Filed Pursuant to Rule 424(b)(3)
Registration No. 333-112097
[TEREX LOGO]
OFFER TO EXCHANGE
all outstanding
7-3/8% Senior Subordinated Notes due 2014
($300,000,000 principal amount outstanding)
for
7-3/8% Senior Subordinated Notes due 2014
Which Have Been Registered Under the Securities Act of 1933
of
TEREX CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON MAY 17, 2004, UNLESS EXTENDED
We are offering you the opportunity to exchange your 7-3/8% Senior Subordinated
Notes due 2014 for our new 7-3/8% Senior Subordinated Notes due 2014 that are
registered under the Securities Act of 1933 in the exchange offer. Your old
notes are not registered under the Securities Act of 1933. Exchanging your old
notes for new notes will provide you with notes that may be easier to sell and
transfer.
Material terms of the exchange offer are:
o EXPIRATION. The exchange offer will expire at 5:00 p.m., New York City
time, on May 17, 2004, unless we extend it.
o EXCHANGE. We will exchange all outstanding old notes that are validly
tendered and not validly withdrawn before the exchange offer expires.
o TERMS OF THE NOTES. The terms of the new notes are substantially identical
to the old notes, except that the new notes are registered under the
Securities Act of 1933. Certain transfer restrictions and registration
rights relating to the old notes do not apply to the new notes.
o REPRESENTATIONS OF HOLDERS. You will be required to make various
representations including that (1) any new notes received by you will be
acquired in the ordinary course of business, (2) you are not participating
in the distribution of the new notes, (3) you are not an affiliate of ours,
and (4) you are not a broker-dealer, and if you are a broker-dealer that
you will receive the new notes for your own account, you will deliver a
prospectus on resale of your new notes and that you acquired your old notes
as a result of market making activities or other trading activities.
o WITHDRAWAL RIGHTS. You may withdraw tenders of old notes at any time before
the exchange offer expires.
o TAX CONSEQUENCES. We believe that the exchange of notes will not be a
taxable event for U. S. federal income tax purposes, but you should see
"Certain United States Federal Income Tax Consequences" on page 61 for more
information.
o USE OF PROCEEDS. We will not receive any proceeds from the exchange offer.
o TRADING. There is no existing market for the new notes and we will not
apply to list them on any securities exchange.
See "Risk Factors" beginning on page 8 for a discussion of certain risks that
should be considered by holders who tender their old notes in connection with
this exchange offer.
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy of adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is April 16, 2004
TABLE OF CONTENTS
PROSPECTUS SUMMARY..................1 CERTAIN UNITED STATES FEDERAL
RISK FACTORS .......................8 INCOME TAX CONSEQUENCES ..........61
FORWARD-LOOKING STATEMENTS ........13 PLAN OF DISTRIBUTION .............62
THE EXCHANGE OFFER ................14 LEGAL MATTERS .....................62
RATIOS OF EARNINGS TO FIXED EXPERTS...........................62
CHARGES ..........................21 WHERE YOU CAN FIND MORE
USE OF PROCEEDS ...................21 INFORMATION ......................62
CAPITALIZATION ....................22 INCORPORATION OF DOCUMENTS BY
DESCRIPTION OF THE NEW NOTES ......23 REFERENCE ........................63
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and may not contain all of the information that you
should consider before investing in the notes. You should read the entire
prospectus carefully, including the "Risk Factors" section and the financial
statements and notes to these statements contained or incorporated by reference
in this prospectus or in our filings with the Securities and Exchange
Commission. All references in this prospectus to "we," "us," "our," "Terex" or
the "Company" mean Terex Corporation and its subsidiaries, unless indicated
otherwise.
The Company
We are a diversified global manufacturer of a broad range of equipment
primarily for the construction, infrastructure and surface mining industries. We
are building a growing franchise under the Terex brand name. We remain focused
on our mission of delivering products that are reliable and cost effective and
producing equipment that improves our customers' return on invested capital. Our
products are manufactured at plants in the United States, Canada, Europe,
Australia, Asia and South America, and are sold primarily through a worldwide
distribution network serving the global construction, infrastructure and surface
mining markets.
