-----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, CFcZ7YvnEQwUNZy3ihAWFnZ24Iw4pMvt01EdLVGvN15nzSYJwvTDUf4QyMgwMogX D8yYbevvD9+WkKOTmuoDVg== 0000950137-97-000418.txt : 19970221 0000950137-97-000418.hdr.sgml : 19970221 ACCESSION NUMBER: 0000950137-97-000418 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970210 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WABASH NATIONAL CORP /DE CENTRAL INDEX KEY: 0000879526 STANDARD INDUSTRIAL CLASSIFICATION: TRUCK TRAILERS [3715] IRS NUMBER: 521375208 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10883 FILM NUMBER: 97522140 BUSINESS ADDRESS: STREET 1: 1000 SAGAMORE PKWY S STREET 2: P O BOX 6129 CITY: LAFAYETTE STATE: IN ZIP: 47905 BUSINESS PHONE: 3174481591 10-K 1 FORM 10-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NUMBER 17684-3 WABASH NATIONAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 52-1375208 (STATE OR OTHER JURISDICTION) (IRS EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1000 SAGAMORE PARKWAY SOUTH 47905 LAFAYETTE, INDIANA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (765) 448-1591 REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange Title of each class on which registered ---------------------------------------- ----------------------- Common Stock, $.01 Par Value New York Stock Exchange Series A Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None 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. __X__ Yes. ____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. [ ] The aggregate market value of voting stock held by nonaffiliates of the registrant as of January 30, 1997 was $326,217,000, based upon the closing price of the Company's common stock as quoted on the New York Stock Exchange composite tape on such date. The number of shares outstanding of the registrant's common stock as of January 30, 1997 was 18,910,923. The Proxy Statement for Annual Meeting of Stockholders to be held May 8, 1997 is incorporated into this Form 10-K Part III by reference. ================================================================================ 2 TABLE OF CONTENTS WABASH NATIONAL CORPORATION FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
PAGES PART I. Item 1. Business .................................................................. 1 Item 2. Properties ................................................................ 8 Item 3. Legal Proceedings ......................................................... 9 Item 4. Submission of Matters to Vote of Security Holders ......................... 9 PART II. Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters .. 9 Item 6. Selected Financial Data ................................................... 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................................................. 10 Item 8. Financial Statements and Supplementary Data ............................... 15 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................................................. 29 PART III. Item 10. Directors and Executive Officers of the Registrant ........................ 30 Item 11. Executive Compensation .................................................... 31 Item 12. Security Ownership of Certain Beneficial Owners and Management ............ 31 Item 13. Certain Relationships and Related Transactions ............................ 31 PART IV. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ........... 31 SIGNATURES ........................................................................... 34
3 PART I ITEM 1--BUSINESS Wabash National Corporation ("Wabash" or the "Company") designs, manufactures and markets standard and customized truck trailers, including dry freight vans, refrigerated trailers and bimodal vehicles and also produces and sells aftermarket parts through its division, Wabash National Parts. The Company believes that it is the largest United States manufacturer of truck trailers and the leading manufacturer of both fiberglass reinforced plastic ("FRP") trailers and aluminum plate trailers. In addition, the Company is the exclusive manufacturer of RoadRailer(R) trailers, a patented bimodal technology owned by the Company which consists of trailers and detachable rail bogies that permit a vehicle to run both over the highway and directly on railroad lines. The Company's wholly-owned subsidiary, Wabash National Finance Corporation, (the "Finance Company") provides leasing and financing programs to its customers for new and used trailers. Wabash markets its products directly and through dealers to truckload and less-than-truckload ("LTL") common carriers, private fleet operators, household moving and storage companies, leasing companies, package carriers and intermodal carriers including railroads. The Company has established significant relationships as a supplier to many large customers in the transportation industry, including those set forth below: - Truckload Carriers: Schneider National, Inc.; Werner Enterprises; Swift Transportation Co.; Dart Transit, Inc.; Heartland Express, Inc.; Crete Carrier Corporation; Knight Transportation; Frozen Food Express Industries (FFE) - Leasing Companies: Transport International Pool (TIP); Penske Truck Leasing; Trailer Leasing Company (TLC); National Semi Trailer Corp.; Leaseway Purchasing Corp. - Private Fleets: Safeway; Chrysler; The Kroger Company; Stone Container Corporation; Foster Farms - Less-Than-Truckload Carriers: Roadway Express, Inc.; Old Dominion Freight Line, Inc.; Caliber Systems (Viking); USF Holland; Central Transport International - Package Carriers: Federal Express; United Parcel Service (UPS) - Domestic Intermodal Carriers: Triple Crown Services, Inc.; National Rail Passenger Corp. (Amtrak); Burlington Northern Santa Fe - International Intermodal Carriers: Bayerische Trailerzug Gesellschaft (BTZ); Compagnie Nouvelle De Conteneurs (CNC) The Company was founded in 1985 by its current President, Donald J. Ehrlich, and sixteen other associates. The Company's founders utilized their years of experience in the truck trailer manufacturing business to design and build a state-of-the-art manufacturing facility and to create a corporate culture which emphasizes design and new product development capabilities and stresses the integration of engineering, manufacturing and marketing. The Company's business strategy is to follow an integrated approach to engineering, manufacturing and marketing which emphasizes flexibility in product design and operations while preserving a low cost structure. Wabash has sought to identify and produce proprietary products in the trucking and bimodal industries which offer added value to customers and, therefore, generate higher profit margins than those associated with standard trailers. The Company has developed its leasing business and expects to continue such development. The Company also intends to expand its distribution of aftermarket parts and strengthen its existing dealer network in order to more effectively distribute its products. The Company believes that its RoadRailer bimodal technology provides the opportunity to maintain a reputation for design and new product development leadership and to continue to develop an international presence. The important elements of the Company's strategies are: 1 4 - Assessment of Customer Needs. The Company's marketing, engineering and manufacturing departments work with customers to assess customer needs and to develop cost-effective engineering and manufacturing solutions. This process results in many highly customized products incorporating unique design features. The Company also seeks to acquire products, services and technologies that address customer needs and provide the opportunity for enhanced profit margins. The Company emphasizes long-term customer relationships at all levels in the Company, built on Wabash's reputation for flexibility and customization. - Engineering, Manufacturing and Purchasing. The Company's integrated approach emphasizes low-cost and flexible production on existing assembly lines without the need for extensive capital investment or re-tooling. The Company uses computer-aided design ("CAD") and computer-aided manufacturing ("CAM") techniques throughout the production process. The Company's product line is produced on several assembly lines in Lafayette, Indiana where quality control and uniformity can be maintained while line or facility downtime is reduced. The Company also utilizes just-in-time techniques for many aspects of the production process including delivery of components immediately prior to the time needed for assembly. These techniques have substantially reduced the capital investment and set-up time associated with introducing product innovations and have also reduced product waste and unnecessary product handling time. - Product Differentiation. Wabash has developed or acquired several proprietary products and processes which it believes are recognized as high in quality and distinctive in design. While the Company is a competitive producer of standardized products, it emphasizes the development and manufacture of distinctive and more customized products and believes that it has the engineering and manufacturing capability to produce these products efficiently. The Company expects to continue a program of aggressive product development and selective acquisitions of quality proprietary products which distinguish the Company from its competitors and provide opportunities for enhanced profit margins. - Corporate Culture. Since the Company's founding, management has fostered a corporate culture which emphasizes design and new product development capabilities as well as extensive employee involvement. All employees participate in extensive classroom training covering all aspects of the Company's business, including team building and problem solving, statistical process control, economics and finance. Wabash employs a compensation program which rewards all hourly employees through the distribution of a percentage of the Company's after-tax profits. Wabash's safety program has been developed with employee participation and has been cited for each of the last eight years (1988-1995) by the Truck Trailer Manufacturing Association for achieving the best safety record among large plants in the industry. The Company believes that its corporate culture has produced a highly trained and motivated workforce that understands the Company's business strategy and that is keenly interested in and rewarded by the success of the Company. Wabash was incorporated in Delaware in 1991 and is the successor by merger to a Maryland corporation organized in 1985. THE TRUCK TRAILER INDUSTRY The U.S. market for truck trailers and related products has historically been cyclical and has been affected by overall economic conditions in the transportation industry as well as regulatory changes. Management believes that customers historically have replaced trailers in cycles that run from approximately six to eight years. Both state and Federal regulation of the size, safety features and configuration of truck trailers have led to increased demand for trailers meeting new regulatory requirements from time to time. Currently, for instance, most states permit the use of 53 foot trailers, and this development has had a positive effect on trailer demand in the past few years. A large percentage of the new trailer market has historically been served by the ten largest truck trailer manufacturers, including the Company. Price, flexibility in design and engineering, product quality and durability, 2 5 warranty, dealer service and parts availability have influenced competitive position in the markets served. Historically, there has been manufacturing over capacity in the truck trailer industry, particularly among the competitors of the Company. The following table sets forth domestic trailer shipments for the Company, its nine largest competitors and for the United States trailer industry as a whole:
1996 1995 1994 1993 1992 ------- ------- ------- ------- ------- WABASH NATIONAL .......... 36,517 42,424 35,679 22,060 19,253 Great Dane ............... 25,730 36,514 29,756 23,900 21,717 Utility .................. 19,731 25,068 19,501 13,768 10,022 Monon .................... 11,164 21,172 13,478 9,500 8,300 Trailmobile .............. 11,094 21,239 16,671 14,500 11,908 Dorsey ................... 8,595 12,276 12,010 10,190 7,496 Fruehauf ................. 8,509 16,653 16,092 9,445 18,916 Stoughton ................ 8,300 14,770 13,000 13,500 10,011 Strick ................... 8,141 18,427 15,599 12,800 10,500 Fontaine ................. 4,613 5,465 4,530 3,700 3,087 Total Industry ........... 192,362 284,268 236,016 188,319 165,268
Source: Southern Motor Cargo Magazine (C) 1997. A complete report for the top 30 manufacturers may be obtained from Southern Motor Cargo, P.O. Box 40169, Memphis, TN 38174. The above figures reflect shipments not units produced. REGULATION Truck trailer length, height, width, maximum weight capacity and other specifications are regulated by individual states. The Federal Government also regulates certain safety features incorporated in the design of truck trailers. Manufacturing operations are subject to environmental laws enforced by Federal, state and local agencies, and the Company is currently in the process of undertaking a soil remediation effort at its facility (See "Environmental Matters"). PRODUCTS Since the Company's inception in 1985, the Company has expanded its product offerings from a single product into a broad line of transportation equipment and related products. As a result of its long-term relationships with its customers, the Company has been able to work closely with its customers to create competitive advantages through development and production of productivity--enhancing transportation equipment. The Company's current product offering includes: Transportation Equipment - Plate Trailers. The aluminum plate trailer was introduced into the Company's product line in 1985. Since these trailers utilize thicker and more durable sidewalls than standard sheet and post or FRP construction and avoid the use of interior liners, the life of the trailer is extended and maintenance costs are significantly reduced. In addition, the post used in constructing the sidewalls of the plate trailer is much thinner and therefore provides greater interior volume than a standard sheet and post trailer. Plate trailers are used primarily by truckload carriers. The Company believes that it is the largest producer of plate trailers in the United States. In late 1995, the Company introduced its composite plate trailer. Features of the new composite plate trailer include increased durability and greater strength than the aluminum plate trailer. The composite material is a high density vinyl core with a steel skin. - RoadRailer trailers. In 1987, the Company began manufacturing RoadRailer trailers. RoadRailer trailers represent a patented bimodal technology consisting of a truck trailer and detachable rail 3 6 "bogie" permitting a trailer to run both over the highway and directly on railroad lines. The Company believes that the RoadRailer system can be operated more efficiently than alternative intermodal systems such as "piggyback" or "stack" railcars which require terminal operators to transfer vehicles or containers to railcars. In 1991, the Company acquired the exclusive rights to market and exploit RoadRailer technology. By offering the bimodal technology in a number of variations, the Company believes it can increase its penetration of the intermodal market and enlarge its pool of potential customers. The current variants are the ReeferRailer(R) trailer, the ChassisRailer(R) trailer, the PupRailer(R) trailer, the AutoRailer(R) trailer and the 19.5 RoadRailer trailer. Management believes that RoadRailer trailers and its variants will provide the opportunity for the Company to maintain a reputation for technological leadership in the transportation industry. - Lightweight Railcars. In 1995, the Company introduced its first prototype lightweight, totally enclosed, high-speed railcar (the "AllRailer(R) railcar"). The AllRailer railcar design allows shippers to transport vehicles by rail in a fully-enclosed environment, protected from both airborne contamination and vandalism. The AllRailer unit has the flexibility to be converted for use in either a bi-level or tri-level configuration by positioning the upper floors to handle automobiles or vehicles such as pick-up trucks, vans or sport/utility vehicles. This feature should result in greater railcar utilization and a reduction in repositioning empty railcars. AllRailer railcars feature a heavy duty version of the RoadRailer slack-free coupler, which reduces up to 99.8 percent of the forces transmitted to vehicles as a result of train slack action. Additional AllRailer railcar features include a wide interior, door edge protection and flat floors with built-in bridge plates between cars, all designed to provide damage-free vehicle loading and unloading. - Refrigerated trailers. Refrigerated trailers were introduced into the product line in 1990. The Company's proprietary process for building these trailers involves injecting insulating foam in the sidewalls and roof in a single process prior to assembly, which improves both the insulation capabilities and the durability of the trailers. These trailers are used primarily by private fleets in the transportation of perishable food products. During 1995, the Company opened its new refrigerated trailer manufacturing facility in Lafayette, Indiana. - FRP vans and doubles. The Company's initial product was fiberglass reinforced plastic trailers which have been purchased primarily by LTL carriers utilizing doubles or triples. Motor carriers utilizing standard double or triple trailers frequently reach the maximum legal weight limits before they fill the capacity of the trailers. Since FRP trailers are lighter in weight than some other types of double trailers, they enable LTL carriers to attain higher productivity than could be achieved using other types of double trailers. The Company believes that it is the largest producer of FRP trailers in the United States. - Aluminum vans and doubles. Aluminum vans and doubles, also known as sheet and post trailers, were introduced into the product line in 1986 and are the standard trailer product purchased by most segments of the trucking industry. - Other. The Company's other transportation equipment include container chassis, flatbed trailers, rollerbed trailers, soft-sided trailers and converter dollies. Leasing and Finance Through 1991, the Company leased trailers to customers on a very limited basis, primarily involving used trailers taken in trade from other customers. In late 1991, the Company began to build its in-house capability to provide leasing programs to its customers through its newly formed subsidiary, Wabash National Finance Corporation ("the Finance Company"). At December 31, 1996, the Finance Company had approximately $63.8 4 7 million in equipment leased to others, net and $43.9 million invested in finance contracts. These leasing assets have been financed through term debt. Leasing revenues of the Finance Company represented 9.2%, 3.6% and 2.9% of total net sales during 1996, 1995 and 1994, respectively. Aftermarket Parts The Company also produces replacement parts and accessories both for its own and competitors' trailers and related equipment. Aftermarket parts represent a stable business which can produce high gross profit margins and are marketed through its division, Wabash National Parts. Management expects that the manufacture and sale of aftermarket parts will be a growing part of its product mix as the number and age of its units in service increases. Sales of these products represented 4.5%, 3.0%, and 3.5% of total net sales during 1996, 1995 and 1994, respectively. Used Trailers The Company is also involved in the sale of used trailers, which are primarily trade-ins from its customers for new trailers. The Company generally sells its used trailers both directly and through the Finance Company. Depending upon the customer's desire, the Company may recondition a used trailer or "stretch" the trailer to convert a 48-foot unit into a 53-foot unit. Used trailer sales promote new sales by permitting trade-in allowances and have represented a stable source of revenue for the Company. The sale of used trailers represented 4.6%, 2.5% and 1.1% of total net sales during 1996, 1995 and 1994, respectively. CUSTOMERS The Company's customer base includes many of the nation's largest truckload common carriers, domestic and international intermodal carriers including railroads, leasing companies, LTL common carriers, private fleet carriers, and package carriers. The Company is currently the sole supplier for several of its customers. Schneider National, Inc. accounted for approximately 13% of the Company's net sales during both 1996 and 1995 and 16% during 1994. Swift Transportation Company accounted for approximately 15% of the Company's net sales in 1996. No other customer represented more than 10% of net sales in 1996, 1995 or 1994. The Company's net sales in the aggregate to its five largest customers were 39%, 33% and 37% of its net sales in 1996, 1995 and 1994, respectively. Truckload common carriers include large national lines as well as regional carriers. The large national truckload carriers, who continue to gain market share at the expense both of regional carriers and private fleets, typically purchase trailers in large orders with highly individualized specifications. Trailers purchased by truckload common carriers including Schneider National, Inc., Werner Enterprises, Swift Transportation Co., Heartland Express, Inc., Dart Transit, Inc., Crete Carrier Corporation, Knight Transportation and FFE represented 58.3%, 63.9% and 57.3% of the Company's total new trailer sales in 1996, 1995 and 1994, respectively. Leasing companies include large national companies as well as regional and local companies. Among leasing companies, the Company's customers include Transport International Pool (TIP), Trailer Leasing Company, National Semi Trailer Corp. and Penske Truck Leasing. New trailer sales to leasing companies represented 8.0%, 10.4% and 14.8% of total new trailer sales in 1996, 1995 and 1994, respectively. Private fleet carriers represent the largest segment of the truck trailer industry in terms of total units, but are dominated by small fleets of 1 to 100 trailers. Among the larger private fleets, such as those of the large retail chain stores, automotive manufacturers and paper products, truck trailers are often ordered with customized features designed to transport specialized commodities or goods. Among private fleets, the Company's customers include Chrysler, Safeway, Foster Farms, The Kroger Company and Stone Container Corporation. New trailer sales to private fleets represented 9.4%, 10.0% and 4.2% of total new trailer sales in 1996, 1995 and 1994, respectively. LTL carriers have experienced consolidation in recent years, and the industry is increasingly dominated by a few large national and several regional carriers. Since the Highway Reauthorization Act of 1983 mandated that all 5 8 states permit the use of 28 foot double trailers, there has been a conversion of nearly all LTL carriers to doubles operations. Order sizes for LTL carriers tend to be in high volume and with standard specifications. LTL carriers who have purchased Company products include Roadway Express, Inc., Old Dominion Freight Line, Inc., Viking, USF Holland, Central Transport and TNT Freightway, Inc. New trailer sales to LTL carriers accounted for 14.9%, 6.8% and 10.3% of total new trailer sales in 1996, 1995 and 1994, respectively. In the U.S., the package carrier industry is dominated by Federal Express, United Parcel Service and Roadway Package System, Inc. Federal Express and UPS have developed rigid specifications for their highly specialized trailers and have historically purchased trailers from a small number of suppliers, including Wabash. New trailer sales to package carriers represented 2.7%, 6.3% and 3.5% of total new trailer sales in 1996, 1995 and 1994, respectively. Customers for the Company's proprietary RoadRailer products included United States and foreign intermodal carriers such as Triple Crown Services, Amtrak, Allied Systems, Bayerische Trailerzug Gesellschaft and Compagnie Nouvelle De Conteneurs. The Company believes that the RoadRailer technology has enabled it to develop an international presence. Anticipated sources of future revenue in the RoadRailer business also includes license fees from the license of RoadRailer technology to overseas manufacturers. New trailer sales of RoadRailer products represented 6.6%, 2.6% and 9.9% of total new trailer sales in 1996, 1995 and 1994, respectively. The balance of new trailer sales in 1996, 1995 and 1994 were made to dealers and household moving carriers. MARKETING AND DISTRIBUTION Trailer Sales. The Company and other truck trailer manufacturers market and distribute their products in two principal ways. Certain types of customers purchase directly from the factory, while others purchase primarily from dealers. The factory direct accounts include the larger truckload, LTL, package and household moving carriers and certain private fleets and leasing companies, and are high volume purchasers. The Company has focused its resources on the factory direct market, where customers are generally aware of the Company's management and its reputation in the trailer manufacturing industry, rather than on its dealer network. The current strategy is to increase its share of the factory direct market while expanding its dealer sales by attracting additional high quality regional dealers. The dealers primarily serve intermediate and smaller sized carriers and private fleets in the geographic region where the dealer is located and on occasion may sell to large fleets. The dealers also perform service work for many of their customers. The Company believes that the expansion of its dealer network will enable it to increase sales to regional carriers including private fleets and will assist in the distribution of aftermarket parts. The larger LTL and private fleets, as well as the national fleets which increasingly dominate the truckload segment, buy factory direct with a great deal of customization. These larger carriers generally will purchase the largest trailer allowable by law in the areas they intend to operate, with maximum interior space. These carriers are the largest users of the plate trailers manufactured by the Company. The Company's factory direct sales are based on specific customer orders. The Company has seven full time marketing and sales employees responsible for factory direct sales. These individuals work closely with senior management and with representatives of the engineering and manufacturing departments in order to effectively market products designed to meet the needs of a specific customer. Factory direct sales represented 73.2%, 66.4% and 65.6% of total new trailer sales in 1996, 1995 and 1994, respectively. After the Company successfully obtained a significant share of the factory direct business and developed a reputation as a high quality manufacturer whose product was purchased by large carriers, the Company began to attract regional dealers. The Company expanded its product line in 1990 to include refrigerated vans to establish the full product line necessary to attract quality dealers. Changes in the management, product line, product quality and financial condition of many competitive manufacturers during the past five years also influenced many dealers to reconsider the product lines carried. At December 31, 1996, the Company's products were being offered by 40 6 9 independent dealers in 61 locations including Canada and Mexico. New trailer sales through dealers represented 26.8%, 33.6% and 34.4% of total new trailer sales in 1996, 1995 and 1994, respectively. On January 11, 1996, the Company announced a strategic alliance with Fruehauf Trailer Corporation ("Fruehauf"). As a part of this alliance, the Company announced that a private label manufacturing agreement had been reached whereby Wabash will build refrigerated van trailers for Fruehauf to market through Fruehauf's distribution network. These trailers will be built to Fruehauf's specifications, utilizing proprietary components such as axles, suspension and landing gear. In addition, the Company announced its intention to develop programs to enhance its aftermarket parts and used trailer business through Fruehauf's distribution network. On October 7, 1996, Fruehauf filed bankruptcy. It is expected this development will have little impact as there had been limited activity between the Companies since the alliance was announced. Leasing and Finance. In late 1991 the Company began to build an in-house capability to provide a leasing program to its customers for new and used trailers. Wabash National Finance Corporation was formed as a wholly owned subsidiary of the Company and a senior executive was hired to manage the leasing operations. Aftermarket Parts. The Company also produces replacement parts and accessories both for its own and competitors' trailers and related equipment. Aftermarket parts represent a stable business which can produce high gross profit margins. These products are offered through the Company's network of over 135 independent dealers and through its aftermarket parts division, Wabash National Parts. RAW MATERIALS The Company utilizes a variety of raw materials and components including aluminum, lumber, tires and suspensions which it purchases from a large number of suppliers. Significant price fluctuations or shortages in raw materials or finished components may adversely affect the Company's results of operations. The raw material used in greatest quantity is aluminum, which is readily available from numerous sources. The Company is increasing its use of composite materials which includes high strength steel and a vinyl core. There is currently a very limited supply of this composite material. As a result, the Company is currently constructing its own composite material facility in Lafayette, Indiana. The central Midwest location of the Company's plant gives Wabash a competitive advantage in the transportation cost of inbound raw materials as well as the cost of delivery of finished product. Customers often use trailers coming off the assembly line to deliver freight outbound from the Midwest. BACKLOG The Company's backlog of orders was approximately $462.0 million, $858.0 million and $1,028.7 million at December 31, 1996, 1995 and 1994, respectively. The Company expects to fill a majority of its existing backlog of orders by the end of 1997. The Company has historically built trailers to customer order and does not maintain an inventory of new trailers built in anticipation of future orders. PATENTS, LICENSES AND TRADEMARKS The Company currently holds or has applied for approximately 63 patents in the United States on various components and techniques utilized in its manufacture of truck trailers, of which 23 patents and 12 applications in the United States cover the Company's RoadRailer technology. RoadRailer technology is also covered by the Company's patents registered in 16 foreign countries. The Company utilizes confidential proprietary information in the design and manufacturing of its products and takes appropriate measures, including legal action where necessary, to protect its trademarks, patents and proprietary rights. The Company does not license the use of its trademarks, patents or proprietary rights to other persons, except that the Company has entered into six licensing agreements with foreign firms in over 19 countries for those firms to utilize the Company's proprietary RoadRailer technology and trademarks in return for royalty payments based on sales. In addition, as a part of the Fruehauf alliance, the Company reached an exclusive cross license agreement relative to composite plate trailer design and patents. Under this agreement, Wabash and Fruehauf will have the exclusive right to build and distribute composite plate trailers covered by patents owned by the Company and Fruehauf. 7 10 RESEARCH AND DEVELOPMENT The Company emphasizes design and product innovation and has increased its expenditures for research and development in recent years since its founding. The Company has a reputation in the industry for its innovation in product design and low cost manufacturing. The Company's policy is to expense all research and development costs as incurred. Research and development costs were $1.2 million in 1996, $1.6 million in 1995 and $1.4 million in 1994. Research and development efforts include the development of proprietary highly automated manufacturing equipment and tooling, much of which was developed by the employees who operate the equipment. The Company attempts to foster a culture that encourages innovation by all employees, particularly those working on the factory floor. ENVIRONMENTAL MATTERS Wabash operates in several sites in Lafayette pursuant to permits issued by the Indiana Department of Environmental Management ("IDEM") Office of Air Management which restrict the emission of volatile organic compounds ("VOC") from the Company's painting, insulating and undercoating operations. The Company regularly reports its VOC emissions to IDEM and the United States Environmental Protection Agency ("EPA"), and believes its emissions comply with applicable laws and regulations. The Company also disposes of waste associated with painting operations in landfills pursuant to permits issued by IDEM and disposes of other solid wastes off-site through independent solid waste haulers. Wood preservatives and solvents associated with manufacturing activities conducted by the previous owner of the site, National Enterprises, Inc., which filed for bankruptcy protection, are contained in soils at a portion of that site and are being remediated voluntarily pursuant to a Work Plan approved by IDEM. Enhanced long-term bioremediation of the affected soils began in June 1991. Sufficient data have not yet been generated to predict when the remediation will be complete, whether the enhanced bioremediation will achieve cleanup objectives imposed by regulatory agencies, and what the ultimate costs of cleanup will be. To date, costs associated with the on-site soil remediation have not been material. The Company does not expect the condition of the Site or the cost of cleanup to have a materially adverse effect upon the financial condition or operations of the Company. In 1989, the Company received and responded to a "Request For Information" pursuant to the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), and the Resource Conservation and Recovery Act, regarding the Tippecanoe Sanitary Landfill in Lafayette, Indiana. With one immaterial exception, the Company has not disposed of waste at this landfill. A generator claim against the Company pursuant to CERCLA for response costs associated with a cleanup of the landfill may be asserted, but none is known to be contemplated. The Company's apportioned share of liability for such cleanup, if any, is expected to be immaterial. EMPLOYEES As of December 31, 1996, the Company employed 2,921 persons, of whom 36 are employed in research and engineering, 2,620 in manufacturing, 48 in sales and marketing, 102 in materials and 115 in administration, finance and management. None of the Company's employees are represented by a labor union. The Company places a heavy emphasis on employee relations through educational programs and quality control teams. The Company believes that its employee relations are excellent. ITEM 2-- PROPERTIES The Company owns an approximately 1 million square foot facility in Lafayette, Indiana which houses its truck trailer manufacturing, tool and die operations, research laboratories and management offices. This facility, comprising 12 buildings on 79 acres, is subject to deeds of trust in favor of the owner of certain industrial revenue bonds sold to finance plant expansions in 1986. As a result of the Company's emphasis on efficient manufacturing processes, the Company believes it utilizes a large percentage of the Company's productive capacity during normal operations. In 1994, the Company purchased an additional facility in Lafayette, Indiana. The additional facility 8 11 contains approximately 500,000 square feet of manufacturing space and is located on 300 acres. This facility was opened during 1995 and is used for expanded production capacity of truck trailers (primarily refrigerated trailers) and RoadRailer bimodal products. The Company also broke ground on its new composite material facility in early 1997 which is expected to be approximately 40,000 square feet of manufacturing space upon completion. The Company believes that these facilities are adequate for its operations. ITEM 3-- LEGAL PROCEEDINGS There are certain lawsuits and claims pending against the Company which arose in the normal course of business. None of these claims are expected to have a material adverse effect on the Company's financial position or results of operations. ITEM 4-- SUBMISSIONS OF MATTERS TO VOTE OF SECURITY HOLDERS None to report. PART II ITEM 5-- MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Following the Company's initial public offering of Common Stock on November 8, 1991, the Company's Common Stock has been traded on the New York Stock Exchange under the symbol "WNC." The following table sets forth, for the period indicated, the high and low last sale prices per share of the Common Stock as reported on the New York Stock Exchange Composite Tape and the dividends declared per common share.
