-deductible goodwill of $2.6 million arising from the Pierce acquisition. The $2.9 million after-tax loss from discontinued operations ($4.7 million pre-tax) in fiscal 1996 resulted from the write-off of receivables of $2.6 million (pre-tax) related to the company's Mexican bus affiliates and from a $2.1 million pre-tax charge for additional warranty and other related costs with respect to the company's former U.S. chassis business which was sold in June 1995. Fiscal Year 1996 Compared to Fiscal Year 1995 The company reported a net loss of $3.1 million, or $0.35 per share, on sales of $413.5 million for the year ended September 30, 1996, compared to net income of $9.2 million, or $1.04 per share, on sales of $438.6 million for the year ended September 30, 1995. The fiscal 1996 results were adversely affected by after-tax charges of $11.3 million, including $3.2 million related to Steeltech, $3.4 million associated with the company's Mexican bus affiliates, and warranty and other related costs of $4.7 million. The company also recognized after-tax benefits of $2.0 million on the reversal of income tax provisions and related accrued interest in fiscal 1996. During the third quarter of fiscal 1995, the company sold its chassis manufacturing business in the U.S. and its interest in a joint venture in Mexico producing chassis for the Mexican market to Freightliner Corporation (Freightliner). The activities of these businesses are reported as discontinued operations and resulted in a charge to income in fiscal 1995. In fiscal 1996, further after-tax charges of $1.2 million were reported with respect to warranty and other related costs of the discontinued operations. The results of Pierce from the date of acquisition to September 30, 1996, which were not material, have been included in the consolidated results of the company. Sales of both commercial and defense products declined in fiscal 1996 compared to fiscal 1995. Commercial sales in fiscal 1996 decreased $14.8 million, or 8.4%, from fiscal 1995 to $162.0 million, primarily due to a decline in sales of commercial van trailers of $31.7 million. Sales of all other commercial product lines increased in fiscal 1996. Commercial export sales totaled $20.4 million and $17.5 million, respectively, in fiscal 1996 and fiscal 1995. Sales of defense products totaled $251.5 million in fiscal 1996, a decrease of $10.3 million, or 3.9%, compared to fiscal 1995. The decrease in defense sales was a result of delays in production of IPF's. Defense export sales were $2.1 million in fiscal 1996 compared to $1.6 million in fiscal 1995. Gross income in fiscal 1996 totaled $35.1 million, or 8.5% of sales, compared to $54.0 million, or 12.3%, of sales in fiscal 1995. Fiscal 1996 margins were reduced by pre-tax charges of $5.1 million related to production delays and cost overruns associated with the IPF subcontract to Steeltech, increased warranty and other related costs of $5.5 million (pre-tax), and lower volume. Operating expenses totaled $38.7 million, or 9.4% of sales, in fiscal 1996 compared to $34.7 million, or 7.9% of sales, in fiscal 1995. The company recognized pre-tax charges of $3.2 million in fiscal 1996 to write off its investment in Steeltech and to write off its remaining investments and advances associated with its Mexican bus affiliates. Miscellaneous income increased to $1.5 million in fiscal 1996 compared to miscellaneous expense of $0.5 million in fiscal 1995 as a result of the reversal of accrued interest related to income taxes in fiscal 1996. The credit for income taxes totaled $1.7 million in fiscal 1996, benefiting from the reversal of $1.0 million in income tax provisions recognized in earlier periods, compared to a provision for income taxes of $7.3 million in fiscal 1995. The $2.9 million after-tax loss from discontinued operations ($4.7 million pre-tax) in fiscal 1996 resulted from the write-off of receivables of $2.6 million (pre-tax) related to the company's Mexican bus affiliates and from a $2.1 million pre-tax charge for additional warranty and other related costs with respect to the company's former U.S. chassis business which was sold in June 1995. The $2.4 million after-tax loss from discontinued operations in fiscal 1995 reflects losses on the sale of the company's former U.S. chassis business and from the sale of an interest in a former Mexican bus affiliate. Acquisitions On September 18, 1996, the company acquired for cash all of the issued and outstanding stock of Pierce, a leading manufacturer and marketer of fire trucks and other fire apparatus in the U.S. The acquisition price of $156.9 million, including acquisition costs and net of cash acquired, was financed from borrowings under a bank credit facility. On November 9, 1995, the company through its wholly-owned subsidiary, Summit Performance Systems, Inc. (Summit), acquired the inventory, land, buildings, machinery and equipment, and technology of Friesz Manufacturing Company (Friesz), a manufacturer of concrete mixer systems and related aftermarket replacement parts, from available cash for $3.9 million (see Subsequent Event). Financial Condition Year Ended September 30, 1997 During fiscal 1997, cash increased $23.1 million. Cash provided from operating activities of $65.8 million was used primarily to fund $6.3 million of capital additions, $1.7 million of payments related to discontinued operations, $22.9 million of long-term debt payments, $6.5 million of purchases of common stock and common stock warrants (net of stock option exercise proceeds), and $4.2 million of dividends. Year Ended September 30, 1996 During fiscal 1996, cash decreased $29.6 million. The acquisitions of Pierce and Friesz for $160.8 million, cash used for operating activities of $16.2 million, capital additions of $5.4 million, stock repurchases of $5.4 million and dividends of $4.4 million, were funded principally from long-term borrowings of $157.9 million, from available cash and from cash provided from discontinued operations of $4.7 million. Cash was used for operating activities in fiscal 1996 due to higher working capital requirements associated with sales in the fourth quarter of fiscal 1996 and first quarter of fiscal 1997. Liquidity and Capital Resources The following contains forward looking statements, including statements that include the words "believes" and "expects" or words of similar import with reference to the company. These statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those described in any such statement. The company's principal uses of cash for the next several years will be interest and principal payments on acquisition indebtedness, capital expenditures, dividends, and potentially further acquisitions. On September 18, 1996, the company entered into a bank credit agreement (the Bank Credit Agreement) to finance the acquisition of Pierce and to refinance a previous revolving credit facility. The Bank Credit Agreement consists of a $150 million term loan which requires annual principal payments of $15 million through fiscal 2002 and a final payment of $60 million on September 30, 2003, and a $50 million revolving credit facility for working capital purposes which expires on September 30, 1999. Through December 8, 1997, the company has made the $15 million principal payments due in September 1997 and 1998, and paid another $25 million which will be prorated against the principal payments required in fiscal 1999 through fiscal 2003. At September 30, 1997, $3.0 million of standby letters of credit reduced available capacity under the revolving credit facility to $47.0 million. The total of all term loan and revolving credit facility borrowings, excluding letters of credit, must be reduced to or below $145.0 million and $130.0 million for 60 consecutive days in fiscal 1998 and 1999, respectively. The Bank Credit Agreement limits capital expenditures to $15 million annually. Capital expenditures are projected to approximate $8 to $10 million annually for the next several years. The Bank Credit Agreement also restricts other corporate activities as described in Note 