We operate in five business segments: (i) Terex Construction; (ii) Terex
Cranes; (iii) Terex Roadbuilding, Utility Products and Other; (iv) Terex Aerial
Work Platforms; and (v) Terex Mining.
Our principal executive offices are located at 500 Post Road East,
Westport, Connecticut 06880, and our telephone number is (203) 222-7170.
Terex Construction
The Terex Construction segment designs, manufactures and markets three
primary categories of equipment and their related components and replacement
parts: heavy construction equipment (including off-highway trucks and scrapers),
compact equipment (including loader backhoes, compaction equipment, mini and
midi excavators, loading machines, site dumpers, telehandlers and wheel
loaders); and mobile crushing and screening equipment (including jaw crushers,
cone crushers, washing screens and trommels). These products are primarily used
by construction, logging, mining, industrial and government customers in
construction and infrastructure projects and supplying coal, minerals, sand and
gravel. Terex Construction products are currently marketed principally under the
following brand names: Terex, Atlas, Benford, Fermec, Finlay, Fuchs, Pegson,
Powerscreen, Schaeff and TerexLift.
Terex Cranes
The Terex Cranes segment designs, manufactures and markets mobile
telescopic cranes, tower cranes, lattice boom crawler cranes, truck mounted
cranes (boom trucks) and telescopic container stackers, as well as their related
replacement parts and components. These products are used primarily for
construction, repair and maintenance of infrastructure, building and
manufacturing facilities. Currently, Terex Cranes products are marketed
principally under the following brand names: Terex, American, Bendini, Comedil,
Demag, Franna, Lorain, P&H, Peiner, PPM and RO-Stinger.
Terex Roadbuilding, Utility Products and Other
The Terex Roadbuilding, Utility Products and Other segment designs,
manufactures and markets fixed installation crushing and screening equipment
(including crushers, impactors, screens and feeders), asphalt and concrete
equipment (including pavers, plants, mixers, reclaimers, stabilizers and
profilers), utility equipment (including digger derricks, aerial devices and
cable placers), light construction equipment (including light towers, trowels,
power buggies, generators and arrow boards), construction trailers and on/off
road heavy-duty vehicles, as well as related components and replacement parts.
These products are used primarily by government, utility and
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construction customers to build roads, maintain utility lines, trim trees and
for commercial and military applications. These products are currently marketed
principally under the following brand names: Terex, Advance, American Truck
Company, Amida, ATC, Bartell, Benford, Bid-Well, Canica, Cedarapids,
Cedarapids/Standard Havens, CMI Johnson Ross, CMI Terex, CMI-Cifali, Grayhound,
Hi-Ranger, Jaques, Load King, Morrison, Re-Tech, Royer, Simplicity, Tatra, Terex
Power, Terex Recycling and Terex Telelect.
We also own much of the North American distribution channel for our utility
products group through the distributors Terex Utilities South and Terex
Utilities West. We also own 40% of Intercontinental Equipment Company, another
distributor of utility products. We also operate a fleet of rental utility
products under the name Terex Utilities Rental.
We are a majority shareholder of Tatra a.s., a company incorporated under
the laws of the Czech Republic. Tatra manufactures a range of 4x4 to 12x12
heavy-duty on and off-road vehicles for military and commercial applications
under the Tatra brand name. We also participate in a joint venture under the
name American Truck Company, or ATC. ATC assembles vehicles based on the Tatra
design and technology incorporating U.S. components.
We also lease and rent a variety of heavy equipment to third parties under
the Terex Re-Rentals brand name. In January 2003, we launched the operations of
Terex Financial Services, Inc., or TFS. TFS offers customers a complete line of
loans and leases to assist in the acquisition of all of our products.
Terex Aerial Work Platforms
The Terex Aerial Work Platforms segment was formed upon completion of our
acquisition of Genie Holdings, Inc. and its affiliates on September 18, 2002.