DIVIDENDS DECLARED PER HIGH LOW COMMON SHARE ---- ----- --------------- 1995 First Quarter ............................. $38.875 $27.875 $0.025 Second Quarter ............................ $33.625 $27.75 $0.025 Third Quarter ............................. $39.75 $30.35 $0.025 Fourth Quarter ............................ $34.00 $19.875 $0.03 1996 First Quarter ............................. $24.125 $18.25 $0.03 Second Quarter ............................ $22.75 $17.375 $0.03 Third Quarter ............................. $18.875 $15.125 $0.03 Fourth Quarter ............................ $20.50 $15.75 $0.03 1997 First Quarter (through January 30, 1997) .. $18.50 $17.125 ---
As of January 30, 1997, the Common Stock was held by 1,191 holders of record. ITEM 6--SELECTED FINANCIAL DATA The following selected consolidated financial data, with respect to the Company for the five years in the period ended December 31, 1996 have been derived from the Company's consolidated financial statements, which statements have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and notes thereto included elsewhere herein. 9 12
YEARS ENDED DECEMBER 31, ------------------------------------- 1996 1995 1994 1993 1992 ---------- ---------- ---------- ---------- ---------- (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Net sales .................................. $631,492 $734,299 $561,797 $360,030 $289,097 Cost of sales .............................. 602,629 677,503 511,821 325,123 267,743 ---------- ---------- ---------- ---------- ---------- Gross profit ........................... 28,863 56,796 49,976 34,907 21,354 Selling, general and administrative expenses.................................. 13,359 11,111 8,723 7,465 6,145 ---------- ---------- ---------- ---------- ---------- Income from operations ................. 15,504 45,685 41,253 27,442 15,209 Interest expense ........................... (10,257) (6,251) (2,684) (1,388) (704) Other, net ................................. 788 875 1,019 (184) 1 ---------- ---------- ---------- ---------- ---------- Income before taxes .................... 6,035 40,309 39,588 25,870 14,506 Provision for income taxes ................. 2,397 14,902 15,663 10,315 5,575 ---------- ---------- ---------- ---------- ---------- Net income ............................. $ 3,638 $ 25,407 $ 23,925 $ 15,555 $ 8,931 ========== ========== ========== ========== ========== Net income per common share ................ $ 0.19 $ 1.34 $ 1.32 $ 0.90 $ 0.54 Cash dividends declared per common share ... $ 0.12 $ 0.105 $ 0.85 $ 0.07 $ 0.017
YEARS ENDED DECEMBER 31, ------------------------------------- 1996 1995 1994 1993 1992 -------- ------- ------ ------ ------- (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) BALANCE SHEET DATA (at end of period): Working capital ............................ $148,712 $113,198 $ 90,802 $ 56,407 $ 44,129 Total lease portfolio ...................... 113,811 76,464 53,479 37,647 18,854 Total assets ............................... 440,071 384,134 300,679 179,801 134,633 Long-term debt, net of current maturities .. 151,307(1) 73,726(1) 24,857 24,422 18,105 Stockholders' equity ....................... 178,368 177,631 154,181 87,464 62,086
(1) Long-term debt, net of current maturities includes $80.9 million in 1996 and $31.0 million in 1995 incurred by the Finance Company in connection with its lease and finance operations. ITEM 7-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW This document contains various forward-looking comments. These comments should be viewed in connection with the risk factors disclosed in the Company's Form 8-K as filed with the Securities and Exchange Commission on January 21, 1997. As a result of the significant investments made by the Company in new products and new markets coupled with a 32% decline in total U.S. truck trailer demand, net sales and net income decreased during 1996. New product introductions resulted in the Company's product mix becoming significantly more dependent on standard type 10 13 trailer equipment at the same time that demand for truck trailers in the United States decreased approximately 32%. The decline in truck trailer demand during 1996 coupled with excess capacity in the industry resulted in extreme pricing pressure on new trailers which unfavorably impacted margins. As a result, the Company's net sales decreased 14% during 1996 to $631.5 million compared to $734.3 million in 1995 while net income decreased to $3.6 million ($0.19 per share) compared to $25.4 million ($1.34 per share) in 1995. The decline in truck trailer demand combined with excess capacity resulted in two of the ten largest manufacturers entering bankruptcy during 1996. Partially offsetting the decrease in net sales were increases in the sales of the Company's leasing and finance and aftermarket parts operations. The demand for the Company's products continued to be strong as the Company began 1997 with approximately $460 million in backlog, a majority of which is expected to be delivered in 1997. In 1995, the Company experienced a 31% increase in net sales and a 6% increase in net income over 1994 levels as a result of increased demand for Company products. The following table sets forth certain operating data as a percentage of net sales for the periods indicated:
PERCENTAGE OF NET SALES YEARS ENDED DECEMBER 31, ------------------------------------ 1996 1995 1994 -------- ------------ ------------ Net sales ........................... 100.0% 100.0% 100.0% Cost of sales ....................... 95.4 92.3 91.1 -------- ------------ ------------ Gross profit ................... 4.6 7.7 8.9 General and administrative expense .. 1.4 1.0 1.0 Selling expense ..................... .7 .5 .6 -------- ------------ ------------ Income from operations ......... 2.5 6.2 7.3 Interest expense .................... (1.6) (.8) (.5) Other, net .......................... .1 .1 .2 -------- ------------ ------------ Income before taxes ............ 1.0 5.5 7.0 Provision for taxes ................. .4 2.0 2.8 -------- ------------ ------------ Net income ..................... .6% 3.5% 4.3% ======== ============ ============
RESULTS OF OPERATIONS Net Sales For the first time since 1991, industry shipments of new trailers decreased from prior year levels. Due to oversupply of new trailers in 1995 and industry consolidation in the full truckload segment, new trailer shipments in 1996 decreased an estimated 32% from 1995, compared to a 20% increase in 1995 from 1994 and a 25% increase in 1994 from 1993. During these periods the Company was able to increase its net sales in 1995 and 1994; however, sales decreased in 1996. During 1996, however, the Company was able to increase its estimated market share despite the 32% reduction in total industry new trailer shipments as a result of its strategy to continuously improve productivity, increase capacity and to provide superior equipment to the full truckload, refrigerated and intermodal segments, as follows:
YEARS ENDED DECEMBER 31, --------------------------------- 1996 1995 1994 ---------- --------- --------- (DOLLAR AMOUNTS IN THOUSANDS) Net sales ...................................... $631,492 $734,299 $561,797 % (decrease)/increase in sales from prior period (14.0)% 30.7% 56.0% Estimated % share of new trailer market ........ 19.0% 14.9% 15.2%
11 14 The decreased net sales for 1996 was attributable to a decrease in new trailer sales of $150.3 million, offset by increased aftermarket parts sales of $6.5 million, increased sales of used trailers previously under lease by the Finance Company of $9 million and a $32 million increase in the revenues of the Finance Company. The decrease in new trailer sales for the year was attributable to a 16% decrease in units sold, reflecting the decreased production on the Company's plate trailer line as a result of the limited supply of composite material and the 32% decline in U.S. truck trailer demand. In late 1995, the Company introduced its new composite plate trailer, the DuraPlate(R) trailer, the next generation of the plate trailer. Historically, the aluminum plate trailer had accounted for over half of the Company's revenues and even a greater percentage of its earnings. While not proprietary, the Company has enjoyed a sizable market share within this segment. As the success of the aluminum plate trailer grew, the Company experienced increased competition within its main product line and as a result, decreased margins. With this in mind, the Company has been developing for some time the next generation of the aluminum plate trailer, one which is proprietary in design. With the introduction of the DuraPlate trailer many of the Company's customers delayed taking the aluminum plate trailer. At the same time, the Company was severely limited on the supply of the composite material from one supplier who was not able to increase its capacity. As a result, the Company's plate trailer production decreased approximately 40% from 1995. The Company anticipates supply of the composite material to improve over the next several quarters as its supplier increases manufacturing capacity; however, this increased capacity is not expected to fulfill the Company's long-term demand for this product. As a result, the Company plans to construct its own composite manufacturing facility in Lafayette, Indiana during 1997 at an estimated cost of $17 million to $20 million. Furthermore, the Company expects pricing to improve in the standard trailer market as overall manufacturing capacity decreases in the domestic trailer market during this period of consolidation. The $32 million increase in leasing and finance revenues during 1996 was due to the increase in the number of trailers leased and financed to customers, which increased from approximately 7,200 trailers on lease at December 31, 1995 to approximately 9,900 trailers on lease at December 31, 1996 and due to the increase in the sale of leased or financed equipment. The increase in aftermarket parts sales reflects the Company's strategy of continuing to increase its independent dealer network, which consisted of over 135 independent dealers at December 31, 1996. The increase in sales of 21.1% and 63.1% in 1995 and 1994, respectively, reflects an increase in units sold due to increased demand for the Company's products. Gross Profit During 1996, the Company experienced continued growth in the demand for several new products recently introduced, including, among others, its new composite plate trailer. However, due to a limited supply of composite material available from the Company's supplier, production on the Company's plate trailer line was down 40% from 1995 levels. As a result, the Company's production mix in 1996 was concentrated in the standard type trailer market which experienced significant pricing pressures and resulted in the Company's decreased gross profit margins. In addition, during late-1995 the Company completed its capacity expansion program which tripled its production capacity over 1993 levels and achieved a record number of new product introductions and new product developments. This increased level of capital expenditures impacted the Company's gross margin percentage in 1996 due to the unfavorable production mix in 1996. The Company believes these investments have positioned it for continued growth in the foreseeable future in light of a downturn in the domestic trailer market while at the same time giving it the opportunity to improve gross margins.
YEARS ENDED DECEMBER 31, ---------------------------------- 1996 1995 1994 --------- --------- --------- (DOLLAR AMOUNTS IN THOUSANDS) Gross profit ......... $28,863 $56,796 $49,976 as a % of net sales .. 4.6% 7.7% 8.9%
12 15 Income from Operations Income from operations (income before interest, taxes and other items) was affected primarily by the changes in gross profit. The decrease in the percent of income from operations in 1996 was a result of the decrease in gross profit margins and increased selling, general and administrative (SG&A) expenses as a percent of net sales. Selling, general and administrative expenses increased during 1996 due in part to a $1.0 million increase in discount fees associated with the increased use of the Company's receivables sales and servicing agreement. Also impacting income from operations in 1996 was decreased income from the Finance Company. This decreased income was primarily due to the bankruptcy of certain large customers in 1996 and 1995. Reduced SG&A expenses as a percent of net sales partially offset decreased gross profit margins in 1995. Selling, general and administrative expenses were 2.1%, 1.5% and 1.6% of net sales in 1996, 1995 and 1994, respectively.
YEARS ENDED DECEMBER 31, ---------------------------------- 1996 1995 1994 --------- --------- --------- (DOLLAR AMOUNTS IN THOUSANDS) Income from operations .. $15,504 $45,665 $41,253 as a % of net sales ..... 2.5% 6.2% 7.3%
Other Income (Expense) Interest expense totaled $10.3 million, $6.3 million and $2.7 million for the years ended December 31, 1996, 1995 and 1994, respectively. The increase in interest expense primarily reflects new term and bank line of credit debt associated with growth in the Finance Company's leasing operations, which is expected to continue, and increased interest expense as a result of increased working capital requirements during 1996. Other, net is primarily comprised of a variety of immaterial, non-operating expense items. During 1994, it also included $1.0 million of interest income generated by higher levels of cash and cash equivalents resulting from the net proceeds of $44.3 million received from the issuance of additional shares of common stock by the Company. Income Taxes The provision for Federal and State income taxes represented 39.7%, 37.0% and 39.6% of pre-tax income for 1996, 1995 and 1994, respectively. During 1995, the Company recognized a state income tax credit related to property improvements on its new facility acquired during 1994. This credit caused the effective tax rate to be 2.4% points lower than the statutory rates in 1995. LIQUIDITY AND CAPITAL RESOURCES During 1996, the Company continued its investment in new product development and its leasing and finance operation. Capital expenditures during 1996 totaled $11.2 million and were principally used for achieving improved manufacturing productivity. In addition, the Company invested approximately $24.0 million during 1996 in working capital, primarily in inventory and accounts payable. The increased inventory was primarily due to increases in work-in-progress and finished goods associated with the production of RoadRailer equipment for export in 1996. The decrease in accounts payable from 1995 is a result of reduced raw material inventory as days payable outstanding remained level with 1995. The Finance Company also invested a net $43.7 million in its lease portfolio during 1996 which resulted in a net investment of $113.8 million at December 31, 1996. These investments during 1996 were financed primarily through an increase in long-term debt of $69 million and cash generated from operations. In connection with the investments discussed above, the Company's debt increased to $151.3 million at December 31, 1996 compared to $73.7 million at December 31, 1995. Of the $151.3 million of consolidated debt outstanding at December 31, 1996, the Finance Company had $80.9 million in outstanding borrowings as a result of its leasing activities compared to $43.2 million at December 31,1995. In December, 1996 the Company amended its unsecured revolving credit line to $85 million, with interest being based upon the London interbank rate 13 16 (LIBOR) plus 25 to 125 basis points, as defined. The Company continues to utilize a receivables sale and servicing agreement established in June, 1995, which enables the Company to sell up to $40 million of receivables without recourse. These credit facilities are used for working capital and other general corporate purposes. On January 31, 1996, the Company issued $50 million, unsecured principal amount of 6.41% Series A Senior Notes due January 31, 2003. The proceeds were used to repay amounts outstanding under the Company's revolving line of credit. In addition, in December, 1996, the Company issued $100 million, unsecured Series B-H Senior Notes due 2001-2008, of which $75 million was drawn down in December and the remaining $25 million will be drawn down in March, 1997. The proceeds will be used to reduce the operating costs and support the future growth of the Finance Company by refinancing certain Finance Company debt. Of the total $75 million drawn down in 1996, $61 million was used to pay off the outstanding balance of the Finance Company's $50 million secured revolving line of credit as well as other secured debt issues of the Finance Company. On April 27, 1995, the Company announced that the Board of Directors authorized a common stock repurchase plan of up to $30 million in the aggregate. The Company may purchase its common stock in the open market or in block transactions from time to time as it deems appropriate. Other sources of funds for capital expenditures, continued expansion of businesses, dividends, principal repayments on debt, stock repurchase and working capital requirements are expected to be cash from operations, additional borrowings under the credit facilities and term borrowings. The Company believes that these funding sources will be adequate for its anticipated requirements. INFLATION The Company has been generally able to offset the impact of rising costs through productivity improvements as well as selective price increases. As a result, inflation is not expected to have a significant impact on the Company's business. 14 17 ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGES Report of Independent Public Accountants ............................................. 16 Consolidated Balance Sheets as of December 31, 1996 and 1995 ......................... 17 Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994 ............................................................................. 18 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994 .................................................................... 19 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 ............................................................................. 20 Notes to Consolidated Financial Statements ........................................... 21
15 18 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Wabash National Corporation: We have audited the accompanying consolidated balance sheets of WABASH NATIONAL CORPORATION (a Delaware corporation) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wabash National Corporation and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Indianapolis, Indiana, January 17, 1997. 16 19 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
DECEMBER 31, ------------------ ASSETS 1996 1995 ------ -------- -------- CURRENT ASSETS: Cash and cash equivalents ..................................... $ 5,514 $ 2,097 Accounts receivable, net ...................................... 71,166 77,535 Current portion of finance contracts .......................... 6,128 5,979 Inventories ................................................... 140,015 134,294 Prepaid expenses and other .................................... 13,087 7,657 -------- -------- Total current assets ...................................... 235,910 227,562 -------- -------- PROPERTY, PLANT AND EQUIPMENT, net ................................ 81,782 76,192 -------- -------- EQUIPMENT LEASED TO OTHERS, net ................................... 63,825 35,362 -------- -------- FINANCE CONTRACTS, net of current portion ......................... 43,858 35,123 -------- -------- OTHER ASSETS ...................................................... 14,696 9,895 -------- -------- $440,071 $384,134 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt ......................... $ 3,942 $ 12,527 Accounts payable ............................................. 69,155 88,490 Accrued liabilities .......................................... 14,101 13,347 -------- -------- Total current liabilities .............................. 87,198 114,364 -------- -------- LONG-TERM DEBT, net of current maturities ......................... 151,307 73,726 -------- -------- DEFERRED INCOME TAXES ............................................. 22,879 18,045 -------- -------- OTHER NONCURRENT LIABILITIES ...................................... 319 368 -------- -------- STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, 25,000,000 shares authorized, no shares issued ............................... ---- ---- Series A Junior Participatory Preferred stock, $.01 par value, 300,000 shares authorized; no shares issued ............... ---- ---- Common stock, $.01 par value, 75,000,000 shares authorized: 18,910,923 and 18,943,228 shares issued and outstanding, respectively .................................. 189 189 Additional paid-in capital ................................... 99,388 99,246 Retained earnings ............................................ 80,070 78,701 Treasury stock, at cost, 59,600 and 19,600 shares, respectively (1,279) (505) -------- -------- 178,368 177,631 -------- -------- $440,071 $384,134 ======== ========
The accompanying notes are an integral part of these consolidated balance sheets. 17 20 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, ------------------------------------ 1996 1995 1994 ---------- ---------- ---------- NET SALES ............................ $ 631,492 $ 734,299 $561,797 COST OF SALES ........................ 602,629 677,503 511,821 ---------- ---------- ---------- Gross profit .................... 28,863 56,796 49,976 GENERAL AND ADMINISTRATIVE EXPENSES .. 8,857 7,245 5,334 SELLING EXPENSES ..................... 4,502 3,866 3,389 ---------- ---------- ---------- Income from operations .......... 15,504 45,685 41,253 OTHER INCOME (EXPENSE): Interest expense .................. (10,257) (6,251) (2,684) Other, net ........................ 788 875 1,019 ---------- ---------- ---------- Income before income taxes ...... 6,035 40,309 39,588 PROVISION FOR INCOME TAXES ........... 2,397 14,902 15,663 ---------- ---------- ---------- Net income ...................... $ 3,638 $ 25,407 $23,925 ========== ========== ========== Net income per common share ..... $ 0.19 $ 1.34 $1.32 ========== ========== ========== Average shares outstanding ...... 18,912,000 18,948,000 18,173,000 ========== ========== ==========
The accompanying notes are an integral part of these consolidated statements. 18 21 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS) COMMON STOCK ADDITIONAL ------------------------ PAID- RETAINED TREASURY SHARES AMOUNT IN CAPITAL EARNINGS STOCK TOTAL ----------- ----------- ----------- ------------ ------------ ---------- BALANCES, December 31, 1993 ..................... 17,389,027 $174 $54,351 $32,939 $ --- $87,464 Net income for the year ...................... ---- ---- ---- 23,925 --- 23,925 Cash dividends ($0.085 per share) ............ ---- ---- ---- (1,580) --- (1,580) Issuance of additional shares of common stock, net of expenses ............................ 1,545,000 15 44,247 ---- --- 44,262 Issuance of common stock under employee stock purchase plan ........................ 2,022 --- 68 ---- --- 68 Exercise of stock options .................... 2,400 --- 42 ---- --- 42 ----------- ----------- ----------- ------------ ---------- --------- BALANCES, December 31, 1994 ..................... 18,938,449 189 98,708 55,284 --- 154,181 Net income for the year ...................... --- --- --- 25,407 --- 25,407 Cash dividends ($0.105 per share) ............ --- --- --- (1,990) --- (1,990) Issuance of common stock under employee stock purchase plan ........................ 3,379 --- 88 --- --- 88 Exercise of stock options .................... 21,000 --- 450 --- --- 450 Purchase treasury stock ...................... (19,600) --- --- --- (505) (505) ---------- ----------- ----------- ------------ ---------- --------- BALANCES, December 31, 1995 ..................... 18,943,228 189 99,246 78,701 (505) 177,631 Net income for the year....................... --- --- --- 3,638 --- 3,638 Cash dividends ($0.12 per share).............. --- --- --- (2,269) --- (2,269) Issuance of common stock under employee stock purchase plan ........................ 4,995 --- 92 --- --- 92 Exercise of stock options .................... 2,700 --- 50 --- --- 50 Purchase treasury stock ...................... (40,000) --- --- --- (774) (774) ---------- ----------- ----------- ------------ ---------- --------- BALANCES, December 31, 1996 ..................... 18,910,923 $189 $99,388 $80,070 $(1,279) $178,368 =========== =========== =========== ============ ========== =========
The accompanying notes are an integral part of these consolidated statements. 19 22 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31, ------------------------------ 1996 1995 1994 --------- --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ....................................................................... $3,638 $25,407 $23,925 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization ................................................ 15,289 11,504 7,386 Bad debt provision ........................................................... 186 616 430 Deferred income taxes ........................................................ 2,317 4,541 4,877 Change in operating assets and liabilities-- Decrease (increase) in accounts receivable ............................... 6,183 (3,313) (37,439) (Increase) in inventories ................................................ (7,919) (57,712) (30,626) (Increase) in prepaid expenses and other ................................. (3,661) (4,370) (183) (Decrease) increase in accounts payable .................................. (19,335) 3,900 41,171 Increase (decrease) in accrued liabilities ............................... 757 (1,667) 5,107 (Increase) decrease in other assets ...................................... (3,421) (2,566) 489 --------- --------- -------- Total adjustments ..................................................... (9,604) (49,067) (8,788) --------- --------- -------- Net cash provided by (used in) operating activities ................... (5,966) (23,660) 15,137 --------- --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ............................................................. (11,211) (37,898) (26,279) Investment in equipment leased to others ......................................... (41,275) (19,076) (6,481) Proceeds from disposal of equipment .............................................. 17,706 9,149 293 Investment in finance contracts .................................................. (24,940) (20,512) (14,875) Principal payments on finance contracts .......................................... 4,844 3,279 2,184 Payments for RoadRailer technology ............................................... (2,008) (275) (3,242) Other ............................................................................ 172 (39) 105 --------- --------- -------- Net cash used in investing activities ................................. (56,712) (65,372) (48,295) --------- --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt ............................................. (24,365) (9,895) (7,801) Proceeds from issuance of long-term debt ......................................... 143,361 10,000 10,332 Borrowings under long-term revolver .............................................. 398,100 311,420 35,000 Payments under long-term revolver ................................................ (448,100) (258,189) (35,231) Proceeds from issuance of common stock, net of expenses .......................... 142 538 44,372 Payment of cash dividend ......................................................... (2,269) (1,895) (1,455) Purchase of treasury stock ....................................................... (774) (505) --- --------- --------- -------- Net cash provided by financing activities ............................. 66,095 51,474 45,217 --------- --------- -------- NET INCREASE (DECREASE) IN CASH ..................................................... 3,417 (37,558) 12,059 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD ............................ 2,097 39,655 27,596 --------- --------- -------- CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD .................................. $5,514 $2,097 $39,655 ========= ========= ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for--- Interest .................................................................... $8,825 $ 6,433 $ 2,534 ========= ========= ======== Income taxes ................................................................ $ 714 $13,648 $10,372 ========= ========= ======== SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES: Operating leases converted to finance contracts .................................. $2,567 $ --- $ 3,107 ========= ========= ======== Finance contracts converted to operating leases .................................. 3,201 1,519 --- ========= ========= ======== Used trailers transferred from inventory into operations ......................... 2,198 --- --- ========= ========= ========
The accompanying notes are an integral part of these consolidated statements. 20 23 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF THE BUSINESS Wabash National Corporation (the Company) designs, manufactures and markets standard and customized truck trailers, including dry freight vans, refrigerated trailers and bimodal vehicles and produces and sells aftermarket parts through its division, Wabash National Parts. The Company's manufacturing facilities are located in Lafayette, Indiana. The Company's wholly-owned subsidiary, Continental Transit Corporation (Continental), delivers finished trailers manufactured by the Company. The Company's wholly-owned subsidiary, Wabash National Finance Corporation (the Finance Company) provides leasing and financing programs to its customers for new and used trailers. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions have been eliminated. b. Significant Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. c. Cash and Cash Equivalents The Company classifies as cash equivalents all highly liquid investments with maturities of three months or less. d. Allowance for Doubtful Accounts Accounts receivable as shown in the accompanying consolidated balance sheets are net of allowance for doubtful accounts of $1,686,000, $1,363,000 and $891,000 at December 31, 1996, 1995 and 1994, respectively. The activity included in the allowance for doubtful accounts were (i) provisions for bad debts of $186,000, $616,000 and $430,000; and (ii) net accounts recovered (written-off) of $137,000, ($144,000), and $15,000 during 1996, 1995 and 1994, respectively. e. Inventories Inventories are priced at the lower of first-in, first-out (FIFO) cost or market. Inventory costs include raw material, labor and overhead costs for manufactured inventories. Used trailers are carried at the lower of their estimated net realizable value or cost. Inventories consist of the following (in thousands): DECEMBER 31, ------------------ 1996 1995 -------- -------- Raw materials and components ................ $72,645 $89,961 Work in progress ............................ 16,344 13,582 Finished goods .............................. 27,608 14,034 Used trailers ............................... 23,418 16,717 -------- -------- $140,015 $134,294 ======== ========
21 24 f. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the depreciable assets. Estimated useful lives are 33 1/3 years for buildings and building improvements and range from 3 to 10 years for machinery and equipment. Maintenance and repairs are charged to expense as incurred. Property, plant and equipment consist of the following (in thousands):
DECEMBER 31, ------------------ 1996 1995 -------- -------- Land ......................................... $ 5,154 $ 4,051 Buildings and improvements ................... 37,656 34,236 Machinery and equipment ...................... 60,852 54,074 Construction in progress ..................... 1,373 --- -------- -------- 105,035 92,361 Less--Accumulated depreciation ............... (23,253) (16,169) -------- -------- $ 81,782 $ 76,192 ======== ========
g. Fair Values of Financial Instruments Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures About Fair Value of Financial Instruments," requires disclosure of fair value information for certain financial instruments. The carrying amounts for trade receivables and payables are considered to be their fair values. The differences between the carrying amounts and the estimated fair values of the Company's other financial instruments at December 31, 1996 and 1995 were immaterial. h. Revenue Recognition Revenues and costs are recognized as the related products are accepted by the customer except in the case of direct finance or operating leases. Revenues from direct finance leases are recognized over the term of the lease at a constant rate of return. Revenues from operating leases are recognized over the term of the lease on a straight-line basis in an amount equal to the invoiced rentals. i. Income Taxes The Company recognizes income taxes under the liability method of accounting for income taxes. The liability method measures the expected tax impact of future taxable income or deductions resulting from differences in the tax and financial reporting bases of assets and liabilities reflected in the consolidated balance sheets. j. Research and Development Research and development expenses are charged to earnings as incurred, and approximated $1,206,000, $1,567,000 and $1,401,000 in 1996, 1995 and 1994, respectively. k. Net Income per Common Share The computation of net income per common share is based on the weighted average number of outstanding common shares during the period. Shares issuable under employee stock options are excluded from the weighted average number of shares when their effect is not dilutive. 22 25 l. Reclassifications Certain items previously reported in specific financial statement captions have been reclassified to conform with the 1996 presentation. m. New Accounting Standard The Company currently accounts for its employee stock option plans using APB Opinion No. 25, Accounting for Stock Issued to Employees, which results in no charge to earnings when issued at fair market value. During 1995, the Financial Accounting Standards Board issued SFAS No. 123, Accounting for Stock-Based Compensation, which considers the stock options as compensation expense to the Company based on their estimated fair value at date of grant based on their estimated fair vaule at date of grant. Under this new standard, the Company has the option of accounting for employee stock option plans as it currently does, or it may use the new method. The Company intends to continue to use the existing method, but has adopted the disclosure requirements of SFAS 123 within Note 5) Stockholders' Equity. 3. LEASING AND FINANCE OPERATIONS The Finance Company has leased equipment to others under operating leases, whereby revenue is recognized as lease payments are due from the customers and the related costs are amortized over the equipment life. Equipment leased to others is depreciated over the estimated useful life of the equipment, not to exceed 11 years and no residual value, or in some cases, a depreciable life equal to the term of the lease and a residual value equal to the estimated market value at lease termination. Depreciation expense on equipment leased to others was $6,093,000, $4,175,000 and $3,048,000 during 1996, 1995 and 1994, respectively. Accumulated depreciation of equipment leased to others is $10,435,000 and $8,284,000 at December 31, 1996 and 1995, respectively. Future minimum lease payments to be received from these noncancellable operating leases, some of which extend to the year 2004, amount to $54,659,000 at December 31, 1996. These payments are due as follows: $15,687,000 in 1997, $10,118,000 in 1998, $7,530,000 in 1999, $6,349,000 in 2000, $5,161,000 in 2001 and $9,813,000 thereafter. The Finance Company also provides financing contracts for the sale of trailer equipment to certain of its customers. The financing is principally structured in the form of finance leases, typically for a five-year term. Finance contracts, as shown on the accompanying financial statements, represent the minimum lease payments receivable plus the estimated residual values less unearned interest. The future minimum lease payments to be received are as follows: $8,387,000 in 1997, $7,483,000 in 1998, $7,018,000 in 1999, $5,849,000 in 2000, $4,499,000 in 2001 and $4,069,000 thereafter, which includes unearned interest of $10,212,000. At December 31, 1996, the total nonguaranteed residuals on these finance contracts was $7,545,000. In certain situations, the Company and the Finance Company have helped customers obtain financing for trailers purchased by guaranteeing the residual values of such equipment. This has been accomplished by (i) selling the trailers to an independent third party, (ii) leasing the trailers back and providing some level of guaranteed residual value to the third party, and (iii) subleasing the trailers to the customer. The total of the residual values guaranteed under these and other leasing arrangements approximates $10,621,000 as of December 31, 1996. The income from the sale of this equipment has been deferred and will be recognized over the term of the financial arrangements. The Company's and the Finance Company's rental expense under situations where trailers have been leased back was $743,000 in 1996, $1,389,000 in 1995 and $1,427,000 in 1994. At December 31, 1996, the future minimum lease payments under these leases are $4,161,000 in 1997, $4,161,000 in 1998, $3,790,000 in 1999 and $3,419,000 in 2000 and $3,419,000 in 2001, of which $3,419,000 per year is guaranteed by the Company. 23 26 The Finance Company provides leasing programs to customers for new and used trailers. The Finance Company's revenues were $58,122,000, $26,084,000 and $16,150,000 during 1996, 1995 and 1994, respectively. Income before income taxes was $2,520,000, $4,305,000 and $3,102,000 in 1996, 1995, and 1994, respectively. Included below is condensed balance sheet information which segregates the assets and liabilities of the Finance Company.