4 to the audited consolidated financial statements. The company believes that such limitations should not impair its future operating activities. The company believes its internally generated cash flow, supplemented by U.S. Government progress payments when applicable and borrowings available under the Bank Credit Agreement will be adequate to meet working capital and other operating and capital requirements of the company during fiscal 1998. Substantial additional borrowings beyond those available under the Bank Credit Agreement would be required to complete the acquisition described under Subsequent Event. The company is dependent on its sales of defense products to the U.S. Government, which represented $288.6 million (42.2%) and $251.5 million (60.8%) of total sales during fiscal 1997 and fiscal 1996, respectively. Substantial decreases in the company's level of defense business from the current level could have an adverse effect on the company's profitability. The company expects fiscal 1998 sales to the U.S. Government to decrease $20 to $30 million from fiscal 1997 levels, although actual sales could vary based on changes in the federal budget, international sales, and other factors. Accordingly, it will be necessary for the company to reduce its fixed costs to maintain the profitability of its defense business at fiscal 1997 levels. On May 2, 1997, the company and Freightliner formally terminated a strategic alliance formed on June 2, 1995. The company repurchased from Freightliner 350,000 shares of its Common Stock and 1,250,000 warrants for the purchase of additional shares of Common Stock for a total of $6.8 million. The company and Freightliner will continue to supply each other with parts and components. Backlog The company's backlog at fiscal year-end 1997 was $361 million, compared to $433 million at year-end 1996. The backlog at fiscal year-end 1997 includes $205 million with respect to U.S. Government contracts, $120 million related to Pierce and the remainder relates to other commercial products. The $72 million decrease in the backlog from year-end 1996 to year-end 1997 is primarily due to a $67 million decrease in the backlog related to U.S. Government contracts. Approximately 99% of the company's backlog pertains to fiscal 1998 business. Virtually all the company's revenues are derived from customer orders prior to commencing production. Stock Buyback In July 1995, the company's board of directors authorized the repurchase of up to 1,000,000 shares of Common Stock. As of September 30, 1997 and 1996, the company had purchased 461,535 shares under this program at a cost of $6.6 million. New Accounting Standards In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share," which is required to be adopted effective for both interim and annual financial statements for periods ending after December 15, 1997. Among other provisions, the dilutive effect of stock options must be excluded under the new requirements for calculating basic earnings per share, which will replace primary earnings per share. This change is not expected to materially impact the company's earnings per share calculations. In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes the standards for reporting and displaying comprehensive income and its components (revenues, expenses, gains, and losses) as part of a full set of financial statements. This statement requires that all elements of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The statement is effective for fiscal years beginning after December 15, 1997. Since this statement applies only to the presentation of comprehensive income, it will not have any impact on the company's results of operations, financial position or cash flows. In June 1997, the Financial Accounting Standards Board also issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 establishes the standards for the manner in which public enterprises are required to report financial and descriptive information about their operating segments. The statement defines operating segments as components of an enterprise for which separate financial information is available and evaluated regularly as a means for assessing segment performance and allocating resources to segments. A measure of profit or loss, total assets, and other related information are required to be disclosed for each operating segment. In addition, this statement requires the annual disclosure of information concerning revenues derived from the enterprise's products or services, countries in which it earns revenue or holds assets, and major customers. The statement is also effective for fiscal years beginning after December 15, 1997. The adoption of SFAS No. 131 will not affect the company's results of operations or financial position, but will affect the disclosure of segment information. Subsequent Event On December 8, 1997, the company announced that it had agreed to acquire McNeilus Companies, Inc. (McNeilus), a $300-million manufacturer and marketer of refuse and recycling truck bodies, rear-discharge concrete mixers, and ready-mix batch plants. The total purchase cost for all McNeilus stock and related non-compete and ancillary agreements is $250 million in cash. The transaction is subject to the approval of the appropriate governmental authorities and is expected to close in the first quarter of calendar 1998. Under certain conditions, if the acquisition is not consummated, the company may be required to pay McNeilus a fee of $10 million, and conversely, McNeilus may be required to pay a $10 million fee to the company. Oshkosh Truck Corporation Consolidated Statements of Income (Loss) Years ended September 30, (In thousands, except per share amounts) 1997 1996 1995 Continuing operations: Net sales $683,234 $413,455 $438,557 Cost of sales 594,390 378,376 384,579 -------- -------- -------- Gross income 88,844 35,079 53,978 Operating expenses: Selling, general and administrative 47,742 32,205 29,242 Engineering, research and development 7,847 6,304 5,443 Amortization of goodwill and other intangibles 4,470 171 --- -------- -------- -------- Total operating expenses 60,059 38,680 34,685 -------- -------- -------- Income (loss) from operations 28,785 (3,601) 19,293 Other income (expense): Interest expense (12,722) (929) (679) Interest income 717 1,040 774 Miscellaneous, net (278) 1,508 (466) -------- -------- -------- (12,283) 1,619 (371) -------- -------- -------- Income (loss) from continuing operations before income taxes 16,502 (1,982) 18,922 Provision (credit) for income taxes 6,496 (1,741) 7,285 -------- -------- -------- Income (loss) from continuing operations 10,006 (241) 11,637 Discontinued operations: Loss from discontinued operations, net of income tax benefit of $1,623 --- --- (3,137) Gain (loss) on disposal of operations, net of income tax benefit of $1,827 in 1996 and $357 in 1995 --- (2,859) 716 -------- -------- -------- --- (2,859) (2,421) -------- -------- -------- Net income (loss) $10,006 $(3,100) $9,216 ======== ======== ======== Earnings (loss) per common share: Continuing operations $1.18 $(.03) $1.32 Discontinued operations --- (.32) (.28) -------- -------- -------- Net income (loss) $1.18 $(.35) $1.04 ======== ======== ======== See accompanying notes. Oshkosh Truck Corporation Consolidated Balance Sheets September 30, (In thousands) 1997 1996 Assets Current assets: Cash and cash equivalents $23,219 $ 127 Receivables, net 81,235 76,624 Inventories 76,497 106,289 Prepaid expenses 3,405 3,619 Refundable income taxes --- 6,483 Deferred income taxes 9,479 7,055 ------- -------- Total current assets 193,835 200,197 Deferred charges 1,067 2,645 Other long-term assets 6,660 7,834 Property, plant and equipment: Land 7,172 7,131 Buildings 42,220 40,421 Machinery and equipment 78,270 77,485 ------- ------- 127,662 125,037 Less accumulated depreciation (72,174) (67,002) ------- -------- Net property, plant and equipment 55,488 58,035 Goodwill and other intangible assets, net 163,344 166,450 ------- ------- Total assets $420,394 $435,161 ======= ======= Liabilities and Shareholders' Equity Current liabilities: Accounts payable $48,220 $ 49,178 Customer advances 30,124 27,793 Payroll-related obligations 15,157 12,843 Accrued warranty 12,320 8,942 Other current liabilities 21,365 16,997 Net current liabilities of discontinued operations 1,536 1,975 Current maturities of long-term debt 15,000 15,000 ------- ------- Total current liabilities 143,722 132,728 Long-term debt 120,000 142,882 Postretirement benefit obligations 10,147 9,517 Other long-term liabilities 1,811 1,843 Net long-term liabilities of discontinued operations 1,362 2,581 Deferred income taxes 22,452 24,008 Shareholders' equity: Class A Common Stock 4 4 Common Stock 89 89 Paid-in capital 13,591 16,059 Retained earnings 120,085 114,246 ------- ------- 133,769 130,398 Cost of Common Stock in treasury (12,869) (8,796) ------- -------- Total shareholders' equity 120,900 121,602 ------- ------- Total liabilities and shareholders' equity $420,394 $435,161 ======= ======= See accompanying notes. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended September 30, (In thousands, except share and per share amounts) Pension Common Paid-In Retained Treasury Liability Stock Capital Earnings Stock Adjustment Total Balance at September 30, 1994 $90 $7,623 $116,890 $(2,591) $(454) $121,558 Net income --- --- 9,216 --- --- 9,216 Cash dividends: Class A Common Stock ($.435 per share) --- --- (191) --- --- (191) Common Stock ($.500 per share) --- --- (4,218) --- --- (4,218) Sale of 350,000 shares of Common Stock 3 5,247 --- --- --- 5,250 Sale of 1,250,000 stock warrants --- 4,187 --- --- --- 4,187 Common Stock issuance costs and cost of stock restriction agreement --- (863) --- --- --- (863) Purchase of Common Stock for treasury --- --- --- (933) --- (933) Exercise of stock options --- 12 --- 121 --- 133 Incentive compensation awards --- 327 --- --- --- 32 Pension liability adjustment --- --- --- --- (1,053) (1,053) ------ ------ ------- ------- ------- ------- Balance at September 30, 1995 93 16,533 121,697 (3,403) (1,507) 133,413 Net loss --- --- (3,100) --- --- (3,100) Cash dividends: Class A Common Stock ($.435 per share) --- --- (177) --- --- (177) Common Stock ($.500 per share) --- --- (4,174) --- --- (4,174) Purchase of Common Stock for treasury --- --- --- (5,618) --- (5,618) Exercise of stock options --- 43 --- 225 --- 268 Termination of incentive compensation awards --- (517) --- --- --- (517) Pension liability adjustment --- --- --- --- 1,507 1,507 ------ ------ ------- ------- ------- ------- Balance at September 30, 1996 93 16,059 114,246 (8,796) --- 121,602 Net income --- --- 10,006 --- --- 10,006 Cash dividends: Class A Common Stock ($.435 per share) --- --- (177) --- --- (177) Common Stock ($.500 per share) --- --- (3,990) --- --- (3,990) Purchase of Common Stock for treasury --- --- --- (4,246) --- (4,246) Purchase of 1,250,000 stock warrants --- (2,504) --- --- --- (2,504) Exercise of stock options --- 36 --- 173 --- 209 ------ ------ ------- ------- ------- ------- Balance at September 30, 1997 $93 $13,591 $120,085 $(12,869) $ --- $120,900 ====== ====== ======= ======= ======= ======= See accompanying notes. Oshkosh Truck Corporation Consolidated Statements of Cash Flows Years ended September 30, (In thousands) 1997 1996 1995 Operating activities: Net income (loss) from continuing operations $10,006 $(241) $11,637 Depreciation and amortization 14,070 8,798 8,409 Write-off of investments 200 4,125 --- Deferred income taxes (3,980) (1,381) 2,577 (Gain) loss on disposal of property, plant and equipment (43) 77 (21) Changes in operating assets and liabilities: Receivables (4,611) (10,648) (4,349) Inventories 29,792 (25,071) (809) Prepaid expenses 214 469 (540) Deferred charges 1,578 333 (94) Accounts payable (958) 13,314 (4,314) Customer advances 2,331 930 (1,887) Income taxes 7,446 (5,268) 636 Payroll-related obligations 2,314 213 313 Accrued warranty 3,378 2,094 (639) Other current liabilities 3,447 (4,646) 11 Other long-term liabilities 598 665 (4,764) ------- ------- ------- Net cash provided from (used for) operating activities 65,782 (16,237) 6,166 Investing activities: Acquisitions of businesses, net of cash acquired --- (160,838) --- Additions to property, plant and equipment (6,263) (5,355) (5,347) Proceeds from sale of property, plant and equipment 395 2,086 114 Increase in other long-term assets (1,532) (2,124) (937) ------- ------- -------- Net cash used for investing activities (7,400) (166,231) (6,170) Net cash provided from (used for) discontinued operations (1,658) 4,743 10,482 Financing activities: Net borrowings (repayments) of long-term debt (22,882) 157,882 --- Sale of Common Stock and Common Stock warrants, net of issuance costs --- --- 8,574 Purchase of Common Stock, Common Stock warrants and proceeds from exercise of stock options, net (6,541) (5,350) (800) Dividends paid (4,209) (4,396) (4,372) ------- ------- ------- Net cash provided from (used for) financing activities (33,632) 148,136 3,402 ------- ------- ------- Increase (decrease) in cash and cash equivalents 23,092 (29,589) 13,880 Cash and cash equivalents at beginning of year 127 29,716 15,836 ------- ------- ------- Cash and cash equivalents at end of year $23,219 $127 $29,716 ======= ======= ======= Supplemental disclosures: Cash paid for interest: Continuing operations $12,974 $538 $759 Discontinued operations --- --- 709 Cash paid for income taxes 2,998 3,116 2,114 See accompanying notes. Oshkosh Truck Corporation Notes to Consolidated Financial Statements September 30, 1997 (In thousands, except share and per share amounts) 1. Summary of Significant Accounting Policies Operations - Oshkosh Truck Corporation and its wholly-owned subsidiaries (the company) is a leading manufacturer of a wide variety of heavy-duty specialized trucks. The company sells its products into three principal markets - fire and emergency support, defense, and other commercial truck markets. The company's fire and emergency support business is principally conducted through its wholly-owned subsidiary, Pierce Manufacturing Inc. (Pierce). Principles of Consolidation and Presentation - The consolidated financial statements include the accounts of Oshkosh Truck Corporation and all its wholly-owned subsidiaries and are prepared in conformity with U.S. generally accepted accounting principles. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. All significant intercompany accounts and transactions have been eliminated. Cash and Cash Equivalents - The company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents, consisting principally of commercial paper, totaled $23,022 at September 30, 1997. The cost of these securities, which are considered "available for sale" for financial reporting purposes, approximates fair value at September 30, 1997. Inventories - The company values its inventories at the lower of cost, computed principally on the last-in, first-out (LIFO) method, or market. Property, Plant and Equipment - Property, plant and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the respective assets principally on accelerated methods. Deferred Charges - Deferred charges include certain engineering and technical support costs incurred in connection with multi-year government contracts. These costs are charged to cost of sales when the related project is billable to the government, or are amortized to cost of sales as base units are delivered under the related contracts. Other Long-Term Assets - Other long-term assets include capitalized software and related costs which are amortized on a straight-line method over a three to five-year period, deferred financing costs which are amortized to interest expense over the term of the debt, prepaid funding of pension costs and certain investments. During fiscal 1996, the company wrote off its $3,025 investment in a Mexican bus manufacturer, a $200 investment in Steeltech Manufacturing, Inc. (Steeltech) and a $900 investment in a joint venture which leases equipment to Steeltech (see Note 11). Goodwill and Other Intangible Assets - The cost of goodwill and other intangible assets is amortized on a straight-line