The Terex Aerial Work Platforms segment designs, manufactures and markets aerial
work platform equipment and telehandlers. Products include material lifts,
portable aerial work platforms, trailer mounted booms, articulating booms, stick
booms, scissor lifts, telehandlers, related components and replacement parts,
and other products. Terex Aerial Work Platforms products currently are marketed
principally under the Genie and Terex brand names. These products are used
primarily by customers in the construction and building maintenance industries
to lift people and/or equipment as required to build and/or maintain large
physical assets and structures.
Terex Mining
The Terex Mining segment designs, manufactures and markets large hydraulic
excavators and high capacity surface mining trucks, related components and
replacement parts, and other products. These products are used primarily by
construction, mining, quarrying and government customers in construction,
excavation and supplying coal and minerals. Currently, Terex Mining products are
marketed principally under the following brand names: O&K, Payhauler, Terex and
Unit Rig.
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Summary of Terms of the Exchange Offer
The Exchange Offer..We are offering to exchange up to $300,000,000 aggregate
principal amount of our new 7-3/8% Senior Subordinated Notes
due 2014, or new notes, which have been registered under the
Securities Act of 1933, for a like amount of our outstanding
7-3/8% Senior Subordinated Notes due 2014, or old notes,
which we issued on November 25, 2003 in a private offering.
To exchange your old notes, you must properly tender them by
following the procedures under the heading "The Exchange
Offer" and we must accept them.
Expiration Date.....The exchange offer expires at 5:00 p.m., New York City time,
on May 17, 2004, unless we extend it.
Withdrawal Rights...You may withdraw the tender of your old notes at any time
before 5:00 p.m., New York City time, on the expiration
date. If we decide for any reason not to accept any old
notes for exchange, we will return your old notes without
expense to you promptly after the expiration or termination
of the exchange offer.
Conditions to the
Exchange Offer......The exchange offer is subject to customary conditions, some
of which we may waive. We reserve the right to terminate and
amend the exchange offer at any time if any such condition
occurs before the expiration date.
Interest Payments...The new notes will bear interest from the date issued.
Interest on your old notes accepted for exchange will cease
to accrue upon issuance of the new notes.
Procedures for
Tendering
old notes...........If you are a holder of old notes who wishes to accept the
exchange offer for new notes:
o you must complete, sign and date the accompanying
Letter of Transmittal, or a facsimile thereof and mail
or otherwise deliver it, together with your old notes,
to the exchange agent at the address set forth under
"The Exchange Offer-Exchange Agent;" or
o arrange for The Depository Trust Company to transmit
certain required information to the exchange agent in
connection with a book-entry transfer.
Do not send Letters of Transmittal and certificates
representing old notes to us.
By tendering your old notes in this manner, you will be
representing, among other things, that:
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o the new notes you acquire pursuant to the exchange
offer are being acquired in the ordinary course of your
business;
o you are not participating, do not intend to
participate, and have no arrangement or understanding
with any person to participate, in the distribution of
the new notes issued to you in the exchange offer;
o you are not an "affiliate" of ours; and
o you are not a broker-dealer, and if you are a
broker-dealer that you will receive the new notes for
your own account, you will deliver a prospectus on
resale of your new notes and that you acquired your old
notes as a result of market making activities or other
trading activities.
Special Procedures
for Beneficial
Owners..............If you are a beneficial owner whose old notes are registered
in the name of a broker, dealer, commercial bank, trust
company or other nominee and wish to tender your old notes
in the exchange offer, please contact the registered owner
as soon as possible and instruct it to tender on your
behalf. If you wish to tender on your own behalf, you must,
prior to completing and executing the Letter of Transmittal
and delivering your old notes, either arrange to have your
old notes registered in your name or obtain a properly
completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
Guaranteed
Delivery
Procedures..........If you wish to tender your old notes and time will not
permit your required documents to reach the exchange agent
by the expiration date, or the procedure for book-entry
transfer cannot be completed on time, you may tender your
old notes according to the guaranteed delivery procedures
set forth in "The Exchange Offer-Procedures for Tendering."
Appraisal or
Dissenters' Rights..Owners of old notes do not have any appraisal or dissenters'
rights in the exchange offer.