DECEMBER 31, 1996 ----------------------- (IN THOUSANDS) DECEMBER 31, WABASH FINANCE 1995 NATIONAL COMPANY CONSOLIDATED CONSOLIDATED --------- --------- ------------ ------------- (INTHOUSANDS) ASSETS: Current assets ............................. $226,526 $ 9,384 $235,910 $227,562 Property, plant and equipment, net ......... 81,729 53 81,782 76,192 Equipment leased to others, net ............ --- 63,825 63,825 35,362 Finance contracts, net of current portion .. --- 43,858 43,858 35,123 Other assets ............................... 13,342 1,354 14,696 9,895 Due from subsidiary to parent .............. 744 (744) --- --- Investment in subsidiary ................... 32,012 --- --- --- -------- -------- ------------ -------- $354,353 $117,730 $440,071 $384,134 ======== ======== ============ ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities ........................ $ 82,983 $ 4,215 $ 87,198 $114,364 Long-term debt, net: Third party .............................. 131,385 19,922 151,307 73,726 Intercompany ............................. (61,000) 61,000 --- --- -------- -------- ------------ -------- 70,385 80,922 151,307 73,726 Other non-current liabilities .............. 22,617 581 23,198 18,413 -------- -------- ------------ -------- 175,985 85,718 261,703 206,503 Stockholders' equity ....................... 178,368 32,012 178,368 177,631 -------- -------- ------------ -------- $354,353 $117,730 $440,071 $384,134 ======== ======== ============ ========
4. LONG-TERM DEBT Long-term debt consists of the following (in thousands):
DECEMBER 31, ------------------- 1996 1995 -------- -------- Revolving bank lines of credit .......................................... $ 6,000 $ 56,000 Industrial Revenue Bonds ................................................ 735 1,060 Notes payable ........................................................... 23,514 28,801 Senior Notes ............................................................ 125,000 --- Other ................................................................... --- 392 -------- -------- 155,249 86,253 Less-Current maturities ................................ (3,942) (12,527) -------- -------- $151,307 $ 73,726 ======== ========
A summary of the terms of the long-term debt agreements follows: Revolving bank lines of credit. Effective December 23, 1996, the Company amended its revolving credit facility. The unsecured revolving bank line of credit permits the Company to borrow up to $85,000,000. Under this facility, the Company has the right to borrow until July 1, 1998, at which time the principal amount then outstanding will be due and payable. Interest payable on such borrowings is variable based upon the London interbank rate (LIBOR) rate plus 25 to 125 basis points, as defined, or a prime rate of interest, as defined. The Company pays a quarterly commitment fee on the unused portion of this facility at rates of .10% to .45% per annum, as defined. As of 24 27 December 31, 1996, the total borrowings under this facility was $6 million at an interest rate of 6.2%. In addition, standby letters of credit totaling $6,127,000 have been issued in connection with the Company's worker's compensation self-insurance program, its outstanding Industrial Revenue Bond and in connection with foreign sales transactions. During December 1996, the Finance Company paid off its revolving line of credit and terminated its arrangement with the bank. A portion of the Senior Notes were used to pay off the outstanding balance. Industrial Revenue Bonds bear interest at 7.5%. Principal payments of $350,000 and $385,000 are due in 1997 and 1998, respectively. The bonds are secured by land, buildings and equipment. The Company has a letter of credit of $109,000 and $434,000 at December 31, 1996 and 1995, respectively, to secure certain portions of the bonds. Notes payable. Notes payable are term borrowings by the Finance Company maturing from 1998 through 2003 from certain commercial banks and commercial finance companies and are secured by equipment under lease and the underlying leases. Notes amounting to $23,514,000 are at fixed annual percentage interest rates ranging from 6.6% to 8.75%. Senior Notes. On January 31, 1996, the Company issued $50 million of unsecured notes due January 31, 2003. These Series A Senior Notes bear interest at 6.41% with interest payments due semi-annually on July 31 and January 31. On December 1, 1996, the Company completed the private placement of $100 million Senior Notes due 2001-2008 of which $75 million were issued in December 1996 with the remaining $25 million to be issued in March, 1997. These unsecured notes bear interest at rates ranging from 6.99% to 7.55%. Interest is due semiannually in June and December. As of December 31, 1996, $61 million of the Company's Senior Notes due 2001 to 2008 were loaned to the Finance Company. The proceeds were used by the Finance Company to pay off its existing revolving credit facility and to refinance certain other long-term debts. The terms and conditions of the intercompany loan to the Finance Company are identical to the terms and conditions of the Senior Notes. Under the various loan agreements, the Company and the Finance Company are required to meet certain covenants. These covenants require the Company to maintain certain levels of net worth and an interest coverage ratio as well as a limitation on indebtedness. The Company and the Finance Company were in compliance with these covenants at December 31, 1996. Maturities of long-term debt at December 31, 1996, are as follows (in thousands):
AMOUNT -------- 1997 ........................ $ 3,942 1998 ........................ 10,189 1999 ........................ 3,767 2000 ........................ 3,686 2001 ........................ 11,268 Thereafter .................. 122,397 -------- $155,249 ========
5. STOCKHOLDERS' EQUITY a. Capital Stock The Company's total authorized number of common shares is 75,000,000 and has a par value of $.01 per share. In addition, the Company authorized 25,000,000 shares of preferred stock, $.01 par value. The Board of Directors has the authority to issue these shares and to fix dividends, voting and conversion rights, redemption provisions, liquidation preferences and other rights and restrictions. 25 28 b. 1992 Stock Option Plan During 1992, the Company adopted its 1992 Stock Option Plan (the Plan) under which nonqualified options may be granted to officers and other key employees of the Company and its subsidiaries. Up to an aggregate of 750,000 shares are reserved for issuance under the Plan, subject to adjustment for stock dividends, recapitalizations and the like. Options granted under the Plan are exercisable for a period of ten years, and vest in equal installments over a five year period from date of grant, except for non-employee Directors of the Company in which options are fully vested on date of grant and are exercisable six months thereafter. Options must be granted at exercise prices equal to at least 85% of fair market value of the covered shares at date of grant. The Company accounts for these plans under APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for these plans been determined consistent with SFAS No. 123, the Company's net earnings would have been reduced to $3.2 million ($0.17 per share) in 1996 and $25.3 million ($1.34 per share) in 1995. Because the SFAS No. 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro-forma compensation cost may not be representative of that to be expected in future years. Stock option activity under the Plan was as follows:
NUMBER OF WEIGHTED-AVERAGE OPTIONS SHARES EXERCISE PRICE - ------- --------- ---------------- December 31, 1993 ......................................... 300,000 $17.56 Granted ................................................ 137,500 29.27 Exercised .............................................. (2,400) 17.50 Cancelled .............................................. (40,500) 17.58 ------- ------ December 31, 1994 ......................................... 394,600 21.64 Granted ................................................ 171,100 33.38 Exercised .............................................. (21,000) 22.19 ------- ------ December 31, 1995 ......................................... 544,700 25.30 Granted ................................................ 178,200 20.59 Exercised .............................................. (2,700) 17.54 Cancelled .............................................. (74,700) 32.29 ------- ------ December 31, 1996 ......................................... 645,500 $23.25 ======= ====== Shares Exercisable ........................................ 226,100 $22.14 ======= ======
The weighted-average fair value of options granted was $10.39 per share in 1996 and $17.26 per share in 1995, with 421,500 of the options outstanding at December 31, 1996 having exercise prices between $17.50 and $22.13, a weighted-average exercise price of $18.84 and a weighted-average remaining life of 8.8 years. 141,300 of these options are exercisable with a weighted-average exercise price of $17.55. The remaining 224,000 options have exercise prices between $23.00 and $33.00, a weighted-average exercise price of $29.33 and a weighted-average remaining life of 7.5 years. 84,800 of these options are exercisable with a weighted-average exercise price of $29.80. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 1996 and 1995, respectively: risk-free interest rates of 6.4 and 6.1 percent; expected dividend yields of .58 and .36 percent; expected volatility of 41.3 and 41.1 percent; and an expected life of 7 years for all options granted. c. 1993 Employee Stock Purchase Plan During 1993, the Company adopted its 1993 Employee Stock Purchase Plan (the Plan) which enables eligible employees of the Company to purchase shares of the Company's $.01 par value common stock. Eligible employees may contribute up to 15% of their eligible compensation toward the semi-annual purchase of common stock. The employees' purchase price is based on the fair market value of the common stock on the date of purchase. No compensation expense is recorded in connection with the Plan. During 1996, 4,995 shares were issued to employees at prices of $18.00 to $18.25 per share. At December 31, 1996, there were approximately 288,700 shares available for offering under the Plan. 26 29 6. STOCKHOLDERS' RIGHTS PLAN On November 7, 1995, the Board of Directors adopted a Stockholder Rights Plan (the "Plan"). The Plan is designed to deter coercive or unfair takeover tactics, to prevent a person or group from gaining control of the Company without offering fair value to all shareholders and to deter other abusive takeover tactics which are not in the best interest of stockholders. Under the terms of the Plan, each share of common stock is accompanied by one right; each right entitles the stockholder to purchase from the Company, one one-thousandth of a newly issued share of Series A Preferred Stock at an exercise price of $120. The rights become exercisable ten days after a public announcement that an acquiring person or group (as defined in the Plan) has acquired 20% or more of the outstanding Common Stock of the Company (the Stock Acquisition Date) or ten days after the commencement of a tender offer which would result in a person owning 20% or more of such shares. The Company can redeem the rights for $.01 per right at any time until ten days following the Stock Acquisition Date (the 10-day period can be shortened or lengthened by the Company). The rights will expire in November, 2005, unless redeemed earlier by the Company. If, subsequent to the rights becoming exercisable, the Company is acquired in a merger or other business combination at any time when there is a 20% or more holder, the rights will then entitle a holder to buy shares of the Acquiring Company with a market value equal to twice the exercise price of each right. Alternatively, if a 20% holder acquires the Company by means of a merger in which the Company and its stock survives, or if any person acquires 20% or more of the Company's Common Stock, each right not owned by a 20% or more shareholder, would become exercisable for Common Stock of the Company (or, in certain circumstances, other consideration) having a market value equal to twice the exercise price of the right. 7. EMPLOYEE 401(K) SAVINGS PLAN Substantially all of the Company's employees are eligible to participate in the 401(k) Savings Plan which provides for Company matching under various formulas. The Company's matching expense for the plan was $994,000, $750,000, and $785,000 for the years ended December 31, 1996, 1995, and 1994, respectively. 8. INCOME TAXES a. Tax Provisions The consolidated income tax provision for 1996, 1995 and 1994 consists of the following components (in thousands):
1996 1995 1994 ------ ------- ------- Current: Federal .................. $ (801) $ 9,382 $ 8,717 State .................... (201) 979 2,069 Deferred ................. 3,399 4,541 4,877 ------ ------- ------- $2,397 $14,902 $15,663 ====== ======= =======
In 1996, 1995 and 1994, the effective Federal income tax rates were 35.2%, 34.9% and 34.8%, respectively. In all periods, there were no individually significant items which caused the effective rate to differ from the Federal statutory rate. In 1995, the Company recorded a $1.5 million state income tax credit as a result of its property improvements eligible for income tax credit by the State of Indiana. 27 30 b. Deferred Taxes Deferred income taxes are primarily due to temporary differences between financial and income tax reporting for the depreciation of property, plant and equipment and equipment under lease, the recognition of warranty expense, payments made in connection with the acquisition of the RoadRailer technology and the amortization thereof, and the recognition of income from assets under finance leases. The long-term deferred tax liabilities were $22,879,000 and $18,045,000 and current prepaid income tax assets were $3,173,000 and $1,738,000 as of December 31, 1996 and 1995, respectively. The components of deferred tax assets and deferred tax liabilities as December 31, 1996 and 1995, are as follows (in thousands):
1996 1995 ------ ------ Deferred tax assets: Rentals on Finance Leases ....................... $9,014 $ 6,107 Deferred State Income Taxes ..................... 954 1,161 Personal Property Taxes ......................... 886 62 Other ........................................... 3,888 2,721 Deferred tax liabilities: Basis Difference-Property, Plant and Equipment .. 24,410 18,367 Earned Finance Charges on Finance Leases ........ 4,058 2,948 RoadRailer Acquisition Payments/Amortization .... 2,381 1,877 Other ........................................... 3,599 3,166 ------- ------- Net deferred tax liability ........................ $19,706 $16,307 ======= =======
9. SIGNIFICANT CUSTOMERS For the year ended December 31, 1996, the two largest customers of the Company accounted for approximately 15% and 13% of the Company's net sales, respectively. The Company's largest customer accounted for approximately 13% and 16% of the Company's net sales for the years ended December 31, 1995 and 1994, respectively. No other customer represented more than 10% of the Company's net sales in 1996, 1995 or 1994. The Company's net sales in the aggregate to its five largest customers were 39%, 33% and 37% of its net sales in 1996, 1995 and 1994, respectively. 10. COMMITMENTS AND CONTINGENCIES There are certain lawsuits and claims pending against the Company which arose in the normal course of business. In the opinion of management, none of these actions are expected to have a material adverse effect on the Company's financial position or results of operations. In connection with the acquisition of the RoadRailer technology, the Company is obligated to make payments not to exceed $12.1 million based upon (i) future sales of trailers and related equipment utilized in the bimodal transportation segment and (ii) future revenues received in connection with the sale or licensing of the bimodal technology. On January 8, 1997, the Company exercised its prepayment option and paid $2,145,000 in full satisfaction of this obligation. Payments for the RoadRailer technology are capitalized and amortized over an estimated average life span of 12 years. During 1996, the Company changed its estimated average life span of the RoadRailer technology from 6 to 12 years which resulted in approximately $700,000 in reduced amortization. The average life span was changed to correspond with the patents economic life securing the technology. At December 31, 1996 and 1995, the RoadRailer technology costs were $5,953,000 and $4,695,000 (net of accumulated amortization of $4,011,000 and $3,262,000), respectively, and are included in "Other Assets" in the accompanying consolidated balance sheets. 28 31 In connection with two of the Company's European RoadRailer sales transactions, the Company is contingently liable for up to five years as a guarantor of certain commitments of two separate entities via a standby letter of credit in the amount of $10 million and a separate letter of guarantee in the amount of $4 million. The Company has made certain commitments for the construction of a composite material facility adjacent to its primary manufacturing facility in Lafayette, Indiana. The commitments include a building and various machinery and equipment. As of December 31, 1996, open commitments related to this facility were approximately $2 million and total commitments are expected to be $17 million to $20 million. The Company does not anticipate significant costs to be incurred to satisfy ongoing soil remediation efforts resulting from the manufacturing activities conducted by the previous owner of its site in Lafayette. 11. QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ----------- ----------- ----------- -------- (IN THOUSANDS, EXCEPT PER SHARE) 1996 Net sales .................... $161,222 $140,606 $161,303 $168,361 Gross profit ................. 9,069 5,880 6,107 7,803 Net income ................... 2,204 102 95 1,237 Net income per common share .. .12 .01 .01 .07 1995 Net sales .................... $177,634 $193,450 $176,129 $187,086 Gross profit ................. 15,060 17,098 13,786 10,852 Net income ................... 6,962 8,054 5,830 4,561 Net income per common share .. .37 .43 .31 .24
ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 29 32 PART III ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following are the executive officers of the Company:
NAME AGE POSITION ---- --- -------- Donald J. Ehrlich (1) .. 59 President, Chief Executive Officer and Chairman of the Board Richard E. Dessimoz .... 49 Vice President and Chief Executive Officer of Wabash National Finance Corporation and Director Charles R. Ehrlich ..... 52 Vice President--Manufacturing Rodney P. Ehrlich ...... 50 Vice President--Engineering Charles E. Fish ........ 42 Vice President--Human Relations Lawrence J. Gross ...... 42 Vice President--Marketing Mark R. Holden (1) ..... 37 Vice President-Chief Financial Officer and Director Connie L. Koleszar ..... 38 Director of Investor Relations Wilfred E. Lewallen .... 52 Vice President--Industrial Engineering Stanley E. Sutton ...... 47 Vice President--Purchasing
(1) Member of the Executive Committee. Donald J. Ehrlich. Mr. Donald J. Ehrlich has been President, Chief Executive Officer and Director of the Company since its founding. In May, 1995, Mr. Ehrlich was elected Chairman of the Board. He also serves as a director of Danaher Corporation, NBD Bank, N.A., and Indiana Secondary Market Corporation. Richard E. Dessimoz. Mr. Dessimoz has been Vice President and Chief Executive Officer of Wabash National Finance Corporation since its inception in December 1991 and a Director of the Corporation since December, 1995. Prior to his employment by the Company, he was employed since 1989 by Premier Equipment Leasing Company as Chief Executive Officer and co-owner, and he was employed from 1985 to 1989 by Evans Transportation Company (a major lessor of railcars and truck trailers) as Chief Operating Officer. Charles R. Ehrlich. Mr. Charles Ehrlich has been Vice President--Manufacturing of the Company and has been in charge of the Company's manufacturing operations since the Company's founding. Rodney P. Ehrlich. Mr. Rodney Ehrlich has been Vice President--Engineering of the Company and has been in charge of the Company's engineering operations since the Company's founding. Charles E. Fish. Mr. Fish is Vice President--Human Relations of the Company and has been in charge of the Company's human relations operations since the Company's founding. Lawrence J. Gross. Mr. Gross has been Vice President--Marketing of the Company since December 1994. Previously he had been President of the Company's RoadRailer division since joining the Company in July, 1991. Prior to his employment by the Company, he was employed since 1985 by Chamberlain of Connecticut, Inc., a licensor of bimodal technology, as Vice President--Marketing until 1990 and as President until he began his employment with the Company. 30 33 Mark R. Holden. Mr. Holden has been Vice President--Chief Financial Officer and Director of the Company since May, 1995. Previously, Mr. Holden had been Vice President Controller of the Company. Prior to his employment by the Company in December, 1992, he was employed by Arthur Andersen LLP since 1981. Connie L. Koleszar. Ms. Koleszar has been Director of Investor Relations since the Company's initial public offering of 1991 and has been employed by the Company in various administrative capacities since its founding. Wilfred E. Lewallen. Mr. Lewallen is Vice President--Industrial Engineering of the Company and has been in charge of the Company's industrial engineering operations since the Company's founding. Stanley E. Sutton. Mr. Sutton has been Vice President--Purchasing of the Company since joining the Company in May 1992. Prior to his employment by the Company, he was employed since 1973 by Pines Trailer Limited Partnership as Vice President--Manufacturing Operations. Officers are elected for a term of one year and serve at the discretion of the Board of Directors. The Company hereby incorporates by reference the information contained under the heading "Election of Directors" from its definitive Proxy Statement to be delivered to stockholders of the Company in connection with the 1997 Annual Meeting of Stockholders to be held May 8, 1997. Donald J. Ehrlich, President, Chief Executive Officer and Chairman, and Charles R. Ehrlich and Rodney P. Ehrlich, executive officers of the Company, are brothers. ITEM 11--EXECUTIVE COMPENSATION The Company hereby incorporates by reference the information contained under the heading "Compensation" from its definitive Proxy Statement to be delivered to the stockholders of the Company in connection with the 1997 Annual Meeting of Stockholders to be held May 8, 1997. ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Company hereby incorporates by reference the information contained under the heading "Beneficial Ownership of Common Stock" from its definitive Proxy Statement to be delivered to the stockholders of the Company in connection with the 1997 Annual Meeting of Stockholders to be held on May 8, 1997. ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company hereby incorporates by reference the information contained under the heading "Compensation Committee Interlocks and Insider Participant" from its definitive Proxy Statement to be delivered to the stockholders of the Company in connection with the 1997 Annual Meeting of Stockholders to be held on May 8, 1997 PART IV ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements: All required financial statements are included in Item 8 of this Form 10-K. Financial statement schedules are omitted as they are not required or not applicable or the required information is included in the Notes to Consolidated Financial Statements. (b) Reports on Form 8-K: 99.1 Form 8-K, filed on January 21, 1997, regarding Cautionary Statements for Purposes of the "Safe Harbor" Provision of the Private Securities Reform Act of 1995. 31 34 (c) Exhibits: The following exhibits are filed with this Form 10-K or incorporated herein by reference to the document set forth next to the exhibit listed below: 3.01 Certificate of Incorporation of the Company(1) 3.02 Certificate of Designations of Series A Junior Participating Preferred Stock(1) 3.03 By-laws of the Company(1) 4.01 Specimen Stock Certificate(1) 4.02 Rights Agreement between the Company and Harris Bank as Rights Agent(1) 10.01 Loan Agreement, Mortgage, Security Agreement and Financing Statement between Wabash National Corporation and City of Lafayette dated as of August 15, 1989(1) 10.02 1992 Stock Option Plan(1) 10.03 Promissory Note in the principal amount of $1,161,395 by Wabash National Finance Corporation in favor of Corestates Bank, N.A. dated December 21, 1993(2) 10.04 Security Agreement of Wabash National Finance Corporation in favor of Corestates Bank, N.A. dated December 21, 1993(2) 10.05 Promissory Note in the principal amount of $1,017,750 by Wabash National Finance Corporation in favor of Corestates Bank, N.A. dated December 21, 1993(2) 10.06 Security Agreement of Wabash National Finance Corporation in favor of Corestates Bank, N.A. dated December 21, 1993(2) 10.07 Promissory Note in the principal amount of $2,882,392 by Wabash National Finance Corporation in favor of Corestates Bank, N.A. dated December 21, 1993(2) 10.08 Security Agreement of Wabash National Finance Corporation in favor of Corestates Bank, N.A. dated December 21, 1993(2) 10.09 Loan Agreement of Wabash National Finance Corporation in favor of Corestates Bank, N.A. dated December 21, 1993(2) 10.10 Real Estate Sale Agreement by and between Kraft General Foods, Inc. and Wabash National Corporation, dated June 1, 1994 (3) 10.11 Purchase and Servicing Agreement, dated July 20, 1994 between NBD Bank, N.A. and Wabash National Corporation (3) 10.12 Revolving Credit Loan Agreement dated April 28, 1995, between NBD Bank, N.A. and Wabash National Corporation (4) 10.13 Receivables Sale and Servicing Agreement dated June 29, 1995, between NBD Bank, N.A. and Wabash National Corporation (5) 10.14 Promissory Note in the principal amount of $10,000,000 by Wabash National Finance Corporation in favor of Nationsbanc Leasing Corporation dated March 22, 1995 (6) 10.15 Loan and Security Agreement of Wabash National Finance Corporation in favor of Nationsbanc Leasing Corporation dated March 22, 1995(6) 10.16 November 9, 1995 Amendment to Revolving Credit Loan Agreement dated April 28, 1995, between NBD Bank, N.A., and Wabash National Corporation (6) 10.17 6.41% Series A Senior Note Purchase Agreement dated January 31, 1996, between certain Purchasers and Wabash National Corporation (6) 10.18 Master Loan and Security Agreement in the amount of $10 million by Wabash National Finance Corporation in favor of Sanwa Business Credit Corporation dated December 27, 1995(6) 10.19 First Amendment to Receivables Sale and Servicing Agreement dated December 28, 1995 between NBD Bank, N.A. and Wabash National Corporation (8) 10.20 Second Amendment to Receivables Sale and Servicing Agreement dated March 29, 1996 between NBD Bank, N.A. and Wabash National Corporation (8) 10.21 Third Amendment to Receivables Sale and Servicing Agreement dated June 28, 1996 between NBD Bank, N.A. and Wabash National Corporation (8) 10.22 Fourth Amendment to Receivables Sale and Servicing Agreement dated September 27, 1996 between NBD Bank, N.A. and Wabash National Corporation (8) 10.23 Fifth Amendment to Receivables Sale and Servicing Agreement date September 30, 1996 between NBD Bank, N.A. and Wabash National Corporation (8)
32 35 10.24 Sixth Amendment to Receivables Sale and Servicing Agreement dated December 23, 1996 between NBD Bank, N.A. and Wabash National Corporation (8) 10.25 September 30, 1996 Second Amendment to Revolving Credit Loan Agreement dated April 28, 1995 between NBD Bank, N.A. and Wabash National Corporation (7) 10.26 December 23, 1996 Third Amendment to Revolving Credit Loan Agreement dated April 28, 1995 between NBD Bank, N.A. and Wabash National Corporation (8) 10.27 First Amendment to the 6.41% Series A Senior Note Purchase Agreement dated January 31, 1996 between certain Purchasers and Wabash National Corporation (8) 10.28 Series B-H Senior Note Purchase Agreement dated December 18, 1996 between certain Purchasers and Wabash National Corporation (8) 10.29 Master Equipment Lease Agreement dated December 30, 1996 between National City Leasing Corporation and Wabash National Finance Corporation (8) 21.00 List of Significant Subsidiaries (8) 23.01 Consent of Arthur Andersen LLP (8) 27.00 Financial Data Schedule (8)
(1) Incorporated by reference to the Registrant's Registration Statement on Form S-1 (No. 33-42810) or the Registrant's Registration Statement on Form 8-A filed December 6, 1995 (item 3.02 and 4.02). (2) Incorporated by reference to the Registrant's Form 10-K for the year ended December 31, 1993. (3) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended June 30, 1994. (4) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended March 31, 1995. (5) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended June 30, 1995. (6) Incorporated by reference to the Registrant's Form 10-K for the year ended December 31, 1995 (7) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 1996 (8) Filed herewith. The Registrant undertakes to provide to each shareholder requesting the same a copy of each Exhibit referred to herein upon payment of a reasonable fee limited to the Registrant's reasonable expenses in furnishing such Exhibit. 33 36 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. WABASH NATIONAL CORPORATION February 10, 1997 By: /s/ Mark R. Holden -------------------------------- Mark R. Holden Vice President-Chief Financial Officer and Director PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED.