basis over the estimated periods benefited ranging from 13 to 40 years. The realizability of goodwill and other intangibles is evaluated periodically as events or circumstances indicate a possible impairment. Such evaluations are based on various analyses, including cash flow and profitability projections, to determine the ability of the company to recover their carrying amounts. The analyses necessarily involve significant judgment to evaluate the capacity of acquired businesses to perform within projections. Customer Advances - Customer advances principally represent amounts received in advance of the completion of a fire apparatus vehicle. Certain of these advances bear interest at variable rates approximating the prime rate. Revenue Recognition - Sales under fixed-price defense contracts are recorded as units are accepted by the government. Change orders are not invoiced until agreed upon by the government. Recognition of profit on change orders and on contracts which do not involve fixed prices is based upon estimates which may be revised during the terms of the contracts. Sales to commercial customers are recorded when the goods or services are billable at time of shipment or delivery of the trucks. Research and Development- Research and development costs are charged to expense as incurred and amounted to approximately $7,847, $6,304, and $5,443 for continuing operations during fiscal 1997, 1996, and 1995, respectively. Warranty - Provisions for estimated warranty and other related costs are recorded at the time of sale and are periodically adjusted to reflect actual experience. Amounts expensed with respect to continuing operations in fiscal 1997, 1996, and 1995 were $9,658, $7,741, and $4,518, respectively. Income Taxes - Deferred income taxes are provided to recognize temporary differences between the financial reporting basis and the income tax basis of the company's assets and liabilities using currently enacted tax rates and laws. Fair Values - The carrying amounts of accounts receivable and payable and long-term debt approximated fair value as of September 30, 1997 and 1996. Environmental Remediation Costs - Statement of Position 96-1 "Environmental Remediation Liabilities" (SOP 96-1) became effective for the company in fiscal 1997. In accordance with SOP 96-1, the company accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. The accruals are adjusted as further information develops or circumstances change. New Accounting Standards - In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," which is required to be adopted effective for both interim and annual financial statements for periods ending after December 15, 1997. Among other provisions, the dilutive effect of stock options must be excluded under the new requirements for calculating basic earnings per share, which will replace primary earnings per share. This change is not expected to materially impact the company's earnings per share calculations. In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes the standards for reporting and displaying comprehensive income and its components (revenues, expenses, gains, and losses) as part of a full set of financial statements. This statement requires that all elements of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The statement is effective for fiscal years beginning after December 15, 1997. Since this statement applies only to the presentation of comprehensive income, it will not have any impact on the company's results of operations, financial position or cash flows. In June 1997, the Financial Accounting Standards Board also issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 establishes the standards for the manner in which public enterprises are required to report financial and descriptive information about their operating segments. The statement defines operating segments as components of an enterprise for which separate financial information is available and evaluated regularly as a means for assessing segment performance and allocating resources to segments. A measure of profit or loss, total assets, and other related information are required to be disclosed for each operating segment. In addition, this statement requires the annual disclosure of information concerning revenues derived from the enterprise's products or services, countries in which it earns revenue or holds assets, and major customers. The statement is also effective for fiscal years beginning after December 15, 1997. The adoption of SFAS No. 131 will not affect the company's results of operations or financial position, but will affect the disclosure of segment information. Earnings (Loss) Per Share - Earnings (loss) per share is computed on the basis of the weighted average number of shares of common stock outstanding (8,502,166; 8,828,224; and 8,823,766 in fiscal 1997, 1996, and 1995, respectively). Stock options, warrants and stock issuable under incentive compensation awards were not dilutive in any of the years presented. Reclassifications - Certain reclassifications have been made to the fiscal 1996 and 1995 financial statements to conform to the 1997 presentation. 2. Balance Sheet Information 1997 1996 Receivables U.S. Government: Amounts billed $34,399 $27,353 Amounts unbilled 1,782 4,918 ------- ------- 36,181 32,271 Commercial customers 45,603 41,510 Other 1,421 3,909 ------- ------- 83,205 77,690 Less allowance for doubtful accounts (1,970) (1,066) ------- ------- $81,235 $76,624 ======= ======= The unbilled amounts represent estimated claims for government-ordered changes which will be invoiced upon completion of negotiations and price adjustment provisions which will be invoiced when they are agreed upon by the government. 1997 1996 Inventories Finished products $ 6,430 $ 15,208 Partially finished products 36,661 51,533 Raw materials 44,455 47,580 ------- ------- Inventories at FIFO cost 87,546 114,321 Less: Progress payments on U.S. Government contracts (2,988) -- Excess of FIFO cost over LIFO cost (8,061) (8,032) ------- -------- $76,497 $106,289 ======= ======== Title to all inventories related to government contracts which provide for progress payments vests in the government to the extent of unliquidated progress payments. Goodwill and Other Intangible Assets Useful Lives 1997 1996 Goodwill 40 Years $103,887 $102,523 Distribution network 40 Years 53,000 53,000 Other 13-40 Years 11,098 11,098 ------- ------- 167,985 166,621 Less accumulated amortization (4,641) (171) ------- ------- $163,344 $166,450 ======= ======= The increase in goodwill from 1996 to 1997 is due to finalization of purchase accounting related to the Pierce acquisition. 3. Acquisitions On September 18, 1996, the company acquired for cash all of the issued and outstanding stock of Pierce, a leading manufacturer and marketer of fire trucks and other fire apparatus in the U.S. The acquisition price of $156,926, including acquisition costs and net of cash acquired, was financed from borrowings under a bank credit facility (see Note 4). The acquisition was accounted for using the purchase method of accounting and, accordingly, the operating results of Pierce are included in the company's consolidated statements of income (loss) since the date of acquisition. The purchase price, including acquisition costs, was allocated based on the estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition and was subsequently adjusted during fiscal 1997. Approximately $62,000 of the purchase price was allocated to the distribution network and other intangible assets. The excess of the purchase price over the estimated fair value of net assets acquired amounted to $103,887 which has been accounted for as goodwill. Pro forma unaudited consolidated operating results of the company, assuming Pierce had been acquired as of October 1, 1995 and 1994, are summarized below: 1996 1995 Net sales $605,439 $618,555 Income (loss) from continuing (1,262) 7,699 Net income (loss) (4,121) 4,901 Earnings (loss) per share: Continuing operations $ (0.14) $ 0.87 Net income (loss) (0.47) 0.56 These pro forma results have been prepared