Consequences of
Not Exchanging
old notes...........If you do not tender your old notes or we reject your
tender, you will not be entitled to any further registration
rights or exchange rights, except under limited
circumstances, and your old notes will continue to be
subject to certain restrictions on transfer. However, your
old notes will remain outstanding and entitled to the
benefits of the indenture governing the new notes.
Resales.............We believe that you can offer for resale, resell or
otherwise transfer the new notes without complying with
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further registration and prospectus delivery requirements of
the Securities Act if you make the representations described
above under "Procedures for Tendering old notes."
We base our belief on interpretations by the Securities and
Exchange Commission staff in no action letters issued to
other issuers in exchange offers like ours. We cannot
guarantee that the Securities and Exchange Commission would
make a similar decision about our exchange offer.
If our belief is wrong, you could incur liabilities under
the Securities Act. We will not protect you against any loss
incurred as a result of this liability under the Securities
Act.
If you are unable to make any of such representations and
you transfer any new notes without delivering a proper
prospectus or without qualifying for a registration
exemption, you may incur liability under the Securities Act
and applicable state securities laws. We will not assume or
indemnify you against such liability.
Federal Tax
Consequences........Your exchange of old notes for new notes pursuant to the
exchange offer generally will not result in any gain or loss
to you for United States federal income tax purposes. For
more information, see "Certain United States Federal Income
Tax Consequences."
Use of Proceeds.....We will receive no proceeds from the exchange offer. We will
pay all of our expenses related to the exchange offer.
Exchange Agent......HSBC Bank USA.
Summary Terms of the New Notes
The exchange offer relates to the exchange of up to $300,000,000 aggregate
principal amount of the old notes for an equal aggregate principal amount of new
notes. The form and terms of the new notes will be the same as the form and
terms of the old notes, except that the new notes will be registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof. The new notes will evidence the same debt as the old notes and will be
entitled to the benefits of the Indenture. See "Description of the New Notes"
for a more complete description of the new notes.
Issuer..............Terex Corporation
Securities Offered..$300,000,000 aggregate principal amount of 7-3/8% Senior
Subordinated Notes due 2014
Maturity............January 15, 2014
Interest Payment
Dates...............We will pay interest on the new notes semi-annually on
January 15 and July 15 of each year, beginning July 15,
2004.
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Ranking.............The new notes will be our senior subordinated unsecured
obligations. They will rank senior in right of payment to
any of our future subordinated indebtedness, equal in right
of payment with any of our existing and future senior
subordinated indebtedness, and subordinated in right of
payment to any of our existing and future senior
indebtedness. The new notes will be effectively subordinated
to indebtedness and other liabilities of our subsidiaries
which are not guarantors. As of December 31, 2003, we had
approximately $564 million of senior indebtedness and
approximately $798 million of senior subordinated
indebtedness, our subsidiaries which are guarantors had
approximately $477 million of senior indebtedness, and our
subsidiaries which are not guarantors had approximately $78
million of indebtedness.
Guarantees..........Substantially all of our domestic subsidiaries will
guarantee the new notes with unconditional guarantees of
payment that will effectively rank below their senior debt,
but will rank equal to their other senior subordinated debt,
in right of payment.
Optional Redemption
by Us...............Except in the case of certain equity offerings by us, we
cannot choose to redeem the new notes until January 15,
2009. At any time after that date (which may be more than
once), we can choose to redeem some or all of the new notes
at certain specified prices plus accrued interest.
Optional Redemption
after Equity
Offerings...........At any time (which may be more than once) before January 15,
2007, we can choose to redeem up to 35% of the outstanding
new notes with money that we raise in one or more public
equity offerings, as long as we pay 107.375% of the
principal amount of the new notes plus accrued interest and
at least 65% of the new notes originally issued remain
outstanding afterwards. See "Description of the New
Notes-Optional Redemption."
Change of Control...Upon a change of control, each holder may require us to
repurchase all or a portion of the new notes at a purchase
price of 101% of their principal amount plus accrued
interest, if any, to the date of purchase. See "Description
of the New Notes-Change of Control."