DATE SIGNATURE AND TITLE ---- ------------------- February 10, 1997 By: /s/ Donald J. Ehrlich ------------------------------------- Donald J. Ehrlich Chief Executive Officer, President and Chairman of the Board (Principal Executive Officer) February 10, 1997 By: /s/ Mark R. Holden -------------------------------------- Mark R. Holden Vice President--Chief Financial Officer and Director (Principal Financial Officer and Principal Accounting Officer) February 10, 1997 By: /s/ Richard E. Dessimoz -------------------------------------- Richard E. Dessimoz Vice President and Chief Executive Officer-Wabash National Finance Corporation and Director February 10, 1997 By: /s/ John T. Hackett --------------------------------------- John T. Hackett Director February 10, 1997 By: /s/ E. Hunter Harrison ---------------------------------------- E. Hunter Harrison Director February 10, 1997 By: /s/ Ludvik F. Koci ---------------------------------------- Ludvik F. Koci Director
34 EX-10.19 2 FIRST AMEND TO RECEIVABLES 1 EXHIBIT 10.19 ================================================================================ FIRST AMENDMENT to RECEIVABLES SALE AND SERVICING AGREEMENT between WABASH NATIONAL CORPORATION as Seller and Servicer and NBD BANK, N.A. as Purchaser DATED AS OF DECEMBER 28, 1995 ================================================================================ 2 This FIRST AMENDMENT dated as of December 28, 1995 (the "Amendment"), is entered into by and between Wabash National Corporation, a Delaware corporation, in its capacity as originator and sell of the Receivables (as defined in the Agreement, defined below) hereunder (in such capacity the "Seller"), and in its capacity as servicer hereunder (in such capacity, the "Servicer"), and NBD Bank, N.A., a national banking association, in its capacity as purchaser (the "Purchaser"). RECITALS WHEREAS, the Seller and the Purchaser have entered into a Receivables Sale and Servicing Agreement dated as of June 29, 1995 (the "Agreement"); WHEREAS, the Seller and the Purchaser desire to amend the Agreement to include an additional sublimit with respect to an additional Obligor (as defined in the Agreement); and WHEREAS, pursuant to Section 12.7 of the Agreement, neither the Agreement nor the terms thereof may be amended, supplemented or modified except in writing signed by the Purchaser and the Seller. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Amendment to Section 2.1, Purchase and Sale of Receivables. The following Obligor and corresponding sublimit shall be added to Section 2.1(b) of the Agreement which lists the limits with respect to each Obligor by which the aggregate Purchase Price of outstanding Purchased Receivables may not exceed: United Parcel Service of America, Inc. $12,000,000 Section 2. Effect of Amendment. Except as amended hereby, the Agreement shall remain in full force and effect in accordance with the terms set forth therein. Section 3. Counterparts. This Amendment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 3 IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Amendment to be duly executed by their respective officers thereunto duly authorized as of the date and year first above written. WABASH NATIONAL CORPORATION, as Seller and Servicer By: /s/ Mark R. Holden ------------------------------- Name: Mark R. Holden Title: Vice President and Chief Financial Officer NBD BANK, N.A., as Purchaser By: /s/ Leo G. Watson, Jr. ------------------------------- Name: Leo G. Watson, Jr. Title: Vice President EX-10.20 3 SECOND AMENDMENT TO RECEIVABLES 1 EXHIBIT 10.20 ================================================================================ SECOND AMENDMENT to RECEIVABLES SALE AND SERVICING AGREEMENT between WABASH NATIONAL CORPORATION as Seller and Servicer and NBD BANK, N.A. as Purchaser DATED AS OF MARCH 29, 1996 ================================================================================ 2 This SECOND AMENDMENT dated as of March 29, 1996 (the "Amendment"), is entered into by and between Wabash National Corporation, a Delaware corporation, in its capacity as originator and sell of the Receivables (as defined in the Agreement, defined below) hereunder (in such capacity the "Seller"), and in its capacity as servicer hereunder (in such capacity, the "Servicer"), and NBD Bank, N.A., a national banking association, in its capacity as purchaser (the "Purchaser"). RECITALS WHEREAS, the Seller and the Purchaser have entered into a Receivables Sale and Servicing Agreement dated as of June 29, 1995 (the "Agreement"); WHEREAS, the Seller and the Purchaser desire to amend the Agreement to include an additional sublimit with respect to an additional Obligor (as defined in the Agreement); and WHEREAS, pursuant to Section 12.7 of the Agreement, neither the Agreement nor the terms thereof may be amended, supplemented or modified except in writing signed by the Purchaser and the Seller. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Amendment to Section 2.1, Purchase and Sale of Receivables. The following Obligor and corresponding sublimit shall be added to Section 2.1(b) of the Agreement which the lists the limits with respect to each Obligor by which the aggregate Purchase Price of outstanding Purchased Receivables may not exceed : Triple Crown Services Company $5,000,000 Section 2. Effect of Amendment. Except as amended hereby, the Agreement shall remain in full force and effect in accordance with the terms set forth therein. Section 3. Counterparts. This Amendment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 3 IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Amendment to be duly executed by their respective officers thereunto duly authorized as of the date and year first above written. WABASH NATIONAL CORPORATION, as Seller and Servicer By: /s/ Mark R. Holden ------------------------------- Name: Mark R. Holden Title: Vice President and Chief Financial Officer NBD BANK, N.A., as Purchaser By: /s/ Leo G. Watson, Jr. ------------------------------- Name: Leo G. Watson, Jr. Title: Vice President EX-10.21 4 THRID AMENDMENT TO RECIVABLES 1 EXHIBIT 10.21 ================================================================================ THIRD AMENDMENT to RECEIVABLES SALE AND SERVICING AGREEMENT between WABASH NATIONAL CORPORATION as Seller and Servicer and NBD BANK, N.A. as Purchaser DATED AS OF JUNE 28, 1996 ================================================================================ 2 This THIRD AMENDMENT dated as of June 28, 1996 (the "Amendment"), is entered into by and between Wabash National Corporation, a Delaware corporation, in its capacity as originator and seller of the Receivables (as defined in the Agreement, defined below) hereunder (in such capacity the "Seller"), and in its capacity as servicer hereunder (in such capacity, the "Servicer"), and NBD Bank, N.A., a national banking association, in its capacity as purchaser (the "Purchaser"). RECITALS WHEREAS, the Seller and the Purchaser have entered into a Receivables Sale and Servicing Agreement dated as of June 29, 1995 (the "Agreement"); WHEREAS, the Seller and the Purchaser desire to amend the Agreement to include an additional sublimit with respect to an additional Obligor (as defined in the Agreement) and to amend the sublimit with respect to an existing Obligor; and WHEREAS, pursuant to Section 12.7 of the Agreement, neither the Agreement nor the terms thereof may be amended, supplemented or modified except in writing signed by the Purchaser and the Seller. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Amendment to Section 2.1, Purchase and Sale of Receivables. (a) The following Obligor and corresponding sublimit shall be added to Section 2.1(b) of the Agreement which the lists the limits with respect to each Obligor by which the aggregate Purchase Price of outstanding Purchased Receivables may not exceed: Knight Transportation, Inc. $1,500,000 (b) The sublimit for Swift Transportation Co. shall be increased from $10,000,000 to $20,000,000 from the date hereof until October 1, 1996 or such other date agreed to in writing by the Purchaser to the Seller. Section 2. Effect of Amendment. Except as amended hereby, the Agreement shall remain in full force and effect in accordance with the terms set forth therein. Section 3. Counterparts. This Amendment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 3 IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Amendment to be duly executed by their respective officers thereunto duly authorized as of the date and year first above written. WABASH NATIONAL CORPORATION, as Seller and Servicer By: /s/ Mark R. Holden ---------------------------- Name: Mark R. Holden Title: Vice President and Chief Financial Officer NBD BANK, N.A., as Purchaser By: /s/ Leo G. Watson, Jr. ---------------------------- Name: Leo G. Watson, Jr. Title: Vice President EX-10.22 5 FOURTH AMENDMENT TO RECEIVABLES 1 EXHIBIT 10.22 - -------------------------------------------------------------------------------- FOURTH AMENDMENT to RECEIVABLES SALE AND SERVICING AGREEMENT between WABASH NATIONAL CORPORATION as Seller and Servicer and NBD BANK, N.A. as Purchaser DATED AS OF SEPTEMBER 27, 1996 - -------------------------------------------------------------------------------- 2 This FOURTH AMENDMENT dated as of September 27, 1996 (the "Amendment"), is entered into by and between Wabash National Corporation, a Delaware corporation, in its capacity as originator and seller of the Receivables (as defined in the Agreement, defined below) hereunder (in such capacity the "Seller"), and in its capacity as servicer hereunder (in such capacity, the "Servicer"), and NBD Bank, N.A., a national banking association, in its capacity as purchaser (the "Purchaser"). RECITALS WHEREAS, the Seller and the Purchaser have entered into a Receivables Sale and Servicing Agreement dated as of June 29, 1995 (the "Agreement"); WHEREAS, the Seller and the Purchaser desire to amend the Agreement to change the limit with respect to the aggregate Purchase Price of outstanding Purchased Receivables (capitalized terms not defined herein shall have the meaning set forth in the Agreement); and WHEREAS, pursuant to Section 12.7 of the Agreement, neither the Agreement nor the terms thereof may be amended, supplemented or modified except in writing signed by the Purchaser and the Seller. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Amendment to Section 2.1, Purchase and Sale of Receivables. Clause (a) of Section 2.1 of the Agreement shall deleted in its entirety and replaced with the following: (a) At no time can the aggregate Purchase Price of outstanding Purchased Receivables be greater than $40,000,000; provided, however, that during the period from September 30, 1996 to October 31, 1996, inclusive, the aggregate Purchase Price of outstanding Purchased Receivables may not be greater than $45,000,000. Section 2. Effect of Amendment. Except as amended hereby, the Agreement shall remain in full force and effect in accordance with the terms set forth therein. Section 3. Counterparts. This Amendment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 3 IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Amendment to be duly executed by their respective officers thereunto duly authorized as of the date and year first above written. WABASH NATIONAL CORPORATION, as Seller and Servicer By: /s/ Mark R. Holden --------------------------------------- Name: Mark R. Holden Title: Vice President and Chief Financial Officer NBD BANK, N.A., as Purchaser By: /s/ Leo G. Watson, Jr. ---------------------------------------- Name: Leo G. Watson, Jr. Title: Vice President EX-10.23 6 FIFTH AMENDMENT TO RECEIVABLES 1 EXHIBIT 10.23 ================================================================================ FIFTH AMENDMENT to RECEIVABLES SALE AND SERVICING AGREEMENT between WABASH NATIONAL CORPORATION as Seller and Servicer and NBD BANK, N.A. as Purchaser DATED AS OF SEPTEMBER 30, 1996 ================================================================================ 2 This FIFTH AMENDMENT dated as of September 30, 1996 (the "Amendment"), is entered into by and between Wabash National Corporation, a Delaware corporation, in its capacity as originator and seller of the Receivables (as defined in the Agreement, defined below) hereunder (in such capacity the "Seller"), and in its capacity as servicer hereunder (in such capacity, the "Servicer"), and NBD Bank, N.A., a national banking association, in its capacity as purchaser (the "Purchaser"). RECITALS WHEREAS, the Seller and the Purchaser have entered into a Receivables Sale and Servicing Agreement dated as of June 29, 1995 (the "Agreement"); WHEREAS, the Seller and the Purchaser desire to amend the Agreement to change a sublimit with respect to an Obligor (as defined in the Agreement) and to change the financial covenants with respect to the Seller; and WHEREAS, pursuant to Section 12.7 of the Agreement, neither the Agreement nor the terms thereof may be amended, supplemented or modified except in writing signed by the Purchaser and the Seller. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Amendment to Section 2.1, Purchase and Sale of Receivables. The sublimit for Swift Transportation Co. shall be $15,000,000 from October 1, 1996 until January 1, 1997 (or such other date agreed to in writing by the Purchaser to the Seller), on which date such sublimit shall become $10,000,000. Section 2. Amendment to Exhibit G. Items 2 and 3 of Exhibit G to of the Agreement shall be deleted in their entirety and replaced with the following: 2. Funded Debt to Total Capitalization. The Seller, on a consolidated basis, will maintain a ratio of funded debt to total capitalization not to exceed 60% at September 30, 1996 through March 30, 1997, and not to exceed 55% at March 31, 1997 and at all times thereafter, calculated on a quarterly basis. 3. Fixed Charge Coverage Ratio. The Seller, on a consolidated basis, will maintain a fixed charge coverage ratio of not less than 1.9 to 1.0 at September 30, 1996 through March 30, 1997, and at 2.0 to 1.0 at March 31, 1997 through June 29, 1997; and at 2.25 to 1.0 at June 30, 1997 through December 30, 1997; and at 2.5 to 1.0 at December 31, 1997 and at all times thereafter; calculated quarterly on a four quarter trailing basis commencing from the most recent quarter end. Section 3. Effect of Amendment. Except as amended hereby, the Agreement shall remain in full force and effect in accordance with the terms set forth therein. 3 Section 4. Counterparts. This Amendment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Amendment to be duly executed by their respective officers thereunto duly authorized as of the date and year first above written. WABASH NATIONAL CORPORATION, as Seller and Servicer By: /s/ Mark R. Holden ------------------------------- Name: Mark R. Holden Title: Vice President and Chief Financial Officer NBD BANK, N.A., as Purchaser By: /s/ Leo G. Watson, Jr. ------------------------------- Name: Leo G. Watson, Jr. Title: Vice President EX-10.24 7 SIXTH AMENDMENT TO RECEIVABLES 1 EXHIBIT 10.24 ================================================================================ SIXTH AMENDMENT to RECEIVABLES SALE AND SERVICING AGREEMENT between WABASH NATIONAL CORPORATION as Seller and Servicer and NBD BANK, N.A. as Purchaser DATED AS OF DECEMBER 23, 1996 ================================================================================ 2 This SIXTH AMENDMENT dated as of December 23, 1996 (the "Amendment"), is entered into by and between Wabash National Corporation, a Delaware corporation, in its capacity as originator and seller of the Receivables (as defined in the Agreement, defined below) hereunder (in such capacity the "Seller"), and in its capacity as servicer hereunder (in such capacity, the "Servicer"), and NBD Bank, N.A., a national banking association, in its capacity as purchaser (the "Purchaser"). RECITALS WHEREAS, the Seller and the Purchaser have entered into a Receivables Sale and Servicing Agreement dated as of June 29, 1995 (the "Agreement"); WHEREAS, the Seller and the Purchaser desire to amend the Agreement to change the financial covenants with respect to the Seller; and WHEREAS, pursuant to Section 12.7 of the Agreement, neither the Agreement nor the terms thereof may be amended, supplemented or modified except in writing signed by the Purchaser and the Seller. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Amendment to Exhibit G. Items 1, 2 and 3 of Exhibit G to of the Agreement shall deleted in their entirety and replaced with the following: 1. Tangible Net Worth. The Seller, on a consolidated basis, will at all times after December 23, 1996, maintain a Tangible Net Worth of not less than $135,000,000, increasing quarterly commencing January 1, 1997 by an amount equal to the sum of fifty percent (50%) of the Seller's consolidated net income (with no downward adjustment for net losses in any quarter) and eighty percent (80%) of net proceeds received by the Seller from equity offerings. 2. Funded Debt to Total Capitalization. The Seller, on a consolidated basis, will maintain a ratio of Funded Debt to Total Capitalization not to exceed 60% (.60 to 1.0) at all times, calculated on a quarterly basis. 3. Fixed Charge Coverage Ratio. The Seller, on a consolidated basis, will maintain a Fixed Charge Coverage Ratio, calculated quarterly on a four quarter trailing basis commencing from the most recent quarter end, at levels not less than those shown in the following table for the periods indicated: 3 PERIOD RATIO From December 23, 1996 until December 31, 1997 1.25 to 1.0 At December 31, 1997 until June 30, 1998, and 1.50 to 1.0 At June 30, 1998 and at all times thereafter 2.0 to 1.0 Section 2. Effect of Amendment. Except as amended hereby, the Agreement shall remain in full force and effect in accordance with the terms set forth therein. Section 3. Counterparts. This Amendment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Amendment to be duly executed by their respective officers thereunto duly authorized as of the date and year first above written. WABASH NATIONAL CORPORATION, as Seller and Servicer By: /s/ Mark R. Holden ------------------------------- Name: Mark R. Holden Title: Vice President and Chief Financial Officer NBD BANK, N.A., as Purchaser By: /s/ Leo G. Watson, Jr. ------------------------------- Name: Leo G. Watson, Jr. Title: Vice President EX-10.25 8 SECOND AMENDMENT TO REVOLVING CREDIT 1 EXHIBIT 10.25 SECOND AMENDMENT TO LOAN AGREEMENT This SECOND AMENDMENT TO LOAN AGREEMENT ("Second Amendment") made as of this 30th day of September, 1996, by and between WABASH NATIONAL CORPORATION, a Delaware corporation with its principal place of business at 1000 Sagamore Parkway South, Lafayette, Indiana 47905 ("Borrower") and NBD BANK, N.A. ("Bank"), a national banking association with its principal banking offices at One Indiana Square, Indianapolis, Indiana 46266. WHEREAS, the Borrower and the Bank entered into that certain Loan Agreement dated April 28, 1995, as amended by that certain Amendment to Loan Agreement dated November 9, 1995 (collectively, the "Agreement") pursuant to which the Bank agreed to extend a Revolving Line of Credit to the Borrower with a Loan Maturity Date of July 1, 1997; and WHEREAS, the Borrower wishes to extend the Loan Maturity Date to January 1, 1998 and also seeks to amend certain of the financial covenants contained in the Agreement; and WHEREAS, the Bank is willing to extend the Loan Maturity Date and to make certain amendments to the financial covenants, on the terms and conditions set forth herein: NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: Section 1. Definitions. The following definitions in the Agreement are hereby amended or added to the Agreement to read in their entirety as follows: "Applicable Commitment Fee" means that percentage of the unused portion of the Commitment to be paid to the Bank pursuant to Section 2.7 hereunder, determined by reference to the ratio of the Borrower's Funded Debt to Total Capitalization, in accordance with the following table: Ratio Application Fee --------------- ---------------- 15% or less .10% 16% through 30% .125% 31% through 40% .15% 41% through 50% .175% 51% through 55% .225% 56% through 60% .275%
2 The Applicable Commitment Fee shall be determined and adjusted, if appropriate, quarterly on the basis of the financial statements of the Borrower for the fiscal quarter immediately preceding the date of determination of the Applicable Commitment Fee. "Applicable Margin" means that percentage to be added to each of the CD Rate, LIBOR Rate or Federal Funds Rate at which interest will accrue on the Advances, determined by reference to the ratio of the Borrower's Funded Debt to Total Capitalization, all in accordance with the following table: LIBOR OR Federal Funds Ratio CD Margin Margin --------------- ----------- ------------- 15% or less .25% .35% 16% through 30% .30% .40% 31% through 40% .40% .50% 41% through 50% .50% .60% 51% through 55% .625% .725% 56% through 60% .75% .85%
Each Applicable Margin shall be determined, and adjusted if appropriate, quarterly on the basis of the financial statements of the Borrower for the fiscal quarter of the Borrower immediately preceding the date of determination furnished to the Bank pursuant to the requirements of Section 5.3, with prospective effect for the following fiscal quarter. Interest will accrue and be payable in any fiscal quarter on the basis of the Applicable Margin in effect during the preceding fiscal quarter until the Borrower's financial statements for the preceding fiscal quarter are delivered to the Bank. On the first interest payment date which follows delivery of such financial statements in any fiscal quarter, an appropriate adjustment shall be made for interest accrued and paid on prior interest payment dates in that quarter, any overpayment being credited against the interest payment then due from the Borrower to the Bank and any deficiency being then due and payable by the Borrower to the Bank. In the event the Borrower fails to provide the quarterly financial statements pursuant to the requirements of Section 5.3, the Ratio of Funded Debt to Total Capitalization will be presumed to be the highest ratio set forth in the above table. "Closing Date" shall mean September 30, 1996. Section 2. Amendments to Section 2 and Section 8.13 of the Agreement. The following amendments are hereby made to Section 2 and Section 8.13 of the Agreement: A. Section 2.1(A) of the Agreement is amended to replace the reference to July 1, 1997 to January 1, 1998. (B) Section 2.1(E) of the Agreement is hereby amended to change the Loan Maturity Date to read "January 1, 1998." (C) Section 8.13 is hereby amended to replace the date "July 1, 1997" with "January 1, 1998". 3 Section 3. Amendment of Financial Covenants. Sections 5.2(L)(ii) and (iii) of the Agreement are hereby amended to read in their entirety as follows: (ii) Funded Debt to Total Capitalization. The Borrower, on a consolidated basis, will maintain a ratio of Funded Debt to Total Capitalization not to exceed 60% at September 30, 1996 through March 30, 1997; and not to exceed 55% at March 31, 1997 and at all times thereafter; calculated on a quarterly basis. (iii) Fixed Charge Coverage Ratio. The Borrower, on a consolidated basis, will maintain a Fixed Charge Coverage Ratio of not less than 1.9 to 1.0 at September 30, 1996 through March 30, 1997, and at 2.0 to 1.0 at March 31, 1997 through June 29, 1997; and at 2.25 to 1.0 at June 30, 1997 through December 30, 1997; and at 2.5 to 1.0 at December 31, 1997 and at all times thereafter; calculated quarterly on a four quarter trailing basis commencing from the most recent quarter end. Section 4. Conditions Precedent. On or prior to the date of execution of this Second Amendment, the Borrower shall deliver to the Bank the following documents, the receipt and sufficiency of which are conditions precedent to the Bank's obligation to increase the Revolving Line of Credit and to extend the Loan Maturity Date: (A) the executed replacement Revolving Line of Credit Promissory Note; (B) a Secretary's Certificate and Borrowing Resolutions of the Executive Committee of the Board of Directors of the Borrower; (C) a Borrower's Counsel Opinion in form and substance acceptable to the Bank and its counsel; and (D) the most recent financial statements of the Borrower, together with a Certificate of Compliance with Financial Covenants, in form and substance acceptable to the Bank. Section 5. Effect of Amendment. Except as specifically amended in this Second Amendment, the Agreement shall continue in full force and effect as therein stated and the Borrower certifies that all representations and warranties contained therein are true and correct as if made as of the date hereof. (1) 4 IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be executed, by their respective duly authorized officers, as of the date first written above. WABASH NATIONAL CORPORATION By: /s/ Mark R. Holden ------------------------------ Mark R. Holden, Vice President and Chief Financial Officer NBD BANK, N.A. By: ----------------------------------- Leo G. Watson, Jr., Vice President -4- EX-10.26 9 THRID AMENDMENT TO REVOLVING CREDIT 1 EXHIBIT 10.26 THIRD AMENDMENT TO LOAN AGREEMENT This THIRD AMENDMENT TO LOAN AGREEMENT ("Third Amendment") is made this ___ day of December 1996 by and between WABASH NATIONAL CORPORATION, a Delaware corporation with its principal place of business at 1000 Sagamore Parkway South, Lafayette, Indiana 47905 ("Borrower") and NBD Bank, N.A., (the "Bank"), a national banking association with its principal banking offices at One Indiana Square, Indianapolis, Indiana 46266. WHEREAS, the Borrower and the Bank entered into that certain Loan Agreement dated April 28, 1995 as amended by an Amendment dated November 9, 1995 as further amended by a Second Amendment dated September 30, 1996 (collectively, the "Agreement"); and WHEREAS, the Borrower has requested that the Bank extend the Loan Maturity Date and amend certain covenants in the Agreement to permit the Borrower to enter into certain indebtedness and make loans to its Subsidiary, Wabash National Finance Corporation; and WHEREAS, the Bank is willing to amend such covenants, on the terms and conditions set forth in the Agreement, as hereinafter amended: NOW THEREFORE, in consideration of the Bank's agreement to extend the Loan Maturity Date and amend certain covenants, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: Section 1. Definitions. All defined terms used herein shall be used with the meanings ascribed to them in the Agreement, unless otherwise specifically defined herein. The following definitions are hereby amended to read in their entirety as follows: "Applicable Commitment Fee" means that percentage of the unused portion of the Commitment, as reduced from time to time in accordance with Section 2.1(A), to be paid to the Bank pursuant to Section 2.7 hereunder, determined by reference to both the Borrower's Ratio of Funded Debt to Total Capitalization and the Fixed Charge Coverage Ratio, in accordance with the following table:(1) 2
Fixed Charge Coverage Ratio -------------------------------------------------------------------------- Funded Debt 2.25 to 2.00 to 1.75 to 1.50 to 1.25 to to Capitalization 2.50 2.49 2.24 1.99 1.74 1.49 - ------------------------------ -------------------------------------------------------------------------- .15 .10% .125% .15% .175% .225% .275% .16 to .30 .125% .15% .175% .225% .275% .30% .31 to .40 .15% .175% .225% .275% .30% .325% .41 to .50 .175% .225% .275% .30% .325% .35% .51 to .55 .225% .275% .30% .325% .35% .40% .56 to .60 .275% .30% .325% .35% .40% .45%
The Applicable Commitment Fee shall be determined and adjusted, if appropriate, quarterly on the basis of the financial statements of the Borrower for the fiscal quarter immediately preceding the date of determination of the Applicable Commitment Fee. "Applicable Margin" means that percentage to be added to each of the LIBOR Rate or Federal Funds Rate at which interest will accrue on the Advances or Loans determined by reference to both the Borrower's Ratio of Funded Debt to Total Capitalization and the Fixed Charge Coverage Ratio. The Applicable Margin for LIBOR Advances or Loans or standby letters of credit under Section 2.1(F) shall be determined as set forth in the following table and the Applicable Margin for Federal Funds Advances or Loans shall be the applicable percentage set forth in the following table plus 10 Basis Points:
Fixed Charge Coverage Ratio -------------------------------------------------------------------------- Funded Debt 2.25 to 2.00 to 1.75 to 1.50 to 1.25 to to Capitalization 2.50 2.49 2.24 1.99 1.74 1.49 - ------------------------------ -------------------------------------------------------------------------- .15 .25% .30% .40% .50% .625% .75% .16 to .30 .30% .40% .50% .625% .75% .80% .31 to .40 .40% .50% .625% .75% .80% .90% .41 to .50 .50% .625% .75% .80% .90% 1.00% .51 to .55 .625% .75% .80% .90% .1.00% 1.125% .56 to .60 .75% .80% .90% 1.00% 1.125% 1.25%
Each Applicable Margin shall be determined and adjusted, if appropriate, quarterly on the basis of the financial statements of the Borrower for the fiscal quarter of the Borrower immediately preceding the date of determination, furnished to the Bank pursuant to the requirements of Section 5.3, with prospective effect for the following fiscal quarter. Interest will 3 accrue and be payable in any fiscal quarter on the basis of the Applicable Margin in effect during the preceding fiscal quarter until the Borrower's financial statements for the preceding fiscal quarter are delivered to the Bank. On the first interest payment date which follows delivery of such financial statements in any fiscal quarter, an appropriate adjustment shall be made for interest accrued and paid on prior interest payment dates in that quarter, any overpayment being credited against the interest payment then due from the Borrower to the Bank and any deficiency being then due and payable by the Borrower to the Bank. In the event the Borrower fails to provide the quarterly financial statements pursuant to the requirements of Section 5.3, the Applicable Margin will be presumed to be the highest percentage set forth in the above table. "Basis Point" means one-one hundredths of one percent (.01%). "Borrowing Base" means the amount equal to the sum of i) 80% of the Borrower's eligible accounts receivable, plus ii) 50% of eligible raw materials, plus iii) 25% of eligible work in progress, plus iv) 80% of finished goods inventory, plus v) 60% of eligible used trailer inventory, plus vi) 65% of the Borrower's eligible lease portfolio. For purposes of the preceding sentence, "eligible accounts receivable" means the Borrower's accounts receivable less any accounts which are 90 days or more past the invoice date; or which are due from any account debtor if 50% or more of the aggregate amount of the accounts receivable from such debtor are 90 days or more past the invoice date; are accounts receivable from Persons outside the United States which are not secured by a letter of credit or guaranty acceptable to the Bank; or are accounts owed by a Subsidiary to the Borrower; and provided that any account receivable otherwise included in the Borrowing Base shall be reduced, but not below zero, by the amount of any accounts payable to the account debtor from whom such account is due; "eligible raw materials" means raw materials less consignment inventory; "eligible work in process" means all work in process less the amount of progress billings; "eligible used trailer inventory" means such inventory less any obsolescence reserve; and "eligible lease portfolio" means the Borrower's total lease portfolio less equipment with rental payments over 90 days past due, less equipment which has been off-lease for more than 90 days, and less any finance contracts over 90 days past due. The following definitions are hereby deleted from the Agreement: "CD Advance", "CD Base Rate", "CD Loan", "CD Rate", and "CD Reserve Percentage". Section 2. Amendments to Section 2 of the Agreement. The following amendments are made to Section 2 of the Agreement A. Section 2.1(A) of the Agreement is hereby amended to change the maximum dollar amount of the Commitment to "Eighty-Five Million and no/100 Dollars ($85,000,000"), and to change the "Loan Maturity Date" to July 1, 1998. Further, the reference to "CD Advances" is hereby deleted. The following additional language is added to the end of that paragraph: "Borrowings hereunder shall be limited to the lesser of the Commitment, as reduced from time to time, or the Borrowing Base in the event that the Borrower's pro forma ratio of Funded Debt to 4 Total Capitalization exceeds 45% (.45 to 1.0). If the principal balance of the Loan exceeds the Borrowing Base, as determined on the basis of the most recent Borrowing Base Certificate furnished by the Borrower or as determined by the Bank upon an inspection of the books and records of the Borrower, the Borrower shall immediately repay that portion of the principal balance of the Loan which is in excess of the Borrowing Base. Such repayment shall be due without demand. At the Borrower's option, the Borrower may repay and permanently reduce the amount of the Commitment, in increments of $5,000,000, at the end of each fiscal quarter". B. Sections 2.1(B), (C) and (D) are hereby amended to delete any reference to "CD Advances" or "CD Rate". C. Section 2.1(E) is hereby amended to change the "Loan Maturity Date" to July 1, 1998. D. Section 2.1(F) is hereby amended to decrease the Maximum Available Credit for letters of credit to Twelve Million Five Hundred Thousand Dollars ($12,500,000). Further, the per annum commitment fee for standby letters of credit shall be calculated based upon the Applicable Margin in effect on the date of determination and shall be payable quarterly in arrears. Section 3. Amendments to Section 5.1. The preamble to Section 5.1 of the Agreement is hereby amended to read in its entirety as follows: "Section 5.1. Affirmative Covenants of Borrower Other Than Reporting Requirements. From the date hereof and thereafter for as long as the Loan is outstanding or Borrower is indebted to the Bank under any of the Financing Documents, Borrower shall and shall cause each Subsidiary to do the following, unless the Bank shall otherwise consent in writing:". Section 4. Amendments to Section 5.2. The following amendments are hereby made to Section 5.2 of the Agreement: A. Preamble to Section 5.2. The preamble to Section 5.2 is hereby amended to read in its entirety as follows: "Section 5.2. Negative Covenants of Borrower. From the date hereof and thereafter so long as any portion of the Loan is outstanding or Borrower is indebted to the Bank under any of the Financing Documents, Borrower shall not, and shall not permit any Subsidiary to do any of the following, without the prior written consent of the Bank:". 5 B. Amendments to Section 5.2(A). The following subsections of Section 5.2(A) Liens. are hereby amended to read in their entirety as follows: "(i) that secure Indebtedness existing on the date of execution of this Agreement and properly reflected on the Borrower's financial statements or Liens securing additional debt of the Borrower and its Subsidiary incurred solely for the construction or purchase of new fixed assets (excluding trailers or other inventory, except as hereinafter provided) with such purchase money Liens limited to the specific assets purchased, and not to exceed, in the aggregate 20% of the Borrower's consolidated Tangible Net Worth at any time outstanding, and provided that any default under such debt shall constitute a default under this Agreement. Provided that the Borrower does not violate a financial covenant in Section 5.2(L), and subject to the Tangible Net Worth limitation set forth above, the Borrower or a Subsidiary may incur Liens on Indebtedness of up to $10 million at any one time outstanding for the purchase of new equipment for lease to third parties. (x) Liens on assets of Wabash National Finance Corporation, or Subsidiary, which exist on the date hereof as set forth on Schedule 5.2.(A) attached hereto." C. Amendment to Section 5.2(H). Section 5.2(H) of the Agreement is hereby amended in its entirety as follows: "(H) Indebtedness. Incur, create, become or be liable directly or indirectly in any manner with respect to or permit to exist any Indebtedness if the incurrence or existence of such Indebtedness will result in a violation of a financial covenant in Section 5.2(L) of this Agreement, and provided that Wabash National Finance Corporation, a Subsidiary shall not incur any Indebtedness other than the secured debt permitted under Section 5.2(A)(i) and (x) and Indebtedness owed to the Borrower in accordance with Section 5.2(M). D. Amendments to Section 5.2(L). Section 5.2(L) of the Agreement is hereby amended to read in its entirety as follows: "(L) Financial Covenants. (i) Tangible Net Worth. The Borrower, on a consolidated basis, will at all times from the date hereof maintain a Tangible Net Worth of not less than $135,000,000, increasing quarterly commencing January 1, 1997 by an amount equal to the sum of fifty percent (50%) of the Borrower's 6 consolidated net income (with no downward adjustment for net losses in any quarter) and eighty percent (80%) of net proceeds received by the Borrower from equity offerings. (ii) Funded Debt to Total Capitalization. The Borrower, on a consolidated basis, will maintain a ratio of Funded Debt to Total Capitalization not to exceed 60% (.60 to 1.0) at all times, calculated on a quarterly basis. (iii) Fixed Charge Coverage Ratio. The Borrower, on a consolidated basis, will maintain a Fixed Charge Coverage Ratio, calculated quarterly on a four quarter trailing basis commencing from the most recent quarter end, at levels not less than those shown in the following table for the periods indicated:
PERIOD RATIO ------ ----- from the date of this Amendment until December 31, 1997 1.25 to 1.0 At December 31, 1997 until June 30, 1998, and 1.50 to 1.0 At June 30, 1998 and at all times thereafter 2.0 to 1.0
E. Amendment to Section 5.2(M). Section 5.2(M) of the Agreement is hereby amended in its entirety as follows: "(M) Loans to or Investments in Subsidiaries. Make loans to, additional equity or other investments in, or otherwise provide financial accommodations to a Subsidiary, in excess of $125,000,000 in the aggregate at any time outstanding (including loans outstanding on the date hereof under Section 5.2(A)(x) and amounts incurred by a Subsidiary under Section 5.2(A)(i)); provided, however, that intercompany accounts payable owed by a Subsidiary to the Borrower shall be considered loans for purposes of this covenant if such accounts payable are not paid within 90 days of origination. F. Additional Covenants. Section 5.2 is hereby amended to add two (2) new covenants as set forth in their entirety as follows: "(N) Restriction on Non-U.S. Assets. Make any direct or indirect purchase or other acquisition of or investment in assets, including lease obligations, from or with any person located outside of the United States, in the aggregate in excess of 25% of the Borrower's consolidated Tangible Net Worth. 7 (O) Limitation on Concentration of Leased Equipment. Permit, or allow a Subsidiary to permit the net book value of equipment or finance contracts from any one lessee to exceed 10% of the Borrower's consolidated Tangible Net Worth, except as set forth in Schedule 5.2(O) attached hereto. Section 5. Amendment to Section 5.3. Section 5.3 of the Agreement is hereby amended to add new subsection (J) to read in its entirety as follows: (J) As soon as possible and in any event within 30 days after the end of each calendar month, a Borrowing Base Certificate (when Funded Debt to Total Capitalization exceeds 45%), a lease portfolio listing, lease receivables aging report and a used trailer inventory report for the Borrower and Subsidiaries, in form and substance satisfactory to the Bank. Section 6. Amendments to Section 6.1. Section 6.1 of the Agreement is hereby amended to insert the words "or any Subsidiary" after the word "Borrower", wherever it appears in the following subsections: (B), (C), (D), (F), (G), or (H). Section 6.1 is also amended to add a new subsection (J) as follows: (J) The failure of the Borrower to complete the private sale of $45,000,000 of its Senior Notes on or before March 31, 1997, (unless such date is extended by the Bank in its sole discretion), pursuant to a Note Purchase Agreement dated as of December 1, 1996. Section 7. Conditions Precedent. On or prior to the date of execution of this Third Amendment, the Borrower shall deliver to the Bank the following documents or complete the following actions, the receipt, sufficiency and completion of which are conditions precedent to the Bank's obligation to amend the Agreement: (A) An executed original of this Third Amendment; (B) An executed replacement Revolving Line of Credit Promissory Note; (C) A Secretary's Certificate and Borrowing Resolutions of the Executive Committee of the Board of Directors of the Borrower; (D) A Borrower's counsel opinion in form and substance acceptable to the Bank and its counsel; (E) A Compliance Certificate in form and substance acceptable to the Bank; 8 (F) A Borrowing Base Certificate; (G) Payment of an Amendment Fee in the amount of $85,000 which will be deducted from the Borrower's demand account maintained with the Bank on the date of closing; and (H) The closing of the Borrower's private placement of up to $100,000,000 of Senior Notes of the Borrower pursuant to a Note Purchase Agreement dated as of December 1, 1996 and the receipt of $55,000,000 in initial proceeds of the sale. Section 8. Effect of Third Amendment. Except as specifically amended in this Third Amendment, the Agreement shall continue in full force and effect as therein stated and the Borrower certifies that all representations and warranties contained therein are true and correct as if made as of the date hereof and that no Event of Default has occurred and is continuing under the Agreement. (1) EX-10.27 10 FIRST AMENDMENT TO SERIES A SENIOR NOTE 1 EXHIBIT 10.27 FIRST AMENDMENT TO NOTE PURCHASE AGREEMENTS THIS FIRST AMENDMENT to the Note Purchase Agreements dated as of January 31, 1996 (this "First Amendment"), is entered into between Wabash National Corporation, a Delaware corporation (the "Company"), and each of the holders of the Company's 6.41% Series A Senior Notes due January 31, 2003 which is a signatory to this First Amendment (the "Signing Noteholders"). RECITALS: A. The Company and The Prudential Insurance Company of America, Nationwide Life Insurance Company, West Coast Life Insurance Company, Nationwide Life and Annuity Insurance Company and Great-West Life & Annuity Insurance Company (the "Original Purchasers") have entered into separate Note Purchase Agreements, each dated as of January 31, 1996 (the "Note Purchase Agreements"). B. The Company and the Signing Noteholders now desire to amend, effective on the date on which the condition specified in Section 3 hereof is satisfied, certain of the terms of the Note Purchase Agreements. C. Capitalized terms used herein shall have the respective meanings ascribed thereto in the Note Purchase Agreements unless herein defined or the context shall otherwise require. D. All requirements of law have been fully complied with and all other acts and things necessary to make this First Amendment a valid, legal and binding instrument according to its terms for the purposes herein expressed has been done or performed. NOW, THEREFORE, the Company and the Noteholders, in consideration of good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, do hereby agree as follows: SECTION 1. AMENDMENT. Section 1.1. Section 10.6(d)(ii) of the Note Purchase Agreements shall be and is hereby amended in its entirety to read as follows: "or (ii) the Company shall not less than 30 days nor more than 60 days prior to the date of such Transfer offer pursuant to a written notice (the "Asset Disposition Prepayment Notice") to apply on a pro rata basis the Excess Net Proceeds to which such assets relate towards the prepayment of all outstanding Senior Funded Debt of the Company (including, without limitation, the Notes pursuant to Section 8.2 hereof, together with accrued interest thereon, including the premium provided for in said Section 8.2). Such Asset Disposition Prepayment Notice shall specify (A) a date (the "Asset Disposition Prepayment Date"), which shall be not less than 120 days nor more 2 than 180 days following the date of such Asset Disposition Prepayment Notice, on which the Company will apply such Excess Net Proceeds to the prepayment on a pro rata basis of all of the outstanding Senior Funded Debt of the Company held by any Person which accepts such offer of prepayment and (B) a date, which shall be not more than 60 days nor less than 30 days prior to such Asset Disposition Prepayment Date, on which each holder of Senior Funded Debt of the Company must accept or decline such offer of prepayment. Without limiting the foregoing, the Company shall not more than 15 days nor less than 10 days prior to such Asset Disposition Prepayment Date send a second written notice (the "Secondary Asset Disposition Prepayment Notice") to all holders of outstanding Senior Funded Debt of the Company notifying each such holder of the decision of each other holder of Senior Funded Debt of the Company to accept or reject such offer of prepayment and in such Secondary Asset Disposition Prepayment Notice offer to each holder of outstanding Senior Funded Debt to apply on a pro rata basis the amount of such Excess Net Proceeds which will not be applied to such prepayment by virtue of any such holder of Senior Funded Debt having declined the original offer of prepayment. On such Asset Disposition Prepayment Date, the Company shall apply the amount of such Excess Net Proceeds which has been agreed or deemed to be agreed by holders of Senior Funded Debt of the Company pursuant to any agreement pursuant to which any such Senior Funded Debt is outstanding shall be applied to the prepayment of Senior Funded Debt held by each holder thereof which has accepted or been deemed to accept such initial offer of prepayment or such initial offer and such secondary offer of prepayment, as the case may be, to the prepayment of Senior Funded Debt as and to the extent herein contemplated. It is understood and agreed by the Company and each holder of the Notes by its acceptance thereof that any such holder may decline any such offer of prepayment, that the failure of any such holder to accept or decline any such offer of prepayment shall be deemed to be an election by such holder to accept such prepayment and that if any such offer is so accepted, the Excess Net Proceeds so offered towards the prepayment of the Notes and accepted shall be prepaid, together with the premium provided for in Section 8.2." Section 1.2. Schedule B of the Note Purchase Agreements shall be and is hereby amended by adding the following definitions thereto in alphabetical order: "Asset Disposition Prepayment Date" is defined in Section 10.6. "Asset Disposition Prepayment Notice" is defined in Section 10.6. "Secondary Asset Disposition Prepayment Notice" is defined in Section 10.6. "Senior Funded Debt" means, with respect to any Person, Funded Debt of such Person which is not expressed to be subordinate or junior in rank to any other Funded Debt of such Person. -2- 3 SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Section 2.1. To induce the Noteholders to execute and deliver this First Amendment, the Company represents and warrants to the Noteholders (which representations shall survive the execution and delivery of this First Amendment) that: (a) this First Amendment has been duly authorized, executed and delivered by it and this First Amendment constitutes the legal, valid and binding obligation, contract and agreement of the Company enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally; (b) the Note Purchase Agreements, as amended by this First Amendment, constitute the legal, valid and binding obligations, contracts and agreements of the Company enforceable against it in accordance with their terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally; (c) the execution, delivery and performance by the Company of this First Amendment (1) has been duly authorized by all requisite corporate action and, if required, shareholder action, (2) does not require the consent or approval of any governmental or regulatory body or agency, and (3) will not (i) violate (A) any provision of law, statute, rule or regulation or its certificate of incorporation or bylaws, (B) any order of any court or any rule, regulation or order of any other agency or government binding upon it, or (C) any provision of any material indenture, agreement or other instrument to which it is a party or by which its properties or assets are or may be bound, or (ii) result in a breach or constitute (alone or with due notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in clause (3)(i)(C) of this Section 2.1(c); and (d) as of the date hereof and after giving effect to this First Amendment, no Default or Event of Default has occurred which is continuing. SECTION 3. CONDITIONS TO EFFECTIVENESS OF AMENDMENT. This First Amendment shall become effective when executed counterparts of this First Amendment, duly executed by the Company and the Signing Noteholders, shall have been delivered to the holders of the Notes. SECTION 4. MISCELLANEOUS. Section 4.1. Except as modified and expressly amended by this First Amendment, the Note Purchase Agreements are in all respects ratified, confirmed and approved and all of the terms, provisions and conditions thereof shall be and remain in full force and effect. -3- 4 Section 4.2. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this First Amendment may refer to the Note Purchase Agreements without making specific reference to this First Amendment but nevertheless all such references shall include this First Amendment unless the context otherwise requires. Section 4.3. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. Section 4.4. This First Amendment may be executed and delivered in any number of counterparts, each of such counterparts constituting an original, but all together only one First Amendment. -4- 5 IN WITNESS WHEREOF, the Company and the Signing Noteholders have caused this instrument to be executed, all as of the day and year first above written. WABASH NATIONAL CORPORATION By /s/Mark R. Holden ---------------------------- Its Vice President and Chief Financial Officer -5- 6 THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By /s/ Signature --------------------------------- Its Vice President -6- 7 Accepted and Agreed to: GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY By /s/ Julie Bock --------------------------------- Its JULIE BOCK ASST. VICE PRESIDENT By /s/ James G. Lowery --------------------------------- Its James G. Lowery Assistant Vice President Private Placement Investments -7- EX-10.28 11 SERIES B-H SENIOR NOTE PURCHASE 1 EXHIBIT 10.28 - -------------------------------------------------------------------------------- WABASH NATIONAL CORPORATION Re: $8,000,000 6.99% Senior Notes, Series B, due December 17, 2001, $22,000,000 Designated Rate Senior Notes, Series C, due March 13, 2002, $9,000,000 7.31% Senior Notes, Series D, due December 17, 2004, $3,000,000 Designated Rate Senior Notes, Series E, due March 13, 2005, $13,000,000 7.47% Senior Notes, Series F, due December 17, 2006, $20,000,000 7.53% Senior Notes, Series G, due December 30, 2008 and $25,000,000 7.55% Senior Notes, Series H, due December 17, 2008 ______________ NOTE PURCHASE AGREEMENT _____________ Dated as of December 1, 1996 - ------------------------------------------------------------------------------- 2 TABLE OF CONTENTS (Not a part of the Agreement)
SECTION HEADING PAGE SECTION 1. AUTHORIZATION OF NOTES; DESIGNATION OF INTEREST RATE FOR SERIES C AND SERIES E NOTES ........................ 1 SECTION 2. SALE AND PURCHASE OF NOTES .................................................................................. 2 SECTION 3. CLOSINGS .................................................................................................... 3 SECTION 4. CONDITIONS TO EACH CLOSING .................................................................................. 3 Section 4.1. Representations and Warranties .......................................................................... 3 Section 4.2. Performance; No Default .................................................................................. 3 Section 4.3. Compliance Certificates .................................................................................. 4 Section 4.4. Opinions of Counsel ...................................................................................... 4 Section 4.5. Purchase Permitted By Applicable Law, etc ................................................................ 4 Section 4.6. Sale of Other Notes ..................................................................................... 4 Section 4.7. Payment of Special Counsel Fees .......................................................................... 5 Section 4.8. Private Placement Number ................................................................................. 5 Section 4.9. Changes in Corporate Structure ........................................................................... 5 Section 4.10. Proceedings and Documents ............................................................................... 5 SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............................................................... 5 Section 5.1. Organization; Power and Authority ........................................................................ 5 Section 5.2. Authorization, etc ....................................................................................... 5 Section 5.3. Disclosure ............................................................................................... 6 Section 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates ......................................... 6 Section 5.5. Financial Statements ..................................................................................... 7 Section 5.6. Compliance with Laws, Other Instruments, etc ............................................................. 7 Section 5.7. Governmental Authorizations, etc ......................................................................... 8 Section 5.8. Litigation; Observance of Agreements, Statutes and Orders ................................................ 8 Section 5.9. Taxes .................................................................................................... 8 Section 5.10. Title to Property; Leases ................................................................................ 8
-2- 3 Section 5.11. Licenses, Permits, etc ................................................................................... 9 Section 5.12. Compliance with ERISA ................................................................................... 9 Section 5.13. Private Offering by the Company .......................................................................... 10 Section 5.14. Use of Proceeds; Margin Regulations ...................................................................... 10 Section 5.15. Existing Indebtedness; Future Liens ..................................................................... 10 Section 5.16. Foreign Assets Control Regulations, etc .................................................................. 11 Section 5.17. Status under Certain Statutes ............................................................................ 11 Section 5.18. Environmental Matters .................................................................................... 11 SECTION 6. REPRESENTATIONS OF THE PURCHASER ........................................................................... 12 Section 6.1. Purchase for Investment .................................................................................. 12 Section 6.2. Source of Funds .......................................................................................... 12 SECTION 7. INFORMATION AS TO COMPANY ................................................................................... 13 Section 7.1. Financial and Business Information ....................................................................... 13 Section 7.2. Officer's Certificate .................................................................................... 16 Section 7.3. Inspection ............................................................................................... 17 SECTION 8. PREPAYMENT OF THE NOTES ..................................................................................... 17 Section 8.1. Required Prepayments ..................................................................................... 17 Section 8.2. Optional Prepayments with Make-Whole Amount .............................................................. 18 Section 8.3. Allocation of Partial Prepayments ........................................................................ 18 Section 8.4. Maturity; Surrender, etc ................................................................................. 18 Section 8.5. Purchase of Notes ........................................................................................ 19 Section 8.6. Make-Whole Amount ........................................................................................ 19 SECTION 9. AFFIRMATIVE COVENANTS ....................................................................................... 20 Section 9.1. Compliance with Law ...................................................................................... 20 Section 9.2. Insurance ................................................................................................ 20 Section 9.3. Maintenance of Properties ................................................................................ 21 Section 9.4. Payment of Taxes and Claims .............................................................................. 21 Section 9.5. Corporate Existence, etc ................................................................................. 21 Section 9.6. Maintenance of Business .................................................................................. 21 Section 9.7. Notes to Rank Pari Passu ................................................................................ 21 SECTION 10. NEGATIVE COVENANTS .......................................................................................... 22 Section 10.1. Consolidated Tangible Net Worth .......................................................................... 22 Section 10.2. Funded Debt .............................................................................................. 22
-3- 4 Section 10.3. Priority Debt ............................................................................................ 22 Section 10.4. Limitation on Liens ...................................................................................... 23 Section 10.5. Mergers, Consolidations and Sales of Assets .............................................................. 24 Section 10.6. Transactions with Affiliates ............................................................................. 26 SECTION 11. EVENTS OF DEFAULT .......................................................................................... 26 SECTION 12. REMEDIES ON DEFAULT, ETC .................................................................................... 28 Section 12.1. Acceleration ............................................................................................ 28 Section 12.2. Other Remedies ........................................................................................... 29 Section 12.3. Rescission ............................................................................................... 29 Section 12.4. No Waivers or Election of Remedies, Expenses, etc ........................................................ 29 SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES ............................................................... 30 Section 13.1. Registration of Notes .................................................................................... 30 Section 13.2. Transfer and Exchange of Notes .......................................................................... 30 Section 13.3. Replacement of Notes ..................................................................................... 30 SECTION 14. PAYMENTS ON NOTES ........................................................................................... 31 Section 14.1. Place of Payment ......................................................................................... 31 Section 14.2. Home Office Payment ...................................................................................... 31 SECTION 15. EXPENSES, ETC ............................................................................................... 31 Section 15.1. Transaction Expenses ..................................................................................... 31 Section 15.2. Survival ................................................................................................. 32 SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT ................................................ 32 SECTION 17. AMENDMENT AND WAIVER ........................................................................................ 32 Section 17.1. Requirements ............................................................................................. 32 Section 17.2. Solicitation of Holders of Notes ......................................................................... 33 Section 17.3. Binding Effect, etc ...................................................................................... 34 Section 17.4. Notes Held by Company, etc ............................................................................... 34 SECTION 18. NOTICES ..................................................................................................... 34
-4- 5 SECTION 19. REPRODUCTION OF DOCUMENTS ................................................................................... 35 SECTION 20. CONFIDENTIAL INFORMATION ................................................................................... 35 SECTION 21. SUBSTITUTION OF PURCHASER ................................................................................... 36 SECTION 22. MISCELLANEOUS ............................................................................................... 36 Section 22.1. Successors and Assigns ................................................................................... 36 Section 22.2. Payments Due on Non-Business Days ........................................................................ 36 Section 22.3. Severability ............................................................................................. 37 Section 22.4. Construction ............................................................................................. 37 Section 22.5. Counterparts ............................................................................................. 37 Section 22.6. Governing Law ............................................................................................ 37 Signature ..................................................................................................................... 38
-5- 6 SCHEDULE A -- INFORMATION RELATING TO PURCHASERS SCHEDULE B -- DEFINED TERMS SCHEDULE 4.9 -- Changes in Corporate Structure SCHEDULE 5.3 -- Disclosure Materials SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary Stock SCHEDULE 5.5 -- Financial Statements SCHEDULE 5.8 -- Certain Litigation SCHEDULE 5.11 -- Patents, etc. SCHEDULE 5.14 -- Use of Proceeds SCHEDULE 5.15 -- Existing Indebtedness SCHEDULE 10.4 -- Existing Liens EXHIBIT 1 -- Form of 6.99% Senior Note, Series B, due December 17, 2001 EXHIBIT 2 -- Form of Designated Rate Senior Note, Series C, due March 13, 2002 EXHIBIT 3 -- Form of 7.31% Senior Note, Series D, due December 17, 2004 EXHIBIT 4 -- Form of Designated Rate Senior Note, Series E, due March 13, 2005 EXHIBIT 5 -- Form of 7.47% Senior Note, Series F, due December 17, 2006 EXHIBIT 6 -- Form of 7.53% Senior Note, Series G, due December 30, 2008 EXHIBIT 7 -- Form of 7.55% Senior Note, Series H, due December 17, 2008 EXHIBIT 4.4(A) -- Form of Opinion of Special Counsel for the Company
-6- 7 EXHIBIT 4.4(B) -- Form of Opinion of Special Indiana Counsel for the Company EXHIBIT 4.4(C) -- Form of Opinion of Special Counsel for the Purchasers
-7- 8 WABASH NATIONAL CORPORATION 1000 SAGAMORE PARKWAY SOUTH LAFAYETTE, INDIANA 47905 Re: $8,000,000 6.99% Senior Notes, Series B, due December 17, 2001, $22,000,000 Designated Rate Senior Notes, Series C, due March 13, 2002, $9,000,000 7.31% Senior Notes, Series D, due December 17, 2004, $3,000,000 Designated Rate Senior Notes, Series E, due March 13, 2005, $13,000,000 7.47% Senior Notes, Series F, due December 17, 2006, $20,000,000 7.53% Senior Notes, Series G, due December 30, 2008 and $25,000,000 7.55% Senior Notes, Series H, due December 17, 2008 Dated as of December 1, 1996 TO EACH OF THE PURCHASERS LISTED IN THE ATTACHED SCHEDULE A: Ladies and Gentlemen: WABASH NATIONAL CORPORATION, a Delaware corporation (the "Company"), agrees with you as follows: SECTION 1. AUTHORIZATION OF NOTES; DESIGNATION OF INTEREST RATE FOR SERIES C AND SERIES E NOTES. (a) The Company will authorize the issue and sale of (a) $8,000,000 aggregate principal amount of its 6.99% Senior Notes, Series B, due December 17, 2001 (the "Series B Notes"), (b) $22,000,000 aggregate principal amount of its Designated Rate Senior Notes, Series C, due March 13, 2002 (the "Series C Notes"), (c) $9,000,000 aggregate principal amount of its 7.31% Senior Notes, Series D, due December 17, 2004 (the "Series D Notes"), (d) $3,000,000 aggregate principal amount of its Designated Rate Senior Notes, Series E, due March 13, 2005 (the "Series E Notes"), (e) $13,000,000 aggregate principal amount of its 7.47% Senior Notes, Series F, due December 17, 2006 (the "Series F Notes"), (f) $20,000,000 aggregate principal amount of its 7.53% Senior Notes, Series G, due December 30, 2008 (the "Series G Notes"), and (g) $25,000,000 aggregate principal amount of its 7.55% Senior Notes, Series H, due December 17, 2008 (the "Series H Notes"; the Series B Notes, the Series C Notes, the Series D Notes, the Series E Notes, the Series F Notes, the Series G Notes and the Series H -8- 9 Notes being hereinafter collectively referred to as the "Notes"), such term to include any such notes issued in substitution therefor pursuant to SECTION 13 of this Agreement or the Other Agreements (as hereinafter defined)). The Notes shall be substantially in the form set out in EXHIBITS 1, 2, 3, 4, 5, 6 and 7, respectively, with such changes therefrom, if any, as may be approved by you and the Company. Certain capitalized terms used in this Agreement are defined in SCHEDULE B; references to a "SCHEDULE" or an "EXHIBIT" are, unless otherwise specified, to a SCHEDULE or an EXHIBIT attached to this Agreement. (b) The Company agrees with the Institutional Investors which are scheduled to purchase the Series C Notes (the "Series C Institutional Investors") and the Series E Notes (the "Series E Institutional Investors") on the date of the third Closing as set forth opposite their respective names on SCHEDULE A that the interest rate to be payable on and in respect of the Series C Notes and the Series E Notes (individually, the "Series C Designated Rate" and the "Series E Designated Rate" and collectively the "Designated Rates") will be set and agreed upon at 10:00 A.M. (New York City time) on March 11, 1997. The Series C Designated Rate will be set and agreed upon by the Company and the Series C Institutional Investors and the Series E Designated Rate will be set and agreed upon by the Company and the Series E Institutional Investors. The Series C Designated Rate will be .75% over the yield to maturity implied by yields reported as of 10:00 A.M. (New York City time) on March 11, 1997 on the display designated as "Page PX1" on the Bloomberg Financial Markets Services Screen (or such other display as may replace Page PX1 on the Bloomberg Financial Markets Services Screen) for actively traded U.S. Treasury securities having a maturity most nearly equal to the five year maturity date of the Series C Notes or if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, then the Series C Designated Rate shall be such interest rate as shall otherwise be agreed upon by the Company and the Series C Institutional Investors. The Series E Designated Rate will be .85% over the yield to maturity implied by the yields reported as of 10:00 A.M. (New York City time) on March 11, 1997 on the display designated as "Page PX1" on the Bloomberg Financial Markets Services Screen (or such other display as may replace Page PX1 on the Bloomberg Financial Markets Services Screen) for actively traded U.S. Treasury securities having a maturity most nearly equal to the eight year maturity date of the Series E Notes or if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, then the Series E Designated Rate shall be such interest rate as shall otherwise be agreed upon by the Company and the Series E Institutional Investors. Not more than ten nor less than five Business Days prior to March 11, 1997 the Company will send a notice to the Series C Institutional Investors and the Series E Institutional Investors confirming the date and time at which the Designated Rates will be set. On March 11, 1997 the Company will initiate a telephonic conference call with the Series C Institutional Investors and the Series E Institutional Investors to set the Designated Rates in the manner herein contemplated. -9- 10 SECTION 2. SALE AND PURCHASE OF NOTES. Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and you will purchase from the Company, at the Closing or Closings, as the case may be, provided for in SECTION 3, Notes in the principal amount and of the series specified opposite your name in SCHEDULE A at the purchase price of 100% of the principal amount thereof. Contemporaneously with entering into this Agreement, the Company is entering into separate Note Purchase Agreements (the "Other Agreements") identical with this Agreement with each of the other purchasers named in SCHEDULE A (the "Other Purchasers"), providing for the sale at such Closing or Closings, as the case may be, to each of the Other Purchasers of Notes in the principal amount and of the series specified opposite its name in SCHEDULE A. Your obligation hereunder, and the obligations of the Other Purchasers under the Other Agreements, are several and not joint obligations, and you shall have no obligation under any Other Agreement and no liability to any Person for the performance or nonperformance by any Other Purchaser thereunder. SECTION 3. CLOSINGS. The sale and purchase of the Notes to be purchased by you and the Other Purchasers shall occur at the offices of Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, at 10:00 A.M. Chicago time, on the date or dates set forth opposite your name on SCHEDULE A, the first of which shall occur on December 17, 1996, the second of which shall occur on December 30, 1996 and the third of which shall occur on March 13, 1997 (individually, each called the "Closing" and collectively the "Closings") or in the case of each such Closing on such other Business Day thereafter on or prior to March 31, 1997 as may be agreed upon by the Company and you and the Other Purchasers. At each Closing the Company will deliver to you the Notes of the series to be purchased by you on the date of such Closing in the form of a single Note (or such greater number of Notes in denominations of at least $100,000 as you may request) dated the date of such Closing and registered in your name (or in the name of your nominee), against delivery by you to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 56-90021 for the account of Wabash National Corporation at First Chicago NBD Bank, Chicago, Illinois, ABA No. 071000013. If at any Closing on which you are scheduled to purchase Notes, the Company shall fail to tender such Notes to you as provided above in this SECTION 3, or any of the conditions specified in SECTION 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment. SECTION 4. CONDITIONS TO EACH CLOSING. -10- 11 Your obligation to purchase and pay for the Notes to be sold to you at the Closing or Closings on which you are scheduled to purchase and pay for such Notes is subject to the fulfillment to your satisfaction, prior to or at such Closing or Closings, of the following conditions: Section 4.1. Representations and Warranties. The representations and warranties of the Company in this Agreement shall be correct when made and at the time of such Closing. Section 4.2. Performance; No Default. The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at such Closing, and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by SCHEDULE 5.14), no Default or Event of Default shall have occurred and be continuing. Neither the Company nor any Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by any covenant contained in SECTIONS 9 or 10 hereof had such SECTIONS applied since such date. Section 4.3. Compliance Certificates. (a) Officer's Certificate. The Company shall have delivered to you an Officer's Certificate, dated the date of such Closing, certifying that the conditions specified in SECTIONS 4.1, 4.2 and 4.9 have been fulfilled. (b) Secretary's Certificate. The Company shall have delivered to you a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes and the Agreements. Section 4.4. Opinions of Counsel. You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing (a) from Hogan & Hartson L.L.P., independent counsel for the Company, covering the matters set forth in EXHIBIT 4.4(b) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to you), (b) from Gambs Mucker Bauman & Seeger, special Indiana counsel to the Company, covering the matters set forth in EXHIBIT 4.4(b) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to you) and (c) from Chapman and Cutler, your special counsel in connection with such transactions, substantially in the form set forth in EXHIBIT 4.4(c) and covering such other matters incident to such transactions as you may reasonably request. -11- 12 Section 4.5. Purchase Permitted By Applicable Law, etc. On the date of such Closing your purchase of Notes scheduled to be sold to you on the date of such Closing shall (a) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation G, T or X of the Board of Governors of the Federal Reserve System) and (c) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted. Section 4.6. Sale of Other Notes. (a) Contemporaneously with such Closing, the Company shall sell to the Other Purchasers scheduled to purchase Notes on the date of such Closing, and such Other Purchasers shall purchase, the Notes to be purchased by them at such Closing as specified in SCHEDULE A. (b) On the date of each Closing consummated prior to the date of such Closing, the Company shall have sold all of the Notes as specified in SCHEDULE A on the date of such prior Closing. Section 4.7. Payment of Special Counsel Fees. Without limiting the provisions of SECTION 15.1, the Company shall have paid on or before such Closing the fees, charges and disbursements of your special counsel referred to in SECTION 4.4 incurred in connection with the preparation of this Agreement, the Other Agreements and matters incident thereto to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to such Closing. Section 4.8. Private Placement Number. On or prior to the date of the first Closing, a Private Placement number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for each series of the Notes. Section 4.9. Changes in Corporate Structure. Except as specified in SCHEDULE 4.9, the Company shall on the date of such Closing not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in SCHEDULE 5.5. -12- 13 Section 4.10. Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by this Agreement on the date of such Closing and on the date of each prior Closing and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request. SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to you that: Section 5.1. Organization; Power and Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Other Agreements and the Notes and to perform the provisions hereof and thereof. Section 5.2. Authorization, etc. This Agreement, the Other Agreements and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof against value therefor each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Section 5.3. Disclosure. The Company, through its agent, Salomon Brothers Inc, has delivered to you and each Other Purchaser a copy of a Private Placement Memorandum, dated October 15, 1996 (the "Memorandum"), relating to the transactions contemplated hereby. Except as disclosed in SCHEDULE 5.3, the Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. Except as disclosed in SCHEDULE 5.3, this Agreement, the Memorandum, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby, including, without limitation, the December 31, 1995 SEC Form 10-K (including all documents incorporated by reference therein), the March 31, 1996 SEC -13- 14 Form 10-Q, June 30, 1996 SEC Form 10-Q and the September 30, 1996 SEC Form 10-Q of the Company, and the financial statements listed in SCHEDULE 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in SCHEDULE 5.3, or in one of the documents, certificates or other writings identified therein, or in the March 31, 1996, June 30, 1996 or September 30, 1996 SEC Forms 10-Q or in the financial statements listed in SCHEDULE 5.5, since December 31, 1995, there has been no change in the financial condition, operations, business, properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby. Section 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates. (a) SCHEDULE 5.4 contains (except as noted therein) complete and correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) of the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's directors and executive officers. (b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in SCHEDULE 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in SCHEDULE 5.4). (c) Each Subsidiary identified in SCHEDULE 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. (d) No Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the agreements listed on SCHEDULE 5.4 and customary -14- 15 limitations imposed by corporate law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary. Section 5.5. Financial Statements. The Company has delivered to each Purchaser copies of the financial statements of the Company and its Subsidiaries listed on SCHEDULE 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such SCHEDULE and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). Section 5.6. Compliance with Laws, Other Instruments, etc. (a) The execution, delivery and performance by the Company of this Agreement and the Notes will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other Material agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary. (b) The Notes and all other obligations under this Agreement of the Company are direct and unsecured obligations of the Company ranking pari passu with all other existing unsecured Indebtedness of the Company (actual or contingent) which is not expressed to be subordinated or junior in rank to any other unsecured Indebtedness of the Company. Section 5.7. Governmental Authorizations, etc. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes. Section 5.8. Litigation; Observance of Agreements, Statutes and Orders. (a) Except as disclosed in SCHEDULE 5.8, there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or -15- 16 any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Section 5.9. Taxes. The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (a) the amount of which is not individually or in the aggregate Material or (b) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and its Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended December 31, 1992. Section 5.10. Title to Property; Leases. The Company and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material (other than assets subject to Capitalized Leases), including all such properties reflected in the most recent audited balance sheet referred to in SECTION 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement, except for those defects in title and Liens that, individually or in the aggregate, would not have a Material Adverse Effect. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. Section 5.11. Licenses, Permits, etc. Except as disclosed in SCHEDULE 5.11, (a) the Company and its Subsidiaries own, possess or have the lawful right to use all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and -16- 17 trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others, except for those conflicts that, individually or in the aggregate, would not have a Material Adverse Effect; (b) to the best knowledge of the Company, no product of the Company or any of its Subsidiaries infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and (c) to the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries. Section 5.12. Compliance with ERISA. (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. (b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities. The terms "benefit liabilities" has the meaning specified in section 4001 of ERISA and the terms "current value" and "present value" have the meaning specified in section 3 of ERISA. (c) The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material. (d) The expected post-retirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting -17- 18 Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material. (e) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406(a)(1) of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this SECTION 5.12(E) is made in reliance upon and subject to (i) the accuracy of your representation in SECTION 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you and (ii) the assumption, made solely for the purpose of making such representation, that Department of Labor Interpretive Bulletin 75-2 with respect to prohibited transactions remains valid in the circumstances of the transactions contemplated herein. Section 5.13. Private Offering by the Company. Neither the Company nor Salomon Brothers Inc (the only Person authorized or employed by the Company as agent, broker, dealer, financial advisor or otherwise in connection with the offering or sale of the Notes or similar securities of the Company) has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any person other than you, the Other Purchasers and not more than 100 other Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither the Company nor any agent acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act. Section 5.14. Use of Proceeds; Margin Regulations. The Company will apply the proceeds of the sale of the Notes as set forth in SCHEDULE 5.14. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation G of the Board of Governors of the Federal Reserve System (12 CFR 207), other than the shares of Common Stock, par value $0.01 per share, of the Company which are purchased for the purpose of retiring such shares, or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock (excluding shares of Common Stock, par value $0.01 per share, of the Company which have been retired) does not constitute more than 5% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 5% of the value of such assets. As used in this SECTION 5.14, the terms -18- 19 "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in said Regulation G, but shall not include the aforesaid shares of Common Stock. Section 5.15. Existing Indebtedness; Future Liens. (a) SCHEDULE 5.15 sets forth a complete and correct list of all outstanding Indebtedness of the Company and its Subsidiaries aggregating in excess of $50,000 as of December 6, 1996, since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (b) Except as disclosed in SCHEDULE 5.15, neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by SECTION 10.3. Section 5.16. Foreign Assets Control Regulations, etc. Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. Section 5.17. Status under Certain Statutes. Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as amended (the "ICA"), or the Federal Power Act, as amended, except that Continental Transit Corp. is subject to regulation under the ICA. Section 5.18. Environmental Matters. Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed to you in writing: -19- 20 (a) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; (b) neither the Company nor any of its Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws, in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect. SECTION 6. REPRESENTATIONS OF THE PURCHASER. Section 6.1. Purchase for Investment. You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds managed by you and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes. Section 6.2. Source of Funds. You represent that at least one of the following statements is an accurate representation as to each source of funds (a "Source") to be used by you to pay the purchase price of the Notes to be purchased by you hereunder: (a) if you are an insurance company, the Source is an "insurance company general account" within the meaning of Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee benefit plan, treating as a single plan all plans maintained by the same employer or employee organization, with respect to which the amount of the general account reserves and liabilities for all contracts held by or on behalf of such plan exceeds ten percent (10%) of -20- 21 the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the NAIC Annual Statement filed with your state of domicile; or (b) if you are an insurance company, the Source does not include assets allocated to any separate account maintained by you in which any employee benefit plan (or its related trust) has any interest, other than a separate account that is maintained solely in connection with your fixed contractual obligations under which the amounts payable, or credited, to such plan and to any participant or beneficiary of such plan (including any annuitant) are not affected in any manner by the investment performance of the separate account; or (c) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Company in writing pursuant to this paragraph (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (d) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part 1(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph (d); or (e) the Source is a governmental plan; or (f) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph (f); or -21- 22 (g) the Source does not include assets of any employee benefit plan that is subject to ERISA. If you or any subsequent transferee of the Notes indicates that you or such transferee are relying on any representation contained in paragraph (c), (d) or (f) above, the Company shall deliver on the date of Closing on which you are scheduled to purchase Notes and on the date of any applicable transfer a certificate, which shall either state that (i) it is neither a party in interest nor a "disqualified person" (as defined in Section 4975(e)(2) of the Code), with respect to any plan identified pursuant to paragraphs (c) or (f) above, or (ii) with respect to any plan, identified pursuant to paragraph (d) above, neither it nor any "affiliate" (as defined in Section V(c) of the QPAM Exemption) has at such time, and during the immediately preceding one year, exercised the authority to appoint or terminate said QPAM as manager of any plan identified in writing pursuant to paragraph (d) above or to negotiate the terms of said QPAM's management agreement on behalf of any such identified plan. As used in this SECTION 6.2, the terms "employee benefit plan", "governmental plan", "party in interest" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. SECTION 7. INFORMATION AS TO COMPANY. Section 7.1. Financial and Business Information. The Company shall deliver to each holder of Notes that is an Institutional Investor: (a) Quarterly Statements -- promptly upon their availability and in any event within 60 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of: (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end -22- 23 adjustments, provided that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this SECTION 7.1(a); (b) Annual Statements -- promptly upon their availability and in any event within 105 days after the end of each fiscal year of the Company, duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied (A) by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP (except for any change in the application of GAAP discussed therein or in the Notes thereto with which such accountants concur) and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, and (B) a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit), -23- 24 provided that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission, together with the accountant's certificate described in clause (B) above, shall be deemed to satisfy the requirements of this SECTION 7.1(b); (c) SEC and Other Reports -- promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement (other than registration statements relating to employee benefit plans on Form S-8 and otherwise without exhibits except as expressly requested by such holder), and each related final prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission and of all press releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material; (d) Notice of Default or Event of Default -- promptly, and in any event within five days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in SECTION 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; (e) ERISA Matters -- promptly, and in any event within five days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer -24- 25 Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; (f) Notices from Governmental Authority -- promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; and (g) Requested Information -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes. Section 7.2. Officer's Certificate. Each set of financial statements delivered to a holder of Notes pursuant to SECTION 7.1(a) or SECTION 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth: (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of SECTIONS 10.1 through SECTION 10.5 hereof, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such SECTION, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such SECTIONS, and the calculation of the amount, ratio or percentage then in existence); and (b) Event of Default -- a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the -25- 26 beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto. Section 7.3. Inspection. The Company shall permit the representatives of each holder of Notes that is an Institutional Investor: (a) No Default -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (b) Default -- if a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested. SECTION 8. PREPAYMENT OF THE NOTES. Section 8.1. Required Prepayments. (a) On December 30, 2006 and December 30, 2007 the Company will prepay $6,666,667 principal amount (or such lesser principal amount as shall then be outstanding) of the Series G Notes at par and without payment of the Make-Whole Amount or any premium, provided that upon any partial prepayment of the Series G Notes pursuant to SECTION 8.2 or purchase of the Series G Notes permitted by SECTION 8.5 the principal amount of each required prepayment of the Series G Notes becoming due under this SECTION 8.1 on and after the date of such prepayment or purchase shall be reduced in the same proportion as -26- 27 the aggregate unpaid principal amount of the Series G Notes is reduced as a result of such prepayment or purchase. (b) On December 17, 2007 the Company will prepay $12,500,000 principal amount (or such lesser principal amount as shall then be outstanding) of the Series H Notes at par and without payment of the Make-Whole Amount or any premium, provided that upon any partial prepayment of the Series H Notes pursuant to SECTION 8.2 or purchase of the Series H Notes permitted by SECTION 8.5 the principal amount of each required prepayment of the Series H Notes becoming due under this SECTION 8.1 on and after the date of such prepayment or purchase shall be reduced in the same proportion as the aggregate unpaid principal amount of the Series H Notes is reduced as a result of such prepayment or purchase. Section 8.2. Optional Prepayments with Make-Whole Amount. The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes, in an amount not less than 10% of the aggregate principal amount of the Notes then outstanding in the case of a partial prepayment (but if in the case of a partial prepayment, then against each series of Notes in proportion to the aggregate principal amount outstanding on each series), at 100% of the principal amount so prepaid, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this SECTION 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify (a) such date, (b) the aggregate principal amount of the Notes to be prepaid on such date, (c) the principal amount of each series of Notes to be prepaid and the principal amount of each Note held by such holder to be prepaid (in each case determined in accordance with SECTION 8.3), and (d) the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date. Section 8.3. Allocation of Partial Prepayments. In the case of each partial prepayment of the Notes, the principal amount of the Notes to be prepaid shall be: (a) allocated among each series of Notes in proportion to the aggregate unpaid principal amount of each such series of Notes, and (b) allocated pro rata among all of the holders of each series of Notes at the time outstanding in accordance with the unpaid principal amount thereof. Section 8.4. Maturity; Surrender, etc. In the case of each prepayment of Notes pursuant to this SECTION 8, the principal amount of each Note to be prepaid shall mature and -27- 28 become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. Section 8.5. Purchase of Notes. The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any series of the outstanding Notes or any part or portion of any thereof, except upon the payment or prepayment of each series of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes. Section 8.6. Make-Whole Amount. The term "Make-Whole Amount" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "Called Principal" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to SECTION 8.2 or has become or is declared to be immediately due and payable pursuant to SECTION 12.1, as the context requires. "Discounted Value" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "Reinvestment Yield" means, with respect to the Called Principal of any Note, .50% over the yield to maturity implied by (a) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page PX1" on the Bloomberg Financial Markets Services Screen (or such other display as may replace Page PX1 on the Bloomberg Financial Markets Services Screen) for actively traded U.S. Treasury -28- 29 securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (b) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H. 15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (i) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (ii) interpolating linearly between (1) the actively traded U.S. Treasury security with the duration closest to and greater than the Remaining Average Life of such Called Principal and (2) the actively traded U.S. Treasury security with the duration closest to and less than the Remaining Average Life. "Remaining Average Life" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (a) such Called Principal into (b) the sum of the products obtained by multiplying (i) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (ii) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "Remaining Scheduled Payments" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to SECTION 8.2 or 12.1. "Settlement Date" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to SECTION 8.2 or has become or is declared to be immediately due and payable pursuant to SECTION 12.1, as the context requires. SECTION 9. AFFIRMATIVE COVENANTS. -29- 30 The Company covenants that from and after the date of the first Closing and continuing so long as any of the Notes are outstanding: Section 9.1. Compliance with Law. The Company will and will cause each of its Subsidiaries to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Section 9.2. Insurance. The Company will and will cause each of its Subsidiaries to maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations and comparable size engaged in the same or a similar business and similarly situated. Section 9.3. Maintenance of Properties. The Company will and will cause each of its Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this SECTION 9.3 shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Section 9.4. Payment of Taxes and Claims. The Company will and will cause each of its Subsidiaries to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (a) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary -30- 31 has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (b) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect. Section 9.5. Corporate Existence, etc. The Company will at all times preserve and keep in full force and effect its corporate existence. Subject to SECTION 10.5, the Company will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless merged into the Company or a Wholly-Owned Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. Section 9.6. Maintenance of Business. The Company will continue, and will cause each Subsidiary to continue, to engage primarily in the material lines of business which the Company and its Subsidiaries operate, respectively, as of the date hereof. Section 9.7. Notes to Rank Pari Passu. The Notes and all other obligations under this Agreement of the Company are and at all times shall remain direct and unsecured obligations of the Company ranking pari passu as against the assets of the Company with all other Notes from time to time issued and outstanding hereunder without any preference among themselves and pari passu with all other present and future unsecured Indebtedness (actual or contingent) of the Company which is not expressed to be subordinate or junior in rank to any other unsecured Indebtedness of the Company. SECTION 10. NEGATIVE COVENANTS. The Company covenants that from and after the date of the first Closing and continuing so long as any of the Notes are outstanding: Section 10.1. Consolidated Tangible Net Worth. The Company will at all times keep and maintain Consolidated Tangible Net Worth at an amount not less than the sum of (a) $135,000,000 plus (b) 25% of Consolidated Net Income computed on a cumulative basis for each of the elapsed fiscal quarters ending after December 31, 2000; provided that notwithstanding that Consolidated Net Income for any such elapsed fiscal quarter may be a deficit figure, no reduction as a result thereof shall be made on the sum to be maintained pursuant hereto. Section 10.2. Funded Debt. -31- 32 The Company will not, and will not permit any Subsidiary to, create, issue, assume, guarantee or otherwise incur or in any manner become liable in respect of any Funded Debt, except: (a) the Notes; (b) Funded Debt existing on the date of the first Closing, all of which is set forth on SCHEDULE 5.15 hereto, and any renewals, extensions and refundings thereof, provided that the principal amount thereof shall not be increased; and (c) other Funded Debt; provided that, in the case of (a), (b) or (c), immediately after giving effect to the creation, issuance, assumption, guarantee or incurrence of such Funded Debt: (i) the aggregate amount of all Funded Debt of the Company and its Subsidiaries on a consolidated basis does not exceed 60% of Consolidated Total Capitalization determined as of the end of the immediately prior fiscal quarter, and (ii) if such Funded Debt is Priority Debt, such creation, issuance, assumption, guarantee or incurrence is permitted by SECTION 10.3. Section 10.3. Priority Debt. The Company will not, and will not permit any Subsidiary to, create, issue, assume, guarantee or otherwise incur or in any manner become liable in respect of any Priority Debt unless (a) the aggregate amount of all Priority Debt outstanding at any time does not exceed 20% of Consolidated Tangible Net Worth at such time, and (b) the creation, issuance, assumption, guarantee or incurrence of such Priority Debt is permitted by SECTION 10.2. Section 10.4. Limitation on Liens. The Company will not, and will not permit any Subsidiary to, create, assume, incur or suffer to exist any Lien upon any of its property, whether now owned or hereafter acquired, except: (a) Liens for taxes, assessments or other governmental charges or levies not yet due or payable to the extent that nonpayment thereof is permitted under the provisions of SECTION 9.4 hereof; (b) Liens created by or resulting from any litigation or legal proceeding which is currently being contested in good faith by appropriate proceedings, provided that the enforcement of such Liens is effectively stayed by such contest; (c) other Liens incidental to the normal conduct of the business of the Company or any Subsidiary or the ownership of its property which are not incurred in -32- 33 connection with the incurrence of Indebtedness and which do not in the aggregate materially impair the use of such property in the operation of the business of the Company and its Subsidiaries taken as a whole or the value of such property for the purposes of such business; (d) any Lien existing on property of the Company or any Subsidiary on the date of the first Closing, all of which are described in SCHEDULE 10.4 hereto; (e) Liens on property of a Subsidiary to secure obligations of such Subsidiary to the Company or another Wholly-Owned Subsidiary; (f) any Lien renewing, extending or refunding any Lien permitted by clause (d) of this SECTION 10.4, provided that the principal amount of the obligations secured thereby is not increased and the Lien is not extended to other property; (g) (i) any Lien on property or on rights relating thereto to secure all or a part of the purchase price or cost of the construction of, or Indebtedness incurred to pay all or a portion of the purchase price or cost of construction of, such property, which Liens are created contemporaneously with, or within 180 days after, such acquisition or the completion of such construction by the Company or a Subsidiary, (ii) any Lien on property existing on such property at the time of acquisition thereof whether or not the Indebtedness secured thereby is assumed by the Company or such Subsidiary, or (iii) any Lien existing on the property of a corporation at the time such corporation is merged into or consolidated with the Company or a Subsidiary or existing on the property of a corporation or firm at the time of a sale, lease or other disposition of the properties of such corporation or firm as an entirety or substantially as an entirety to the Company or a Subsidiary; provided, however, that, in each case the obligations secured by any such Lien shall not exceed the lesser of the total acquisition or purchase price or cost of construction or improvement, as the case may be, or 100% of the fair market value of the related property at the time of such acquisition, completion or construction, merger, consolidation, sale, lease or other disposition (as determined in good faith by a Responsible Officer of the Company), and any such Lien shall attach solely to the property acquired or constructed; and (h) Liens securing other Priority Debt permitted under SECTION 10.3. Section 10.5. Mergers, Consolidations and Sales of Assets. (a) The Company will not, and will not permit any Subsidiary to, consolidate with or be a party to a merger with any other Person, or sell, lease or otherwise dispose of all or substantially all of its assets; provided that: -33- 34 (i) any Subsidiary may merge or consolidate with or into the Company or any Wholly-owned Subsidiary so long as in any merger or consolidation involving the Company, the Company shall be the surviving or continuing corporation; and (ii) the Company may consolidate or merge with or into any other corporation if (1) the corporation which results from such consolidation or merger (the "surviving corporation") is solvent and organized under the laws of any state of the United States or the District of Columbia, (2) the due and punctual payment of the principal of and premium, if any, and interest on all of the Notes, according to their tenor, and the due and punctual performance and observation of all of the covenants in the Notes and this Agreement to be performed or observed by the Company are expressly assumed in writing by the surviving corporation and the surviving corporation shall furnish to the holders of the Notes an opinion of counsel satisfactory to such holders to the effect that the instrument of assumption has been duly authorized, executed and delivered and constitutes the legal, valid and binding contract and agreement of the surviving corporation enforceable in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors' rights generally and by general equitable principles, and (3) at the time of such consolidation or merger and immediately after giving effect thereto: (A) no Default or Event of Default would exist and (B) the surviving corporation would be permitted by the applicable provisions of SECTION 10.2(C) to incur at least $1.00 of additional Funded Debt. (b) The Company will not, and will not permit any of its Subsidiaries to, Transfer any of its property if, after giving effect to such Transfer, the aggregate Value of all property Transferred (other than as permitted by clauses (i), (ii) or (iii) of this SECTION 10.5(B) on or after the date of the first Closing shall exceed 25% of Consolidated Total Assets determined as of and based upon the Company's September 30, 1996 SEC Form 10-Q, except: (i) the Transfer in the ordinary course of business of (1) inventory held for sale or (2) equipment, fixtures, supplies or materials no longer required in the operation of the business of the Company or such Subsidiary or that is obsolete; (ii) the Company or any Subsidiary may sell its accounts receivable for fair market value, without recourse, to: (1) a bank or other financial institution or (2) any other Person in a transaction in which a bank or other financial institution their purchases such accounts receivable in a transaction or transactions relating to the sale by the Company or such Subsidiary to such Person of such accounts receivable; -34- 35 (iii) any Subsidiary may Transfer property to the Company or another Wholly-Owned Subsidiary; and (iv) either: (1) prior to, or contemporaneously with, such Transfer the Company shall have delivered to each holder of a Note an Officer's Certificate certifying that the Company is electing to use the Excess Net Proceeds from such Transfer in the manner provided in this clause (1) and, within one year after the date of such Transfer, the Company or the Subsidiary making such Transfer shall have used such Excess Net Proceeds to acquire other property useful and intended to be used in the operation of the business of the Company and its Subsidiaries as described in SECTION 9.6 and having a fair market value at least equal to the Value of the property Transferred, provided that such acquired property shall not be subject to any Lien to any greater extent than the Liens to which the property transferred was subject or (2) the Company shall not less than 30 days nor more than 60 days prior to the date of such Transfer offer pursuant to a written notice (the "Asset Disposition Prepayment Notice") to apply on a pro rata basis the Excess Net Proceeds to which such assets relate towards the prepayment of all outstanding Senior Funded Debt of the Company (including, without limitation, the Notes, together with accrued interest thereon, but without premium). Such Asset Disposition Prepayment Notice shall specify (A) a date (the "Asset Disposition Prepayment Date"), which shall be not less than 120 days nor more than 180 days following the date of such Asset Disposition Prepayment Notice, on which the Company will apply such Excess Net Proceeds to the prepayment on a pro rata basis of all of the outstanding Senior Funded Debt of the Company held by any Person which accepts such offer of prepayment and (B) a date, which shall be not more than 60 days nor less than 30 days prior to such Asset Disposition Prepayment Date, on which each holder of Senior Funded Debt of the Company must accept or decline such offer of prepayment. Without limiting the foregoing, the Company shall, not more than 15 days nor less than 10 days prior to such Asset Disposition Prepayment Date, send a second written notice (the "Secondary Asset Disposition Prepayment Notice") to all holders of outstanding Senior Funded Debt of the Company notifying each such holder of the decision of each other holder of Senior Funded Debt of the Company to accept or reject such offer of prepayment and in such Secondary Asset Disposition Prepayment Notice offer to each holder of outstanding Senior Funded Debt to apply on a pro rata basis the amount of such Excess Net Proceeds which will not be applied to such prepayment by virtue of any such holder of Senior Funded Debt having declined the original offer of prepayment. On such Asset Disposition Prepayment Date, the Company shall apply the amount of such Excess Net Proceeds which has been agreed or deemed to be agreed by holders of Senior Funded Debt of the Company pursuant to any agreement pursuant to which any such Senior Funded Debt is outstanding shall be applied to the prepayment of Senior Funded Debt held by each holder thereof which has accepted or been so deemed to accept such initial -35- 36 offer of prepayment or such initial offer and such secondary offer of prepayment, as the case may be, to the prepayment of Senior Funded Debt as and to the extent herein contemplated. It is understood and agreed by the Company and each holder of the Notes by its acceptance thereof that any such holder may decline any such offer of prepayment, that the failure of any such holder to accept or decline any such offer of prepayment shall be deemed to be an election by such holder to decline such prepayment and that if any such offer is so accepted, the Excess Net Proceeds so offered towards the prepayment of the Notes and accepted shall be prepaid without premium pursuant to SECTION 8.2, notwithstanding that the terms and provisions of said SECTION 8.2 contemplate that any prepayment pursuant thereto shall be with a premium. Section 10.6. Transactions with Affiliates. The Company will not and will not permit any Subsidiary to enter into directly or indirectly any transaction or Material group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary), except in the ordinary course and pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate. SECTION 11. EVENTS OF DEFAULT. An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing: (a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) the Company defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or (c) the Company defaults in the performance of or compliance with any term contained in SECTIONS 7.1(D) or 10.1 through 10.5; or (d) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this SECTION 11) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note; or -36- 37 (e) any representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in this Agreement or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or (f) (i) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $2,000,000 beyond any period of grace provided with respect thereto, or (ii) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $2,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared (or one or more Persons are entitled to declare such Indebtedness to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), (x) the Company or any Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $2,000,000, or (y) one or more Persons have the right to require the Company or any Subsidiary so to purchase or repay such Indebtedness; or (g) the Company or any Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any of its Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation -37- 38 or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of its Subsidiaries, or any such petition shall be filed against the Company or any of its Subsidiaries and such petition shall not be dismissed within 60 days; or (i) a final judgment or judgments for the payment of money aggregating in excess of $1,000,000 are rendered against one or more of the Company and its Subsidiaries and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or (j) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed $1,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect. As used in SECTION 11(J), the terms "employee benefit plan" and "employee welfare benefit plan" shall have the respective meanings assigned to such terms in Section 3 of ERISA. SECTION 12. REMEDIES ON DEFAULT, ETC. Section 12.1. Acceleration. (a) If an Event of Default with respect to the Company described in paragraph (g) or (h) of SECTION 11 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that -38- 39 such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default has occurred and is continuing, any holder or holders of more than 35% in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (c) If any Event of Default described in paragraph (a) or (b) of SECTION 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Notes becoming due and payable under this SECTION 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for), and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. Section 12.2. Other Remedies. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under SECTION 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. Section 12.3. Rescission. At any time after any Notes have been declared due and payable pursuant to clause (b) or (c) of SECTION 12.1, the holders of not less than 66-2/3% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable -39- 40 law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to SECTION 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this SECTION 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. Section 12.4. No Waivers or Election of Remedies, Expenses, etc. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under SECTION 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this SECTION 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements. SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. Section 13.1. Registration of Notes. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. Section 13.2. Transfer and Exchange of Notes. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or its attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, of the same series and in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of EXHIBIT 1, 2, 3, 4, 5, 6 or 7, as the -40- 41 case may be. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $100,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $100,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in SECTION 6.2. Section 13.3. Replacement of Notes. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, (i) an Institutional Investor or (ii) another holder of a Note which has a minimum net worth of at least $50,000,000, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. SECTION 14. PAYMENTS ON NOTES. Section 14.1. Place of Payment. Subject to SECTION 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in Chicago, Illinois at the principal office of a bank or trust company in such jurisdiction which the Company agrees to designate at any time when there is any holder of any Note not entitled to the benefits of SECTION 14.2. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction. -41- 42 Section 14.2. Home Office Payment. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in SECTION 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below your name in SCHEDULE A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to SECTION 14.1. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to SECTION 13.2. The Company will afford the benefits of this SECTION 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this SECTION 14.2. SECTION 15. EXPENSES, ETC. Section 15.1. Transaction Expenses. Whether or not the transactions contemplated hereby are consummated, the Company will pay all out-of-pocket costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each Other Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Notes, or by reason of being a holder of any Note, and (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses, if any, of brokers and finders (other than those retained by you). -42- 43 Section 15.2. Survival. The obligations of the Company under this SECTION 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement. SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof. SECTION 17. AMENDMENT AND WAIVER. Section 17.1. Requirements. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, provided that (a) no amendment or waiver of any of the provisions of SECTION 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of SECTION 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of SECTIONS 8, 11(a), 11(b), 12, 17 or 20; and provided further that, anything contained in this SECTION 17 to the contrary notwithstanding, if for any reason whatsoever it becomes necessary or appropriate to enter into any amendment of this Agreement or any waiver with respect to compliance herewith by the Company during the period from and including the date of the first Closing through and including the earlier of the date of the third Closing and March 31, 1997 (the "Series C and Series E Note Cut-Off Date"): (1) Principal Mutual Life Insurance Company shall be deemed to be the holder of $24,000,000 aggregate principal amount of outstanding Notes and Great-West Life & Annuity Insurance Company shall be deemed to be the holder of $13,000,000 aggregate principal amount of outstanding Notes (i) for purposes of any determination of the percentage of holders of the Notes -43- 44 required to grant or deny such requested amendment or waiver and (ii) for purposes of any determination of any payment of remuneration, whether by way of supplemental or additional interest, fee or otherwise pursuant to SECTION 17.2(B), notwithstanding that the issuance, sale and delivery of the Notes on the date of the third Closing has not been consummated at the time such amendment or waiver is requested or such payment of remuneration is determined pursuant to SECTION 17.2(B), and (2) if for any reason whatsoever, the Notes to be issued to Principal Mutual Life Insurance Company or to Great-West Life & Annuity Insurance Company are not issued on or prior to the Series C and Series E Note Cut-Off Date, any such amendment or waiver entered into as contemplated by the foregoing clause (1)(i) of this SECTION 17.1 shall, at the option of the Required Holders, be deemed null and void. Section 17.2. Solicitation of Holders of Notes. (a) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount or series of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this SECTION 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of any series of the Notes as consideration for or as an inducement to the entering into by such holder of Notes or any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of each series of Notes then outstanding even if such holder did not consent to such waiver or amendment. Section 17.3. Binding Effect, etc. Any amendment or waiver consented to as provided in this SECTION 17 applies equally to all holders of each series of Notes and is binding upon them and upon each future holder of any Note of any series and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note of any series nor any delay in exercising any rights hereunder or under any Note of any series shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. -44- 45 Section 17.4. Notes Held by Company, etc. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes of any series directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding. SECTION 18. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) by telefacsimile if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in SCHEDULE A, or at such other address as you or it shall have specified to the Company in writing, (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or (iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of the Chief Financial Officer, or at such other address as the Company shall have specified to the holder of each Note in writing. Notices under this SECTION 18 will be deemed given only when actually received. SECTION 19. REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular -45- 46 course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This SECTION 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. SECTION 20. CONFIDENTIAL INFORMATION. For the purposes of this SECTION 20, "Confidential Information" means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified in writing when received by you as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any Person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary or (d) constitutes financial statements delivered to you under SECTION 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, trustees, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this SECTION 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this SECTION 20), (v) any Person from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this SECTION 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to -46- 47 be bound by and to be entitled to the benefits of this SECTION 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this SECTION 20. SECTION 21. SUBSTITUTION OF PURCHASER. You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in SECTION 6. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this SECTION 21), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this SECTION 21), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement. SECTION 22. MISCELLANEOUS. Section 22.1. Successors and Assigns. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. Section 22.2. Payments Due on Non-Business Days. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. Section 22.3. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. -47- 48 Section 22.4. Construction. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. Section 22.5. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. Section 22.6. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF ILLINOIS, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. * * * * * If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company. Very truly yours, WABASH NATIONAL CORPORATION By [Title] The foregoing is hereby agreed to as of the date thereof. [VARIATION] By _______________________________ -48- 49 [Title] -49- 50 DEFINED TERMS As used herein, the following terms have the respective meanings set forth below or set forth in the SECTION hereof following such term: "Affiliate" means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Company or any Subsidiary or any corporation of which the Company and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests. As used in this definition, "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of the Company. "Asset Disposition Prepayment Date" is defined in SECTION 10.5(B)(IV). "Asset Disposition Prepayment Notice" is defined in SECTION 10.5(B)(IV). "Business Day" means (a) for the purposes of SECTION 8.6 only, any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in Indianapolis, Indiana are required or authorized to be closed. "Capitalized Lease" shall mean any lease the obligation for Rentals with respect to which is required to be capitalized on a consolidated balance sheet of the lessee and its subsidiaries in accordance with GAAP. "Capitalized Rentals" of any Person shall mean as of the date of any determination thereof the amount at which the aggregate Rentals due and to become due under all Capitalized Leases under which such Person is a lessee would be reflected as a liability on a consolidated balance sheet of such Person. "Closing" and "Closings" are defined in SECTION 3. SCHEDULE B (to Note Purchase Agreement) 51 "Code" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "Company" means Wabash National Corporation, a Delaware corporation. "Confidential Information" is defined in SECTION 20. "Consolidated Funded Debt" means Funded Debt of the Company and its Subsidiaries, determined on a consolidated basis eliminating intercompany items. "Consolidated Net Income" means, with reference to any period, the net income (or loss) of the Company and its Subsidiaries for such period (taken as a cumulative whole), as determined in accordance with GAAP, after eliminating all offsetting debits and credits between the Company and its Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and its Subsidiaries in accordance with GAAP. "Consolidated Tangible Net Worth" means as of the date of any determination thereof, the arithmetic sum of: (a) the amount of the capital stock accounts (net of treasury stock, at cost) plus (or minus in the case of deficit) the surplus and retained earnings of the Company and its Subsidiaries, PLUS (b) minority interests and deferred taxes of the Company and its Subsidiaries, MINUS (c) the net book value, after deducting any reserves applicable thereto, of all items of the following character which are included in the assets of the Company and its Subsidiaries, to wit: (i) the incremental increase in an asset resulting from any reappraisal, revaluation or write-up of assets (other than any revaluation or write-up of assets in accordance with GAAP); and (ii) goodwill, patents, patent applications, permits, trademarks, trade names, copyrights, licenses, franchises, experimental expense, organizational B-51 52 expense, unamortized debt discount and expense, the excess of cost of shares acquired over book value of related assets and such other assets as are properly classified as "intangible assets" acquired by the Company or any Subsidiary after the date of the first Closing to the extent and in the amount by which the fair market value thereof is in excess of 10% of Consolidated Total Assets as of any date of determination of Consolidated Total Assets; all determined in accordance with GAAP. "Consolidated Total Assets" means as of the date of any determination thereof, total assets of the Company and its Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated Total Capitalization" means as of the date of any determination thereof, the sum of (a) Consolidated Funded Debt plus (b) Consolidated Tangible Net Worth. "Default" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "Default Rate" means that rate of interest that is the greater of (i) 8.99% per annum in the case of the Series B Notes, the Series C Designated Rate plus 2% per annum in the case of the Series C Notes, 9.31% per annum in the case of the Series D Notes, the Series E Designated Rate plus 2% per annum in the case of the Series E Notes, 9.47% per annum in the case of the Series F Notes, 9.53% per annum in the case of the Series G Notes and 9.55% per annum in the case of the Series H Notes or (ii) 2% over the rate of interest publicly announced by Morgan Guaranty Bank of New York in New York City, New York as its "base" or "prime" rate. "Designated Rate" is defined in SECTION 1(b). "Environmental Laws" means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. B-52 53 "ERISA Affiliate" means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code. "Event of Default" is defined in SECTION 11. "Excess Net Proceeds" means, with respect to any Transfer of property, the Net Proceeds from such Transfer to the extent attributable to property Transferred in excess of the limitation imposed by the provisions of the introductory portion of SECTION 10.5(B). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Funded Debt" of any Person means all Indebtedness of such Person which would, in accordance with GAAP, constitute long-term Indebtedness, including, without limitation (a) all Indebtedness of such Person for borrowed money or which has been incurred in connection with the acquisition of assets in each case having a final maturity of more than one year from the date of origin thereof (or which is renewable or extendible at the option of the obligor for a period or periods more than one year from the date of origin), including in any event all payments in respect thereof that are required to be made within one year from the date of any determination of Funded Debt, whether or not the obligation to make such payments shall constitute a current liability of the obligor under GAAP, and all Indebtedness of such Person outstanding under any revolving credit, line of credit, commercial extension of credit or similar agreement between such Person and an Institutional Investor which is classified as long-term in accordance with GAAP, (b) all Capitalized Rentals of such Person, (c) all Guaranties by such Person of Funded Debt of others, and (d) all Indebtedness of such Person outstanding under any revolving credit, line of credit, commercial extension of credit or similar agreement between such Person and an Institutional Investor, whether or not classified as long-term or short-term Indebtedness, if, during the 365-day period immediately preceding the date of any determination of Funded Debt of such Person, there shall not have been a period of at least 30 consecutive days during which Indebtedness of such Person outstanding under such revolving credit, line of credit, commercial extension of credit or similar agreement is equal to zero, in which event there shall be included in such determination of Funded Debt an amount equal to the highest aggregate amount of all such Indebtedness outstanding during any period of 30 consecutive days selected by such Person during such preceding 365-day period. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America. "Governmental Authority" means (a) the government of B-53 54 (i) the United States of America or any State or other political subdivision thereof, or (ii) any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "Guaranty" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness or obligation or any property constituting security therefor; (b) to advance or supply funds (i) for the purchase or payment of such Indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation; (c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of any other Person to make payment of the Indebtedness or obligation; or (d) otherwise to assure the owner of such Indebtedness or obligation against loss in respect thereof. In any computation of the Indebtedness or other liabilities of the obligor under any Guaranty, the Indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "Hazardous Material" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration B-54 55 of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls). "holder" means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to SECTION 13.1. "Indebtedness" means, with respect to any Person, without duplication, (a) its liabilities for borrowed money; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) its Capitalized Rentals; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (e) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (d) hereof. Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (e) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. In no event shall Indebtedness include Unfunded Pension Liability of any Plan of the Company and its Subsidiaries, which amount, as of December 31, 1995, was zero. "Institutional Investor" means (a) any original purchaser of a Note, (b) any holder of a Note holding more than 5% of the aggregate principal amount of the Notes then outstanding, and (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "Investments" means all investments in cash or by delivery of property, made directly or indirectly in any property or assets or any Person, whether by acquisition of shares of capital stock, Indebtedness or other obligations or securities or by loan, advance or capital contribution B-55 56 or otherwise; provided "Investments" shall not mean or include routine investments and property to be used or consumed in the ordinary course of business. "Lien" means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). "Make-Whole Amount" is defined in SECTION 8.6. "Material" means material in relation to the business, operations, affairs, financial condition, assets, properties, or prospects of the Company and its Subsidiaries taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under this Agreement and the Notes, or (c) the validity or enforceability of this Agreement or the Notes. "Memorandum" is defined in SECTION 5.3. "Multiemployer Plan" means any Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "Net Proceeds" means, with respect to any Transfer of any property by any Person, an amount equal to the excess of (a) the aggregate amount of all consideration (valued at the fair market value of such consideration at the time of consummation of such Transfer) received by such Person in respect of such Transfer, over (b) the ordinary and reasonable out-of-pocket costs and expenses actually incurred by such Person in connection with such Transfer. "Notes" is defined in SECTION 1. "Officer's Certificate" means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. "Other Agreements" is defined in SECTION 2. "Other Purchasers" is defined in SECTION 2. B-56 57 "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "Person" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "Plan" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. "Priority Debt" means (i) all Indebtedness of the Company or any Subsidiary secured by a Lien on any property of the Company or any Subsidiary, excluding Indebtedness secured by Liens permitted by clauses (a), (c), (d), (e), (f) or (g) of SECTION 10.4, but including Indebtedness secured by Liens permitted by clauses (b) or (h) of SECTION 10.4, and (ii) all Indebtedness of Subsidiaries. "property" or "properties" means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate. "QPAM Exemption" means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. "Required Holders" means, at any time, the holders of at least 66-2/3% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates). "Responsible Officer" means any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this agreement. "Secondary Asset Disposition Prepayment Notice" is defined in SECTION 10.5(B)(IV). "Securities Act" means the Securities Act of 1933, as amended from time to time. "Senior Financial Officer" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company. B-57 58 "Senior Funded Debt" of any Person means Funded Debt of such Person which is not expressed to be subordinate or junior in rank to any other Funded Debt of such Person. "Series B Notes" is defined in SECTION 1. "Series C Notes" is defined in SECTION 1. "Series D Notes" is defined in SECTION 1. "Series E Notes" is defined in SECTION 1. "Series F Notes" is defined in SECTION 1. "Series G Notes" is defined in SECTION 1. "Series H Notes" is defined in SECTION 1. "Series C Note and Series E Note Cut-Off Date" is defined in SECTION 17.1 "Series C Designated Rate" is defined in SECTION 1(B). "Series E Designated Rate" is defined in SECTION 1(B). "Series C Institutional Investors" is defined in SECTION 1(B). "Series E Institutional Investors" is defined in SECTION 1(B). "Subsidiary" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. "Transfer" means, with respect to any property, the sale, exchange, conveyance, lease, transfer or other disposition of such property. B-58 59 "Unfunded Pension Liability" of any Plan means the amount, if any, by which the actuarial present value of the accumulated plan benefits under the Plan as of the close of its most recent plan year, determined in accordance with statement of Financial Accounting Standards No. 35, based upon the actuarial assumptions used by the Plan's actuary in the most recent annual valuation of the Plan, exceeds the fair market value of the assets allocable thereto, determined in accordance with Section 412 of the Code. "Value" means, with respect to any property on any date, the greater of the book value of such property on such date or the fair market value of such property on such date. "Wholly-Owned Subsidiary" means, at any time, any Subsidiary one hundred percent (100%) of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly-Owned Subsidiaries at such time. B-59 60 EXHIBIT 4.4(c) (to Note Purchase Agreement) EX-10.29 12 MASTER EQUIPMENT LEASE AGREEMENT 1 EXHIBIT 10.29 MASTER EQUIPMENT LEASE AGREEMENT No. 07008 ------- This is a MASTER EQUIPMENT LEASE AGREEMENT BETWEEN NATIONAL CITY LEASING CORPORATION, a Kentucky corporation, whose principal office is located at 101 South Fifth Street, Louisville, Kentucky 40202 ("NATIONAL CITY") and WABASH NATIONAL FINANCE CORPORATION, an Indiana corporation, whose principal office is located at 9 North Vail Avenue, Arlington Heights, Illinois 60005 ("LESSEE"). 1. LEASE. National City agrees to lease to Lessee and Lessee agrees to lease from National City, subject to the terms and conditions set forth herein, the items of personal property (the "Equipment") described in each Equipment Schedule (a "SCHEDULE") executed and delivered by the parties hereto and incorporating the terms of this Master Equipment Lease Agreement by reference therein (the "LEASE"). The terms "AGREEMENT", "HEREOF", "HEREIN", and "HEREUNDER", when used in this Lease, shall mean this Lease, each Schedule and any schedule thereto. This Agreement constitutes an agreement of lease and nothing herein contained shall be construed as conveying to Lessee any right, title, or interest in the Equipment except as lessee only. The parties agree that this Lease is a "FINANCE LEASE" as defined in Section 2A-103(g) of the Uniform Commercial Code ("UCC"). Lessee acknowledges either (a) that Lessee has reviewed and approved any written Supply Contract (as defined in UCC Section 2A-103(y)) covering the Equipment purchased from the Supplier (as defined in UCC Section 2A-103(x)) thereof for lease to Lessee or (b) that National City has informed or advised Lessee, in writing, either previously or by this Lease of the following: (i) the identity of the Supplier; (ii) that Lessee may have rights under the Supply Contract and (iii) that Lessee may contact the Supplier for a description of any such rights Lessee may have under the Supply Contract. 2. TERM: ACCEPTANCE: RENT: RETURN. The term of lease of each Item of Equipment shall commence on the date the Lessee accepts the Equipment (the "COMMENCEMENT DATE") as evidenced by the Certificate of Delivery and Acceptance pertaining to such Equipment and, unless earlier terminated pursuant to the provisions hereof, shall continue for the term specified in each Schedule. Lessee's execution and delivery of a Certificate of Delivery and Acceptance shall constitute Lessee's Irrevocable acceptance of the Equipment covered thereby for all purposes of this Agreement. Lessee shall pay to National City (at National City's office specified above, or as National City may otherwise designate), rent as specified in each Schedule. Each date on which an installment of rent is payable is hereinafter called a "RENT PAYMENT DATE". As to each Schedule, the first Rent Payment Date shall be the Rent Payment Date set forth therein, with the succeeding Rent Payment Dates as set forth therein. In addition, if applicable, Lessee shall pay interim rent for the period between the Commencement Date and the first Rent Payment Date, based on a 30-day month and the number of days between the Commencement Date and the first Rent Payment Date. Lessee shall also pay to National City, on demand, a late payment charge of 5% of each installment of rent and any other amount owing hereunder which is not paid when due. Upon the expiration or earlier termination of the term of lease of each item of Equipment leased hereunder, Lessee shall at its expense return such item to National City at such location as National City may designate, in the condition required to be maintained by Section 7 hereof, 2 provided that Lessee may elect an alternative disposition of the Equipment pursuant to Section 20 hereof. 3. NO WARRANTIES. Lessee acknowledges that: National City is not the manufacturer of the Equipment nor the manufacturer's agent nor a dealer therein; and NATIONAL CITY HAS NOT MADE AND DOES NOT MAKE ANY REPRESENTATION OR WARRANTY WHATSOEVER, EITHER EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY, FITNESS, CONDITION, DESIGN OR OPERATION OF THE EQUIPMENT, ITS FITNESS FOR A PARTICULAR PURPOSE, THE QUALITY OR CAPACITY OF THE MATERIALS IN THE EQUIPMENT OR WORKMANSHIP IN THE EQUIPMENT, NOR ANY OTHER REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER. Lessee confirms that it has made (or will make) the selection of each item of Equipment on the basis of its own judgment and expressly disclaims reliance upon any statements, representations or warranties made by National City. National City shall not be liable to Lessee for any matter relating to the ordering, manufacture, purchase, delivery, assembly, installation, testing, operation or expense of any kind caused by the Equipment. National city shall not be liable for any consequential damages as that term is used in UCC Section 2-719(3). National City hereby assigns to Lessee all rights which National City has or may acquire against any manufacturer, supplier, or contractor with respect to any warranty and representation relating to the Equipment leased hereunder. Lessee acknowledges that Lessee has reviewed and approved the Purchase Order, Supply Contract or Purchase Agreement covering the Equipment purchase from the vendor or Supplier thereof for lease to Lessee. 4. EQUIPMENT TO REMAIN PERSONAL PROPERTY; LOCATION; IDENTIFICATION; INSPECTION. Lessee represents that the Equipment shall be and at all times remain separately identifiable personal property. Lessee shall, at its expense, take such action as may be necessary to prevent any third party from acquiring any right to or interest in the Equipment by virtue of the Equipment being deemed to be real property or a part of other personal property and shall indemnify National City against any loss which it may sustain by reason of Lessee's failure to do so. Except for maintenance or repairs permitted or required in Section 7 hereof, the Equipment may not be removed from the location specified in the Schedule pertaining thereto without National City's prior written consent and Lessee's provision of reasonable documentation as requested by National City. If requested by National City, Lessee shall attach to and maintain on the Equipment a conspicuous plate or marking disclosing ownership therein. National City or its representatives may, at reasonable times, inspect the Equipment. 