for informational purposes only and include certain adjustments to depreciation expense related to acquired plant and equipment, amortization expense arising from goodwill and other intangible assets, interest expense on acquisition debt, elimination of certain non-recurring expenses incurred by Pierce prior to the acquisition, and the estimated related income tax effects of all such adjustments. Anticipated efficiencies from the consolidation of Pierce's manufacturing facilities and from the synergies related to the consolidation of certain functions among Pierce and the company were not fully determinable and therefore have been excluded from the amounts included in the pro forma operating results. These pro forma results do not purport to be indicative of the results of operations which would have resulted had the combination been in effect as of October 1, 1995 and 1994 or of the future results of operations of the consolidated entities. On November 9, 1995, the company through its wholly-owned subsidiary, Summit Performance Systems, Inc. (Summit), acquired the land, buildings, machinery and equipment, and technology of Friesz Manufacturing Company (Friesz) from available cash for $3,912. Friesz was engaged in the manufacture and sale of concrete mixer systems and related aftermarket replacement parts. Approximately $2,150 of the purchase price has been allocated to intangible assets, principally designs and related technology. The acquisition was accounted for using the purchase method of accounting and, accordingly, the operating results of Friesz are included in the company's consolidated statements of income (loss) since the date of acquisition. Had the acquisition occurred as of October 1, 1995 or 1994, there would have been no material pro forma effects on the net sales, net income (loss) or earnings (loss) per share of the company in fiscal 1996 or 1995. 4. Long-Term Debt On September 18, 1996, the company entered into a bank credit agreement (the Bank Credit Agreement) to finance the acquisition of Pierce (see Note 3) and to refinance a previous revolving credit facility. The Bank Credit Agreement consists of a $150,000 term loan which requires annual principal payments of $15,000 through fiscal 2002 and a final payment of $60,000 on September 30, 2003, and a $50,000 revolving credit facility for working capital purposes which expires on September 30, 1999. The total of all term loan and revolving credit facility borrowings, excluding letters of credit, must be reduced to or below $145,000, and $130,000 for 60 consecutive days in fiscal 1998, and 1999, respectively. Interest on the term loan and the revolving credit facility is payable at prime or at the applicable Eurodollar rate plus 2.25% and 1.875%, respectively, subject to adjustment if certain financial criteria are met (weighted average rate of 7.98% and zero, respectively, at September 30, 1997, and 8.25% and 8.25%, respectively, at September 30, 1996). The company is charged a 0.25% fee with respect to any unused balance under its revolving credit facility, and a 1.875% fee with respect to any letters of credit issued under the revolving credit facility. These fees are subject to adjustment if certain financial criteria are met. At September 30, 1997, $2,962 of standby letters of credit reduced available capacity under the revolving credit facility to $47,038. At September 30, 1997, substantially all the tangible and intangible assets of the company are pledged as collateral under the Bank Credit Agreement. Among other restrictions, the Bank Credit Agreement: (1) limits payments of dividends, purchases of the company's stock, and capital expenditures; (2) requires that certain financial ratios be maintained at prescribed levels; (3) restricts the ability of the company to make additional borrowings, or to consolidate, merge or otherwise fundamentally change the ownership of the company; and (4) limits investments, dispositions of assets and guarantees of indebtedness. The company believes that such limitations should not impair its future operating activities. The aggregate annual maturities of long-term debt for the five years succeeding September 30, 1997, are as follows: 1998 - $15,000; 1999 - $15,000; 2000 - $15,000; 2001 - $15,000; and 2002 - $15,000. From October 1, 1997 through December 8, 1997, the company has paid from available cash the $15,000 mandatory principal payment due September 30, 1998 and paid an additional $25,000 on the term loan which will be applied on a pro rata basis to the principal payments due in the fiscal years of 1999 to 2003. 5. Income Taxes Income Tax Provision 1997 1996 1995 Current: Federal $8,236 $2,988 $5,572 State 1,866 368 873 ------ ------ ------ Total current 10,102 3,356 6,445 Deferred: Federal (3,271) (4,630) 763 State (335) (467) 77 Total deferred (3,606) (5,097) 840 ------ ------- ------- $6,496 $(1,741) $7,285 ====== ======= ======= Effective Rate Reconciliation 1997 1996 1995 U.S. federal tax rate 35.0% (34.0)% 35.0% State income taxes, net 6.0 (5.0) 3.5 Reduction of prior years' excess (5.5) (50.5) -- tax provisions Foreign sales corporation (1.5) (5.2) (0.6) Goodwill amortization 5.4 -- -- Other, net -- 6.9 0.6 ----- ----- ----- 39.4% (87.8)% 38.5% ===== ===== ===== Deferred Tax Assets and Liabilities 1997 1996 Deferred tax assets: Other current liabilities $5,277 $6,625 Accrued warranty 4,439 3,194 Postretirement benefit obligations 3,916 3,674 Investments 1,887 1,801 Payroll-related obligations 1,846 818 Other 729 419 ------- ------- Total deferred tax assets 18,094 16,531 Deferred tax liabilities: Intangible assets 23,402 24,150 Property, plant and equipment 4,175 5,972 Inventories 2,341 1,922 Deferred charges 1,091 1,091 Other 58 349 ------- ------- Total deferred tax liabilities 31,067 33,484 -------- -------- Net deferred tax liability $(12,973) $(16,953) ======== ======== The company has not recorded a valuation allowance with respect to any deferred tax assets. 6. Employee Benefit Plans The company has defined benefit pension plans covering substantially all employees. The plans provide benefits based on compensation, years of service and date of birth. The company's policy is to fund the plans in amounts which comply with contribution limits imposed by law. Components of net periodic pension cost for these plans for fiscal 1997, 1996, and 1995, including costs of discontinued operations which are not significant in any year presented but excluding Pierce pension costs for 1996 due to the proximity of its acquisition to the company's fiscal year end, are as follows: 1997 1996 1995 Service cost benefits earned during year $1,387 $1,149 $1,140 Interest cost on projected benefit obligations 2,439 1,979 1,862 Actual return on plan assets (8,789) (3,347) (2,505) Net amortization and deferral 6,123 1,232 438 ------ ------ ------ Net periodic pension cost $1,160 $1,013 $935 ====== ====== ====== The following table summarizes the funded status of the pension plans and the amounts recognized in the company's consolidated balance sheets at September 30, 1997 and 1996: 1997 1996 Actuarial present value of benefit obligations: Vested $29,334 $26,009 Nonvested 694 602 ------- ------- Accumulated benefit obligations 30,028 26,611 Adjustment for projected benefit obligations 4,759 4,731 ------- -------- Projected benefit obligations 34,787 31,342 Plan assets at fair value 39,556 31,089 ------- -------- Plan assets in excess of (less than) projected benefit obligations 4,769 (253) Unrecognized net transition asset (594) (661) Unrecognized net (gain) loss (1,538) 4,811 Unrecognized prior service cost 1,229 345 ------ ------ Prepaid pension asset $3,866 $4,242 ====== ====== The plans' assets are comprised of investments in commingled equity and fixed income funds and individually managed equity portfolios. Actuarial assumptions are as follows: 1997 1996 1995 Discount rate 7.75% 7.75% 7.50% Rate of increase in compensation 4.50 4.50 4.50 Expected long-term rate of return on plan assets 9.25 9.25 9.25 In addition to providing pension benefits for the majority of its employees, the