5. TAXES; INDEMNITY. Lessee agrees to pay, and to indemnify and hold National City harmless from, all license fees, assessments, and sales, use, property, excise and other taxes and charges (other than federal income taxes and taxes imposed by any other jurisdiction which are based on, or measured by, the net income of National City for reasons other than the ownership or leasing of the Equipment in that jurisdiction) imposed upon or with respect to (a) the Equipment or any part thereof arising out of or in connection with the shipment of Equipment or the possession, ownership, use or operation thereof, or (b) this Agreement or the consummation of the transactions herein contemplated. National City shall prepare and file any and all returns required in connection with the obligations which Lessee has assumed under this section, except such filings as National City may, at its option, direct Lessee to make. Each party shall upon request furnish the other a copy of any such filing made or governmental invoice received covering such obligations. Lessee further agrees to assume liability for, and to indemnify and hold National City harmless against, all claims, costs, expenses, damages and liabilities arising from or pertaining to the manufacture, assembly, installation, ownership, use, possession and operation of the Equipment, including, without limitation, latent and other defects, whether or not discoverable by Lessee or any other person, 2 3 any expense, liability or loss directly or indirectly related to or arising out of any injury to any person or tangible or intangible property, whether arising from negligence or under any theory of strict or absolute liability or any other cause, or any claim for patent or copyright infringement, together with all legal fees and expenses reasonably incurred by National City in connection with any liability asserted against it, whether groundless or otherwise. Lessee shall, and shall cause all other persons, if any, operating or in possession of the Equipment, to comply at all times and in all respects with all laws and regulations (whether federal, state, or local and whether statutory, administrative, judicial, or other) and with every lawful governmental order (whether administrative or judicial) pertaining to the operation and use of the Equipment and, without limiting the generality of the foregoing, will, and will cause each such person to, (i) operate, and use the Equipment in compliance with all Environmental Laws and handle all Hazardous Materials in compliance therewith, and (ii) comply with and keep in full effect each approval, certification, license, permit, or other authorization required by any Environmental Law for the conduct of any activity upon or within the Equipment, and will indemnify National City from and against any and all liabilities and any and all fees, costs and expenses arising out of use of the Equipment. "ENVIRONMENTAL LAW" means the Clean Air Act (42 USC Section 7401 et seq.), Comprehensive Environmental Response, Compensation, and Liability Act (42 USC Section 9601 et seq.), the Hazardous Material Transportation Act (49 USC Section 1801 et seq.), the Resource Conservation and Recovery Act (42 USC Section 6901 et seq.), the Federal Water Pollution Control Act (33 USC Section 1251 et seq.), the Toxic Substances Control Act (15 USC Section 2601 et seq.) and the Occupational Safety and Health Act (29 USC Section 651 et seq.), as such laws have been or hereafter may be amended, and the regulations promulgated pursuant thereto, and any and all similar present or future federal, state, or local laws and the regulations promulgated pursuant thereto and "HAZARDOUS MATERIAL" means any chemical, material, or substance which could be detrimental to animal health, human health, vegetation, the environment or the Equipment which is, or the disposal, manufacture, release, storage or transport of which is, or exposure to which is, prohibited, restricted, or otherwise regulated under any Environmental Law; The agreements and indemnities contained in this section shall survive the expiration or earlier termination of this Agreement. 6. ASSIGNMENTS: SUBLETTING; ENCUMBRANCES. (a) LESSEE WILL NOT WITHOUT NATIONAL CITY'S PRIOR WRITTEN CONSENT, ASSIGN OR TRANSFER THIS LEASE OR ANY INTEREST HEREIN, OR SUBLEASE OR RELINQUISH POSSESSION OF, OR CREATE OR SUFFER TO EXIST ANY LIEN, MORTGAGE, SECURITY INTEREST OR ENCUMBRANCE UPON THE EQUIPMENT. (b) National City may assign or transfer this Lease or National City's interest in the Equipment without notice to Lessee. Any assignee of National City shall have all of the rights, but none of the obligations, of National City under this Lease and Lessee agrees that it will not assert against any assignee of National City any defense, counterclaim, or offset that Lessee may have against National City. Lessee acknowledges that any assignment or transfer by National City shall not materially change Lessee's duties or obligations under this Lease nor materially increase the burdens or risks imposed on Lessee. 3 4 7. USE: REPAIRS; ETC. Lessee will cause the Equipment to be operated in accordance with the manufacturer's or supplier's instructions or manuals by competent and duly qualified personnel only and in compliance with all laws and regulations and the insurance policies required to be maintained hereunder. Lessee shall, at its own cost and expense, enter into and keep in force during the term hereof a maintenance agreement with the manufacturer of the Equipment or such other maintenance vendor as may be approved in writing, by National City, to maintain, service and repair the Equipment so as to keep it in as good operating condition as it was when it first became subject to this Lease, ordinary wear and tear excepted. National City shall have the right to approve such maintenance agreement (which approval shall not be unreasonably withheld) and shall be furnished with an executed copy thereof. Lessee shall, at its own cost and expense, to the extent not covered by the aforesaid maintenance agreement, maintain the Equipment in good operating condition. Replacement parts shall be free and clear of any mortgage, lien, charge, or encumbrance (and title thereto shall vest in National City immediately upon installation, attachment or incorporation of the same in, on or into such Unit). Upon termination of this Lease, at the expiration of the Lease Term or otherwise, the Equipment shall be returned to National City in as good operating condition as when it became subject to this Lease, ordinary wear and tear excepted, and in such condition as to be acceptable to the manufacturer for regular maintenance without any remedial maintenance. Lessee will not alter or add to the Equipment without National City's prior written consent. Lessee will remove any attachments, alterations or accessories and return the Equipment to its original condition, normal wear and tear excepted, at the termination of this Lease if National City shall so demand. In the absence of such demand, all attachments, alterations or accessories shall become part of the Equipment at the time of their attachment thereto. 8. LOSS: DAMAGE. If National City determines that any Equipment is lost, stolen, destroyed, damaged beyond repair or rendered permanently unfit for normal use for any reason, or in the event of any condemnation, confiscation, seizure, or requisition of title to or use of such Equipment (a "Casualty Occurrence"), Lessee will, at the option of National City, either (a) replace the same with Equipment in good repair or (b) promptly pay to National City an amount equal to the Rent in respect of the Equipment suffering a Casualty Occurrence due and payable on the first of the month following the date of the Casualty Occurrence, plus a sum equal to the Stipulated Loss Value of such Equipment determined as of the Rent Payment Date next following the date of the Casualty Occurrence as set out in the appropriate Schedule, less any physical damage insurance proceeds paid to National City as a result of said Casualty Occurrence. As of the Rent Payment Date next following the Casualty Occurrence, the Rent for such Equipment shall cease to accrue and the term of this Lease as to such Equipment shall terminate and (except in the case of loss, theft or complete destruction of the Equipment) National City shall be entitled to recover possession of the Equipment. National City hereby appoints Lessee its agent to dispose of any Equipment suffering a Casualty Occurrence at the best price obtainable on an "AS IS, WHERE IS" basis without recourse or warranties of any kind. Provided that National City has been paid the Stipulated Loss Value and all Rent and other sums due and owing as to such Equipment, Lessee shall be entitled to the net proceeds of such sale to the extent such proceeds do not exceed the Stipulated Loss Value of such Equipment. Any excess shall be paid to National City . 9. INSURANCE. Lessee shall maintain at all times on the Equipment, at Lessee's expense, property damage, direct damage and public liability insurance in such amounts, against such risks and in such form and with such insurers as shall be satisfactory to National City. The required insurance shall be specified in the applicable Schedule; provided, that the amount of direct damage insurance shall not on any date be less than the full replacement value of the Equipment as of 4 5 such date. Each public liability insurance policy will name National City as additional named insured as its interests may appear and each damage insurance policy will name National City as loss payee, and each insurance policy shall contain a clause requiring the insurer to give to National City at least 30-days prior written notice of any alteration of the terms or cancellation of such policy. Lessee shall furnish to National City a certificate or other evidence satisfactory to National City that such insurance coverage is in effect, provided, however, that National City shall be under no duty to ascertain as to the existence or adequacy of such insurance. National City makes no representation that the minimum insurance coverage requirements in a Schedule will be adequate at all times to satisfy Lessee's obligations hereunder. Lessee has the responsibility to provide additional insurance coverage to maintain coverage hereunder in an amount adequate to fulfill its obligation hereunder and is consistent with insurance coverage for similar risks in Lessee's industry or line of business. 10. NONCANCELLABLE AGREEMENT: LESSEE'S OBLIGATIONS UNCONDITIONAL. This Agreement cannot be canceled or terminated except as expressly provided herein. Lessee agrees that its obligation to pay all rent and other amounts payable hereunder and to perform its duties with respect hereto shall be absolute and unconditional under any and all circumstances, including, without limitation, the following: (a) any setoff, counterclaim, recoupment, defense or other right which Lessee may have against National City, the manufacturer, or supplier of any Equipment or anyone else for any reason whatsoever; (b) any defect in the condition, design, title, operation or fitness for use, or any damage to or loss of any Equipment; (c) any insolvency, reorganization or similar proceedings by or against Lessee; or (d) any other event or circumstances whatsoever, whether or not similar to the foregoing. Each rent or other payment made by Lessee hereunder shall be final and Lessee will not seek to recover all or any part of such payment from National City for any reason whatsoever. 11. EVENTS OF DEFAULT AND REMEDIES. An Event of Default shall occur hereunder if Lessee: (a) shall fail to make any payment of rent or other amount owing hereunder when due and such failure shall continue for a period of 10 days; (b) shall fail to perform or observe any other covenant, agreement or condition hereunder within 30 days of written notice thereof being given by National City to Lessee, or if more than 30 days are reasonably required, Lessee fails to commence to diligently perform such obligations within such 30 days; (c) shall make any representation or warranty to National City herein or in any document or certificate furnished National City in connection herewith which shall prove to be incorrect at any time; (d) shall become insolvent or make an assignment for the benefit of creditors or consent to the appointment of a trustee or receiver, (e) after 60 days if a trustee or receiver shall be appointed for Lessee or for a substantial part of its property or for the Equipment, or reorganization, arrangement, insolvency, dissolution or liquidation proceedings shall be instituted by or against Lessee and such appointment or proceedings are not terminated within such time; 5 6 (f) shall suffer an adverse material change in its financial condition from the date hereof, and as a result thereof National City deems itself or any of its Equipment to be insecure; or (g) shall be in default under any other agreement at any time executed with National City or any affiliate or subsidiary of National City Corporation then National City may declare this Agreement to be in default and may do one or more of the following with respect to any or all of the Equipment as National City in its sole discretion may elect, to the extent permitted by, and subject to compliance with any mandatory requirements of applicable law then in effect: (i) terminate this Lease effective immediately; or (ii) demand that Lessee, and Lessee shall at its expense upon such demand, return the Equipment promptly to National City in the manner and condition required by and otherwise in accordance with the provisions of Section 2 hereof, as if the Equipment were being returned at the expiration of its term of lease hereunder, or National City, at its option, may enter upon the premises where the Equipment is located and take possession of and remove the same by summary proceedings or otherwise, all without liability to Lessee for damage to property or otherwise; or (iii) take possession of any or all Equipment and remove the same without liability for injuries suffered through or loss caused by such repossession. LESSEE WAIVES ANY AND ALL RIGHTS TO NOTICE AND JUDICIAL HEARING WITH RESPECT TO THE REPOSSESSION OR ATTACHMENT OF THE EQUIPMENT BY NATIONAL CITY IN THE EVENT OF DEFAULT HEREUNDER BY LESSEE. In the event National City proceeds pursuant to this subsection (iii), National City may sell any or all Equipment at public or private sale as is commercially reasonable given the existing conditions on an "AS IS, WHERE IS" basis without recourse or warranties of any kind, or otherwise hold, use, operate, or keep idle such Equipment, as National City in its sole discretion determines is commercially reasonable free and clear of all rights of Lessee; or (iv) whether or not National City has exercised any other right hereunder, by written notice to Lessee, cause Lessee to pay National City (as liquidated damages for loss of a bargain and not as a penalty) on the date specified in such notice an amount equal to the Rent due and payable on the first day of the calendar month following the date of the notice of Lease termination plus a sum equal to the appropriate Stipulated Loss Value determined as of the Rent Payment Date next following the date of the notice of Lease termination as set out in the applicable Schedule or; (v) National City may exercise any other right or remedy which may be available to it under applicable law or proceed by appropriate court action to enforce the terms hereof or to recover damages for the breach hereof. In addition, Lessee shall pay National City all costs and expenses incurred by National City as a result of Lessee's default hereunder or the termination hereof, including, without limitation, reasonable attorney's fees and costs arising out of repossession and disposal of the Equipment. Provided Lessee has previously paid to National City the sum of the Stipulated Loss Value, Rent due and owing and other costs and expenses incurred pursuant hereto, Lessee shall be entitled to the net proceeds of any such sale, disposition or re-lease of the Equipment to the extent they do not exceed the Stipulated Loss Value. Any excess shall be retained by National City. To the extent the Equipment is re-leased by National City, Lessee shall be credited the present value of 6 7 the lease rental stream at the discount rate of National City Prime as of the date the re-lease is agreed to between the parties. Furthermore, to the extent the parties to this Lease need to determine the present value of any moneys due under the Lease, the parties agree that the discount rate shall be National City Prime. "NATIONAL CITY PRIME" means the fluctating rate of interest which is publicly announced from time to time by National City Bank, Clevalnd Ohio, at its principal place of business as being its "prime rate" or "base rate" thereafter in effect, with each change in the Prime Rate automatically, immediately and without notice changing the fluctuating interest rate thereafter applicable hereunder. The Prime Rate is not necessarily the lowest rate of interest then available from National City Bank on fluctating rate loans. In addition, Lessee shall continue to be liable for all indemnities under this Lease and for all reasonable attorney fees and other costs and expenses resulting from the termination hereof and/or the exercise of National City's remedies, including placing any Equipment in the condition required by Section 7 hereof. Except as expressly provided above, no remedy referred to in this section is exclusive, but each shall be cumulative and in addition to any other remedy referred to herein or otherwise available to National City at law or equity; and the exercise or beginning of exercise by National City or any one or more of such remedies shall not preclude the simultaneous or later exercise by National City of any other remedies. No express or implied waiver by National City of an Event of Default shall constitute a waiver of any other subsequent Event of Default. To the extent permitted by law, Lessee waives any rights now or hereafter conferred by statute or otherwise which may require National City to sell, re-lease or otherwise use the Equipment in mitigation of National City's damages or which may otherwise limit or modify any of National City's rights or remedies. 12. INDEMNIFICATION FOR TAX BENEFITS. (a) National City, as the owner of the Equipment, shall be entitled to such deductions, credits and other benefits as are provided by the Internal Revenue Code of 1986, as amended, (hereinafter called the "CODE") to an owner of property. (b) Lessee agrees that neither it nor any entity controlled by it, in control of it, or under common control with it, directly or indirectly, will at any time take any action or file any returns or other documents inconsistent with the foregoing and that each of such corporations will file such returns, take such action and execute such documents as may be reasonable and necessary to facilitate accomplishment of the intent thereof. Lessee agrees to copy or make available for inspection and copying by National City such records as will enable National City to determine whether it is entitled to the benefit of any amortization or depreciation deduction which may be available from time to time with respect to the Equipment. (c) If National City, under any circumstances or for any reason whatsoever, except for acts of National City or future changes in the Code, shall lose, shall not have or shall lose the right to claim, or there shall be disallowed or recaptured all or any portion of the federal tax depreciation deductions with respect to any item of Equipment based on depreciation or National City's full cost of such item of Equipment and computed on the basis of a method of depreciation provided by the Code as National City in its complete discretion may select, then Lessee agrees to pay National City upon demand an amount which, after deduction of all taxes required to be paid by National City in respect to the receipt thereof under the laws of any federal, state or local government or taxing authority of the United States or of any taxing authority or governmental authority of any foreign country, shall be equal to the sum of 7 8 (i) an amount equal to the additional income taxes paid or payable by National City in consequence of the failure to obtain the benefit of a depreciation deduction, and (ii) any interest and/or penalty which may be assessed in connection with any of the foregoing. (d) The provisions of this Section 12 shall survive the expiration or earlier termination of this Agreement. 13. NATIONAL CITY'S RIGHTS TO PERFORM. If Lessee fails to make any payment required to be made hereunder or fails to comply with any other agreements contained herein, National City may make such payment or comply with such agreement, and the amount of such payment and the reasonable expenses of National City incurred in connection with such payment or compliance, shall be payable by Lessee on demand. 14. FURTHER ASSURANCES. Lessee will, at its expense, promptly and duly execute and deliver to National City such further documents and assurances and take such further action as National City may from time to time request in order to more effectively carry out the intent and purpose of this Agreement so as to establish and protect the rights, interest and remedies intended to be created in favor of National City hereunder, including, without limitation, the execution and filing of financing statements and continuation statements with respect to the Equipment and this Agreement. Lessee authorizes National City to effect any such filing (including the filing of any financing statements without the signature of Lessee) and National City's expenses with respect thereto shall be payable by Lessee on demand. 15. NOTICES. All notices and other communications required to be given to any party hereunder shall be in writing and delivered or mailed by regular mail to such party at the address set forth above or at such other address as it may designate to other parties. 16. MISCELLANEOUS. Any provision of this Agreement which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof, and any such unenforceability in any jurisdiction shall not render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, Lessee waives (a) any provision of law which renders any provision hereof unenforceable in any respect; (b) any and all rights conferred upon a Lessee by Article 2A of the UCC, including but not limited to Lessee's rights to (i) cancel this Agreement; (ii) repudiate this Agreement; (iii) revoke acceptance of the Equipment; (iv) recover damages from National City for any breaches of warranty or for any other reason; (v) claim a security interest in the Equipment in Lessee's possession or control for any reason; 8 9 (vi) deduct all or any part of any claimed damages resulting from National City's default, if any, under this Lease; (Vii) accept partial delivery of this Equipment; (viii) recover any general, special, incidental or consequential damages, for any reason whatsoever; (ix) specific performance, replevin, detinue, sequestration, claim and delivery of the like for any Equipment identified to the Lease, or any substitutions or replacements thereof; and (c) any rights now or hereafter conferred by statute or otherwise which may require National City to sell, lease or otherwise use any Equipment in mitigation of Lessee's damages. Provided the Lessee is not in default under any provision of this Lease, National City shall not interfere with Lessee's quiet enjoyment of the use of the Equipment pursuant to the terms of this Agreement and National City shall defend and protect such quiet enjoyment against all persons claiming by, through or under National City. This Agreement and the provisions hereof shall inure to the benefit of National City and its successors and assigns, and shall be binding on and inure to the benefit of Lessee and its successors and assigns. 17. CONDITIONS PRECEDENT. The obligation of National City contained in Section 1 hereof shall be subject to the following conditions precedent. (a) there shall have occurred no material adverse change in the business or the financial condition of Lessee from the date hereof until the Commencement Date of any Schedule; (b) Lessee shall have furnished National City with a certificate or other evidence satisfactory to National City that insurance coverage as required by Section 9 hereof is in effect as to the item of Equipment desired to be leased; (c) upon the request of National City, Lessee shall furnish National City opinions of counsel in form and substance acceptable to National City; (d) unless specifically waived by National City, Lessee shall have furnished National City waivers, in form and substance acceptable to National City, of all rights in or to Equipment of any landlord or mortgagee of any real property upon which the Equipment is or is to be situated; and (e) all other instruments and legal and corporate proceedings in connection with the transactions contemplated herein shall be satisfactory in form and substance to National City, and counsel to National City shall have received copies of all documents which it may have requested in connection therewith. If any of the above conditions is not satisfied at the time Lessee submits any Schedule, National City shall have no obligation under this Agreement to lease the items of personal property covered thereby to Lessee. 18. FINANCIALS. Lessee agrees that for so long as any item of Equipment shall be leased under this Agreement, Lessee will deliver or cause to be delivered to National City (a) as soon as practicable, and in any event within sixty (60) days after the end of each quarterly period (othe than the fourth quarterly period) for each fiscal year of leesee, the 9 10 balance sheet of Lessee as of the end of such quarterly period together with the related statements of income and expenses for such quarterly period all in reasonable detail prepared in accordance with generally accepted accounting principles consistently applied throughout the period involved and certified by Lessee's chief financial officer; and (b) as soon as practicable, and in any event within one hundred twenty (120) days after the close of each fiscal year of Lessee, the audited balance sheet of Lessee as of the end of such fiscal year together with related statements of income and surplus for such fiscal year all in reasonable detail, prepared in accordance with generally accepted accounting principles consistently applied throughout the period involved and certified by an independent pubic accountant acceptable to National City. 19. REPRESENTATION, WARRANTIES AND COVENANTS. Lessee represents, warrants and covenants that (a) if Lessee is a corporation, Lessee is duly organized and validly existing in good standing under the laws of the state of its incorporation and is duly qualified and licensed to do business as a foreign corporation in good standing in those jurisdictions where such qualifications are necessary to authorize Lessee to carry on its present business and operations and to own its properties or to perform its obligations hereunder; (b) if Lessee is a partnership, Lessee is duly organized and validly existing under the partnership laws of its state of domicile and is duly authorized in any foreign jurisdiction where such qualification is necessary to authorize Lessee to carry on it present business and operations and to own its properties and to perform its obligations hereunder; (c) if Lessee is a limited liability company, Lessee is duly organized and validly existing under the laws of its state of domicile and is duly authorized in any foreign jurisdiction where such qualification is necessary to authorize Lessee to carry on its present business and operations and to own its properties and to perform its obligations hereunder; (d) Lessee has full power, authority and legal right to execute, deliver and carry out as Lessee the terms and provisions of this Agreement and any other documents in connection with this lease transaction; (e) if Lessee is a corporation, Lessee's execution, delivery and performance of this Agreement and the other documents and agreements referred to herein, and the performance of its obligations under this Agreement have all been authorized by all necessary corporate action, do not require the approval or consent of stockholders, or of any trustee or holders of any indebtedness or obligation of Lessee and will not violate any law, governmental rule, regulation or order binding upon Lessee or any provision of any indenture, mortgage, contract or other agreement to which Lessee is a party or by which it is bound or to which it is subject, and will not violate any provision of the Certificate of Incorporation, By-laws or any preferred stock agreement of Lessee; (f) if Lessee is a partnership, Lessee's execution, delivery and performance of this Agreement and the other documents and agreements referred to herein, and the performance of its obligations under this Agreement have all been authorized by all necessary partnership actions; (9) if Lessee is a limited liability company, Lessee's execution, delivery and performance of this Agreement and the other documents and agreements referred to herein, and the performance of its obligations under this Agreement have all been authorized by all necessary member action; 10 11 (h) there are no pending or threatened investigations, actions or proceedings before any court or administrative agency or other tribunal body, which seek to question or set aside any of the transactions contemplated by this Agreement, or which, if adversely determined, would materially affect the condition, business or operation of Lessee; (i) Lessee is not in default in any material manner in the payment or performance of any of its obligations or in the performance of any contract, agreement or other instrument to which it is a party or by which it or any of its assets may be bound; (j) the balance sheet of Lessee as of the end of its most recent fiscal year and the related profit and loss statement of Lessee for the fiscal year ended on said date, including the related schedules and notes, together with the report of an independent certified public accountant, heretofore delivered to National City, are all true and correct and present fairly (x) the financial position of Lessee as at the date of said balance sheet and (y) the results of the operations of Lessee for said fiscal year; (k) all proceedings required to be taken to authorize the lease of the Equipment from National City and to protect National City's interest in such Equipment, free and clear of all liens and encumbrances whatsoever, have been taken; (l) Lessee has no significant liabilities (contingent or otherwise) which are not disclosed by or reserved against the financial statements referred to in (j) above; (m) all the financial statements referred to in (j) above have been prepared in accordance with generally accepted accounting principles and practices applied on a basis consistently maintained throughout the period involved; (n) there has been no change which would have a material adverse effect on the business or financial condition of Lessee from that set forth in the balance sheet referred to in (j) above; (o) no authorization, consent, approval, license, exemption of or filing or registration with court, governmental unit or department, commission, board, bureau, agency, instrumentality or the like is required or necessary for the valid execution and delivery of the Agreement, any bill of sale and the other documents and agreements referred to herein; (p) this Master Lease Agreement, the Schedules and any accompanying documents, having been duly authorized, executed and delivered to National City, constitute legal, valid and binding obligations of Lessee, enforceable against Lessee in accordance with the terms thereof except as such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditor's rights generally; and (q) the Equipment is personal property and neither real property nor a fixture; 20. OPTIONS. National City and Lessee hereby agree that so long as no Event of Default shall have occurred and be continuing Lessee may have such options as are set forth in the applicable Schedule. 11 12 21. CHOICE OF LAW. The rights and liabilities of the parties under this Agreement and each Schedule shall be interpreted, enforced and governed in all respects by the laws of the Commonwealth of Kentucky. Lessee hereby consents and subjects itself to the jurisdiction of every local, state and federal court within the Commonwealth of Kentucky, agrees that except as otherwise required by law, Lessee shall never file or maintain any action or proceeding in connection with this Agreement or any Schedule in any court outside the Commonwealth of Kentucky, waives personal service of any and all process in connection therewith and consents to the service of such process upon Lessee in the manner provided in the Agreement for giving notice. LESSEE HEREBY KNOWINGLY AND VOLUNTARILY WAIVES JURY TRIAL IN RESPECT OF ANY ACTION OR PROCEEDING IN CONNECTION WITH THIS AGREEMENT OR ANY SCHEDULE. 22. ATTORNEY'S FEES. If National City commences any action to enforce or define any right or obligation of Lessee under this Agreement or any Schedule, Lessee shall pay to National City all reasonable attorney's fees and all other legal expenses (including for expert and other witnesses) for preparation, negotiation, filing, maintenance, defense, settlement and appeal of litigation paid or incurred by National City. 23. HEADINGS. The headings for the various sections of this Agreement are intended solely for convenience of reference and are not intended nor shall they be used to construe, explain, modify or place any meaning upon any provision hereof. 24. MODIFICATION. Neither this Agreement nor any Schedule can be modified or amended except by written agreement signed and currently dated by both signatories hereto. Lessee's Initials:___________. 25. COUNTERPARTS; ORIGINALS. The parties may execute this Agreement and any Schedule in any number of counterparts. All such counterparts of this Agreement shall constitute one Agreement. One copy of the Agreement and each Schedule shall be designated as the "ORIGINAL" and all other copies shall be "DUPLICATES". Only the "ORIGINAL" shall constitute chattel paper. 26. LESSEE'S ACKNOWLEDGMENT OF NO EXTRINSIC PROMISES. LESSEE AGREES THAT THERE HAVE BEEN NO REPRESENTATIONS, AGREEMENTS, STATEMENTS, PROMISE, UNDERSTANDINGS OR INDUCEMENTS (COLLECTIVELY IN THIS SECTION "PROMISES") MADE TO LESSEE BY OR ON BEHALF OF NATIONAL CITY OR ANY THIRD PERSON IN CONNECTION WITH THIS AGREEMENT, ANY SCHEDULE, ANY EQUIPMENT LEASED HEREUNDER, OR ANY PRESENT OR FUTURE TRANSACTION OF WHICH THIS AGREEMENT AND/OR ANY SCHEDULE IS OR BECOMES A PART OTHER THAN THOSE PROMISES, IF ANY, EXPRESSLY IN WORDS MADE IN THIS AGREEMENT AND EACH SCHEDULE. 27. ENTIRE AGREEMENT. THIS AGREEMENT IS AN INTEGRATION AND EACH SCHEDULE IS AN INTEGRATION AND RESPECTIVELY THE ENTIRE AGREEMENT BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER OF EACH TRANSACTION EMBRACED THEREBY. ALL AGREEMENTS, REPRESENTATIONS, PROMISES, INDUCEMENTS, STATEMENTS AND UNDERSTANDINGS, PRIOR TO AND CONTEMPORANEOUS WITH THIS AGREEMENT AND PRIOR TO AND CONTEMPORANEOUS WITH EACH SCHEDULE, WRITTEN OR ORAL, BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER OF EACH SUCH TRANSACTION, IF ANY, ARE AND EACH IS SUPERSEDED BY THIS AGREEMENT AND BY EACH SCHEDULE AS IT IS EXECUTED. 12 13 Executed as of the 30th day of December, 1996. By execution hereof, the signer hereby certifies that he/she has read this Agreement and that he/she is duly authorized to execute this Master Equipment Lease Agreement on behalf of the Lessee. WABASH NATIONAL FINANCE CORPORATION (an Indiana corporation) By: [signature] ------------------------------ Title: Vice President ----------------------------- NATIONAL CITY LEASING CORPORATION By: [signature] ------------------------------ Title: Vice President ----------------------------- 13 EX-21 13 LIST OF SIGNIFICANT SUBSIDIARIES 1 Exhibit 21.00 SUBSIDIARIES OF THE COMPANY AND OWNERSHIP OF SUBSIDIARY STOCK Name of State of % of shares Subsidiary Incorporation Owned by the Company ----------- ------------- -------------------- Wabash National Finance Corporation Indiana 100% Continental Transit Corporation Indiana 100% EX-23.01 14 CONSENT OF AURTHOR ANDERSON 1 Exhibit 23.01 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into the Company's previously filed Registration Statement File No. 33-49256 and File No. 33-65318. /s/ Arthur Andersen LLP --------------------------- ARTHUR ANDERSEN LLP Indianapolis, Indiana February 10, 1997 EX-27 15 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 5,514 0 72,852 1,686 140,015 235,910 105,035 23,253 440,071 87,198 151,307 0 0 189 178,179 440,071 631,492 631,492 602,629 602,629 13,359 0 10,257 6,035 2,397 3,638 0 0 0 3,638 0.19 0.19
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