company provides health benefits to certain of its retirees and their eligible spouses. Approximately 50% of the company's employees become eligible for these benefits if they reach normal retirement age while working for the company. The following table summarizes the status of the postretirement benefit plan and the amounts recognized in the company's consolidated balance sheets at September 30, 1997 and 1996: 1997 1996 Postretirement benefit obligations: Retirees $2,828 $2,929 Fully eligible active participants 522 397 Other active participants 5,647 4,865 ------- ------- 8,997 8,191 Unrecognized net gain 1,150 1,326 ------- ------- Postretirement benefit obligations $10,147 $9,517 ======= ======= Net periodic postretirement benefit cost for fiscal 1997, 1996, and 1995, including discontinued operations which is not significant in any year presented, includes the following components: 1997 1996 1995 Service cost $366 $353 $372 Interest cost on the accumulated postretirement benefit obligation 613 580 610 Amortization of unrecognized net gain (32) -- -- ----- ----- ----- Net periodic postretirement benefit cost $947 $933 $982 ===== ===== ===== Net change in postretirement benefit obligations includes the following: 1997 1996 Balance at beginning of year $9,517 $8,839 Benefits paid (317) (255) Net periodic postretirement benefit cost 947 933 ------- ------- Balance at end of year $10,147 $9,517 ======= ======= The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 10.2% in fiscal 1997, declining to 6.5% in fiscal 2006. The weighted average discount rate used in determining the postretirement benefit obligation was 7.75% in fiscal 1997 and 1996. If the health care cost trend rate was increased by 1%, the postretirement benefit obligation at September 30, 1997 would increase by $799 and net periodic postretirement benefit cost for fiscal 1997 would increase by $107. The company has defined contribution 401(k) plans covering substantially all employees. The plans allow employees to defer 2% to 19% of their income on a pre-tax basis. Each employee who elects to participate is eligible to receive company matching contributions. Amounts expensed for company matching contributions for continuing operations were $825, $401, and $407 in fiscal 1997, 1996, and 1995, respectively. 7. Shareholders' Equity The company is authorized to issue 1,000,000 shares of $.01 par value Class A Common Stock of which 406,878 shares and 409,258 shares were issued and outstanding at September 30, 1997 and 1996, respectively. The company is authorized to issue 18,000,000 shares of $.01 par value Common Stock. At September 30, 1997, 8,951,287 and 7,900,481 shares of Common Stock were issued and outstanding, respectively. At September 30, 1996, 8,948,907 and 8,227,770 shares of Common Stock were issued and outstanding, respectively. The company is also authorized to issue up to 2,000,000 shares of $.01 par value Preferred Stock, none of which were issued or outstanding at September 30, 1997 or 1996. On May 2, 1997, the company and Freightliner Corporation (Freightliner) formally terminated a strategic alliance formed on June 2, 1995. The company repurchased from Freightliner 350,000 shares of its Common Stock and 1,250,000 warrants for the purchase of additional shares of Common Stock for a total of $6,750. The company and Freightliner will continue to supply each other with parts and components. The company has a stock restriction agreement with two shareholders owning the majority of the company's Class A Common Stock. The agreement is intended to allow for an orderly transition of Class A Common Stock into Common Stock. The agreement provides that at the time of death or incapacity of the survivor of them, the two shareholders will exchange all of their Class A Common Stock for Common Stock, and at that time, if not earlier, will support an amendment to the Articles of Incorporation which will provide for a mandatory conversion of all Class A Common Stock into Common Stock. Each share of Class A Common Stock is convertible into Common Stock on a one-for-one basis. As of September 30, 1997, 406,878 shares of Common Stock are reserved for the conversion of Class A Common Stock. In July 1995, the company authorized the buy back of up to one million shares of the company's Common Stock. As of September 30, 1997 and 1996, the company had purchased 461,535 shares of its Common Stock at an aggregate cost of $6,551. Dividends are required to be paid on both the Class A Common Stock and Common Stock at any time that dividends are paid on either. Each share of Common Stock is entitled to receive 115% of any dividend paid on each share of Class A Common Stock, rounded up or down to the nearest $0.0025 per share. Holders of the Common Stock have the right to elect or remove as a class 25% of the entire Board of Directors of the company rounded to the nearest whole number of directors, but not less than one. Holders of Common Stock are not entitled to vote on any other company matters, except as may be required by law in connection with certain significant actions such as certain mergers and amendments to the company's Articles of Incorporation, and are entitled to one vote per share on all matters upon which they are entitled to vote. Holders of Class A Common Stock are entitled to elect the remaining directors (subject to any rights granted to any series of Preferred Stock) and are entitled to one vote per share for the election of directors and on all matters presented to the shareholders for vote. The Common Stock shareholders are entitled to receive a liquidation preference of $7.50 per share before any payment or distribution to holders of the Class A Common Stock. Thereafter, holders of the Class A Common Stock are entitled to receive $7.50 per share before any further payment or distribution to holders of the Common Stock. Thereafter, holders of the Class A Common Stock and Common Stock share on a pro rata basis in all payments or distributions upon liquidation, dissolution or winding up of the company. 8. Stock Option and Performance Share Award Plans The company has reserved 756,071 shares of Common Stock at September 30, 1997 to provide for the exercise of outstanding stock options and warrants, and the issuance of Common Stock under incentive compensation awards. Under the 1990 Incentive Stock Plan for Key Employees (the Plan), officers, other key employees and directors may be granted options to purchase up to an aggregate of 825,000 shares of the company's Common Stock at not less than the fair market value of such shares on the date of grant. Participants may also be awarded grants of restricted stock under the Plan. The Plan expires on April 9, 2000. Options become exercisable ratably on the first, second and third anniversary of the date of grant. Options to purchase shares expire not later than ten years and one month after the grant of the option. The following table summarizes the transactions of the Plan for the three year period ended September 30, 1997: Weighted Number Average of Exercise Options Price Unexercised options outstanding - 400,649 $10.22 Options granted 100,500 13.84 Options exercised (14,250) 9.31 Options forfeited or expired (9,831) 12.24 Unexercised options outstanding - 477,068 10.96 Options granted 14,500 14.68 Options exercised (24,515) 9.72 Options forfeited or expired (6,251) 12.58 Unexercised options outstanding - 460,802 11.12 Options granted 5,000 12.00 Options exercised (20,331) 10.34 Options forfeited or expired (7,570) 12.97 Unexercised options outstanding - 437,901 11.14 Price range $7.88 - $11.25 (weighted-average contractual 303,151 9.78 Price range $12.00 - $15.25 (weighted-average contractual 134,750 14.19 Exercisable options at September 30, 391,403 10.82 Shares available for grant at 318,170 Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), became effective for the company in fiscal 1997. As allowed by SFAS 123, the company has elected to continue to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) in accounting for the Plan. Under APB 25, the company does not recognize compensation expense on the issuance of its stock options because the option terms are fixed and the exercise price equals the market price of the underlying stock on the grant date. As required by SFAS 123, the company has determined the pro forma information as if the company had accounted for stock options granted since September 30, 1995, under the fair value method of SFAS 123. The Black-Scholes option pricing model was used with the following weighted- average assumptions: risk-free interest rates of 6.27% in 1997 and 5.39% and 6.38% in 1996; dividend yield of 4.17% in 1997 and 3.60% and 3.28% in 1996; expected common stock market price volatility factor of .305; and a weighted-average expected life of the options of six years. The weighted- average fair value of options granted in 1997 and 1996 were $3.07 and $4.08 per share, respectively. The pro forma effect of these options on net earnings and earnings per share was not material. These pro forma calculations only include the effects of 1996 and 1997 grants. As such, the impacts are not necessarily indicative of the effects on reported net income of future years. 9. Operating Leases Total rental expense for plant and equipment charged to continuing operations under noncancellable operating leases was $886, $797, and $1,004 in fiscal 1997, 1996, and 1995, respectively. Minimum rental payments due under operating leases for subsequent fiscal years are: 1998- $937; 1999-$545; 2000-$212; 2001-$123; and 2002-$71. Included in rental expense are charges of $128, $128, and $215 in fiscal 1997, 1996, and 1995, respectively, relating to leases between the company and certain shareholders. 10. Discontinued Operations On June 2, 1995, Freightliner acquired certain assets of the company's motor home, bus and van chassis business. The consideration included cash of $23,815 and the assumption by Freightliner of certain liabilities. The assets sold to Freightliner consisted of inventories, property, plant and equipment and the company's ownership interest in a Mexican chassis manufacturer. The liabilities assumed by Freightliner included warranty obligations related to previously produced chassis and industrial revenue bonds that were secured by the underlying real estate. The disposition of the chassis business has been accounted for as a discontinued operation. Revenues of the chassis business for fiscal 1995 (through the date of sale) were $55,804. The net liabilities of the discontinued operations have been segregated in the consolidated balance sheets. Details of such amounts at September 30, 1997 and 1996, are as follows: 1997 1996 Accrued warranty $1,352 $1,862 Other, net 184 113 ------ ------- Net current liabilities of discontinued operations $1,536 $1,975 ====== ======= Accrued warranty $1,235 $2,181 Other, net 127 400 ------ ------ Net long-term liabilities of discontinued operations $1,362 $2,581 ====== ====== In fiscal 1996, the company incurred charges totaling $2,623 arising from the write-off of receivables and other obligations related to the company's former joint venture in Mexico. In addition, in fiscal 1996, the company recognized additional warranty and other related costs totaling $2,063 with respect to the company's former U.S. chassis business. The company has allocated interest on the debt which was assumed by Freightliner to discontinued operations. Interest expense included in discontinued operations totaled $685 in fiscal 1995. 11. Contingencies, Significant Estimates and Concentrations The company is engaged in litigation against Super Steel Products Corporation (SSPC), the company's former supplier of mixer systems for front-discharge concrete mixer trucks under a long-term supply contract . SSPC sued the company in state court claiming the company breached the contract. The company counterclaimed for repudiation of contract. On July 26, 1996, a jury returned a verdict for SSPC awarding damages totaling $4,485. On October 10, 1996, the state court judge overturned the verdict against the company, granted judgment for the company on its counterclaim, and ordered a new trial for damages on the company's counterclaim. Both SSPC and the company have appealed the state court judge's decision. The Wisconsin Court of Appeals has agreed to hear the case and both the company and SSPC have filed briefs in this matter. The company currently is engaged in the arbitration of certain disputes between the Oshkosh Florida Division and O.V. Containers, Inc., which arose out of the performance of a contract to deliver 690 skeletal container chassis. The arbitration is being conducted before a three- member panel under the commercial dispute rules of the American Arbitration Association, and is not expected to conclude before April, 1998. The company is vigorously contesting warranty and other claims made against it, and has asserted substantial claims against O.V. Containers, Inc. The outcome of these matters cannot be predicted at the present time. As part of its routine business operations, the company disposes of and recycles or reclaims certain industrial waste materials, chemicals and solvents at third party disposal and recycling facilities which are licensed by appropriate governmental agencies. In some instances, these facilities have been and may be designated by the United States Environmental Protection Agency (EPA) or a state environmental agency for remediation. Under the Comprehensive Environmental Response, Compensation, and Liability Act (the Superfund law) and similar state laws, each potentially responsible party (PRP) that contributed hazardous substances may be jointly and severally liable for the costs associated with cleaning up the site. Typically, PRPs negotiate a resolution with the EPA and/or the state environmental agencies. PRPs also negotiate with each other regarding allocation of the cleanup cost. As to one such Superfund site, Pierce is one of 414 PRPs participating in the costs of addressing the site and has been assigned an allocation share of approximately 0.04%. Currently a remedial investigation/ feasibility study is being completed, and as such, an estimate for the total cost of the remediation of this site has not been made to date. However, based on estimates and the assigned allocations, the company believes its liability at the site will not be material and its share is adequately covered through reserves established by the company at September 30, 1997. Actual liability could vary based on results of the study, the resources of other PRPs, and the company's final share of liability. The company is addressing a regional trichloroethylene (TCE) groundwater plume on the south side of Oshkosh, Wisconsin. The company believes there may be multiple sources in the area. TCE was detected at the company's North Plant facility with recent testing showing the highest concentrations in a monitoring well located on the upgradient property line. Because the investigation process is still ongoing, it is not possible for the company to estimate its long-term total liability associated with this issue at this time. Also, as part of the regional TCE groundwater investigation, the company conducted a groundwater investigation of a former landfill located on company property. The landfill, acquired by the company in 1972, is approximately 2.0 acres in size and is believed to have been used for the disposal of household waste. Based on the investigation, the company does not believe the landfill is one of the sources of the TCE contamination. Based upon current knowledge, the company believes its liability associated with the TCE issue will not be material and is adequately covered through reserves established by the company at September 30, 1997. However, this may change as investigations proceed by the company, other unrelated property owners, and government entities . The company is subject to other environmental matters and legal proceedings and claims which arise in the ordinary course of business. Although the final results of all such matters and claims cannot be predicted with certainty, management believes that the ultimate resolution of all such matters and claims, after taking into account the liabilities accrued with respect to such matters and claims, will not have a material adverse effect on the company's financial condition or results of operations. Actual results could vary, among other things, due to the uncertainties involved in litigation. The company has guaranteed certain customers' obligations under deferred payment contracts and lease purchase agreements totaling approximately $4,178 at September 30, 1997. The company is also contingently liable under bid, performance and specialty bonds totaling approximately $94,101 at September 30, 1997. Provisions for estimated warranty and other related costs are recorded at the time of sale and are periodically adjusted to reflect actual experience. As of September 30, 1997 and 1996, the company has accrued $12,320 and $8,942 for warranty claims. Certain warranty and other related claims involve matters of dispute that ultimately are resolved by negotiation, arbitration or litigation. Infrequently, a material warranty issue can arise which is beyond the scope of the company's historical experience. During fiscal 1997 and 1996, the company recorded warranty and other related costs for matters beyond the company's historical experience totaling $3,770 and $5,602, respectively, with respect to continuing operations and $2,063 with respect to discontinued operations in fiscal 1996 (see Note 10). It is reasonably possible that additional warranty and other related claims could arise from disputes or other matters beyond the scope of the company's historical experience. The company subcontracted production under an $85,000 ISO-Compatible Palletized Flatracks (IPF) contract for the U.S. Army to Steeltech, a minority-owned firm, pursuant to Department of Defense regulations under the IPF contract. Due to financial difficulties encountered by Steeltech, the company advanced working capital requirements to Steeltech in fiscal 1995 and 1996. As a result of delays in the start-up of full-scale production under the IPF contract, the company wrote off certain of its advances and an investment in Steeltech totaling $3,300 in fiscal 1996. Steeltech's IPF production passed first article testing in July 1996 and production is expected to be completed in fiscal 1998. As of September 30, 1997 and 1996, the company had outstanding advances due from Steeltech of $162 and $2,855, respectively. In fiscal 1996, the company also wrote off an investment of $900 in a joint venture which leases equipment to Steeltech and accrued $1,084 for the potential satisfaction of a guarantee of 50% of the outstanding indebtedness of the joint venture. The company is further contingently liable for Department of Defense progress payments that have been advanced to Steeltech totaling $3,352 at September 30, 1997 ($5,380 at September 30, 1996) in the event of incomplete performance under the IPF contract. While management currently expects the company to realize its remaining advances to Steeltech as of September 30, 1997 and to avoid liability for progress payments advanced to Steeltech, it is reasonably possible that the company could become liable for a portion of such progress payments. The company derives a significant portion of its revenue from the U.S. Department of Defense, as follows: 1997 1996 1995 Defense: U.S. Department of $272,042 $249,413 $260,112 Export 16,584 2,059 1,623 ------- ------- ------- 288,626 251,472 261,735 Commercial: Domestic 373,946 141,540 159,326 Export 20,662 20,443 17,496 ------- ------- ------- 394,608 161,983 176,822 ------- ------- ------- Net sales $683,234 $413,455 $438,557 ======= ======= ======= U.S. Department of Defense sales include $17,723 and $58,855 in fiscal 1997 and 1996, respectively, for products sold internationally under the Foreign Military Sales (FMS) Program. There were no sales under the FMS Program in 1995. Inherent in doing business with the U.S. Department of Defense are certain risks, including technological changes and changes in levels of defense spending. All U.S. Department of Defense contracts contain a provision that they may be terminated at any time at the convenience of the government. In such an event, the company is entitled to recover allowable costs plus a reasonable profit earned to the date of termination. Various actions or claims have been asserted or may be asserted in the future by the government against the company. A potential action by the government against the company in connection with a grand jury investigation was commenced in 1989. In 1996, the government discontinued this investigation without any action against the company or its employees, although a civil investigation is possible. 12. Subsequent Event On December 8, 1997, the company announced that it had agreed to acquire McNeilus Companies, Inc. (McNeilus), a $300-million manufacturer and marketer of refuse and recycling truck bodies, rear-discharge concrete mixers, and ready-mix batch plants. The total purchase cost for all McNeilus stock and related non-compete and ancillary agreements is $250 million in cash. The transaction is subject to the approval of the appropriate governmental authorities and is expected to close in the first quarter of calendar 1998. Under certain conditions, if the acquisition is not consummated, the company may be required to pay McNeilus a fee of $10 million, and conversely, McNeilus may be required to pay a $10 million fee to the company. Report of Ernst & Young LLP, Independent Auditors Board of Directors Oshkosh Truck Corporation We have audited the accompanying consolidated balance sheets of Oshkosh Truck Corporation (the company) as of September 30, 1997 and 1996, and the related consolidated statements of income (loss), shareholders' equity and cash flows for each of the three years in the period ended September 30, 1997. 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 in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the company at September 30, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 1997, in conformity with generally accepted accounting principles. Milwaukee, Wisconsin October 31, 1997, except for Notes 4 and 12, as to which the date is December 8, 1997
EX-21 7 EXHIBIT 21 Subsidiaries State/other jurisdiction Other Name of incorporation trade name Pierce Manufacturing Inc. Wisconsin N/A Summit Performance Systems, Inc. Wisconsin N/A Oshkosh Truck Foreign Sales Corporation Inc. U.S. Virgin Islands N/A Dover Technologies Inc. Wisconsin N/A Pierce Manufacturing International Inc. Barbados N/A EX-23 8 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report on Form 10-K of Oshkosh Truck Corporation of our report dated October 31, 1997, except for Notes 4 and 12, as to which the date is December 8, 1997, included in the 1997 Annual Report to Shareholders of Oshkosh Truck Corporation. Our audits also included the financial statement schedule of Oshkosh Truck Corporation listed in Item 14(a). This schedule is the responsibility of the company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. We also consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-38822 and No. 33-62687) pertaining to the Oshkosh Truck Corporation 1990 Incentive Stock Plan of our report dated October 31, 1997, except for Notes 4 and 12, as to which the date is December 8, 1997, with respect to the consolidated financial statements and schedule of Oshkosh Truck Corporation included in or incorporated by reference in the Annual Report (Form 10-K) for the year ended September 30, 1997. Ernst & Young LLP Milwaukee, Wisconsin December 23, 1997 EX-27 9
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF OSHKOSH TRUCK CORPORATION AS OF AND FOR THE YEAR ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR SEP-30-1997 JUL-01-1997 SEP-30-1997 23,219 0 83,205 1,970 76,497 193,835 127,662 72,124 420,394 143,722 120,000 0 0 93 120,807 420,394 683,234 683,234 594,390 594,390 0 881 12,722 16,502 6,496 10,006 0 0 0 10,006 1.18 1.18
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