Covenants...........The indenture will contain covenants that limit what we (and
most or all of our subsidiaries) may do. The indenture will
limit our ability to:
o incur additional indebtedness;
o pay dividends and make distributions;
o make certain investments;
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o permit payment or dividend restrictions on certain of
our subsidiaries;
o transfer and sell assets;
o create certain liens;
o engage in certain transactions with affiliates;
o issue stock of subsidiaries; and
o consolidate or merge or sell all or substantially all
of our assets and the assets of our subsidiaries.
In addition, we will be obligated to offer to repurchase the
new notes at a price of 100% of their principal amount plus
accrued interest to the date of repurchase in the event of
certain asset sales.
These restrictions and prohibitions are subject to a number
of important qualifications and exceptions. See "Description
of the New Notes-Certain Covenants."
For more complete information about the notes, see the "Description of the
New Notes" section of this prospectus.
Risk Factors
See "Risk Factors" beginning on page 8 for a discussion of certain factors
that you should consider before participating in the exchange offer.
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RISK FACTORS
You should carefully consider the following risk factors in connection with
the exchange offer and your decision to exchange your old notes for new notes.
You should also consider the other information contained or incorporated by
reference in this prospectus.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.
Risks Related to the Exchange Offer
You are responsible for compliance with exchange offer procedures; You will not
receive notice from the exchange agent or us of defects or irregularities in
your tender your old notes.
Issuance of the new notes in exchange for your old notes pursuant to this
exchange offer will be made only after a timely receipt by us of your old notes,
a properly completed and signed Letter of Transmittal and all other required
documents. Therefore, if you desire to tender your old notes in exchange for new
notes you should allow sufficient time to ensure timely delivery. Neither the
exchange agent nor us are under any duty to give notification of defects or
irregularities in the tender of your old notes for exchange. Old notes that are
not tendered or are tendered but not accepted for exchange will, following the
completion of this exchange offer, continue to be subject to the existing
restrictions on transfer of the old notes and, upon completion of this exchange
offer, our obligation to register your old notes will terminate.
There may be consequences if you do not exchange your old notes for new notes.
If you do not exchange your old notes for the new notes pursuant to the
exchange offer, you will continue to be subject to the restrictions on transfer
of your old notes described in the legend on your old notes. In general, you may
only offer or sell the old notes if they are registered under the Securities Act
and applicable state securities laws, or offered and sold pursuant to an
exemption from such requirements. We do not intend to register the old notes
under any law. In addition, if you exchange your old notes in the exchange offer
for the purpose of participating in a distribution of the new notes, you may be
deemed to have received restricted securities and, if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. To the extent old
notes are tendered and accepted in the exchange offer, the trading market, if
any, for the old notes would be damaged. For more information on the
consequences of not exchanging your old notes, see "The Exchange Offer -
Consequences of Failure to Exchange."
Risks Related to the Offering of the New Notes
Our significant debt levels may limit our future ability to obtain additional
financing and to pursue business opportunities.
As of December 31, 2003, we had total debt of approximately $1,362 million,
which represented approximately 61% of our total capitalization. The proceeds
from the sale of the old notes, together with $119 million of cash, were used
primarily to repay some of our debt.
There are several important consequences of having debt, including the
following:
o a portion of our cash from operating activities will be used to pay
principal and interest on our debt;
o competitive pressures and adverse economic conditions are more likely
to have a negative effect on our business; and
o our ability to make acquisitions and to take advantage of significant
business opportunities may be negatively affected.
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Our ability to pay the required interest and principal payments on our debt
depends on the future performance of our business. The performance of our
business is subject to general economic conditions and other financial and
business factors. Many of these factors are beyond our control. If we do not
have enough cash flow in the future to pay the required interest or principal
payments on our debt, we may be required to refinance all or a part of our debt
or borrow additional amounts. We do not know if refinancing our debt will be
possible at that time or if we will be able to find someone who will lend us
more money.
In addition, because approximately 50% of our debt bears interest at
floating rates, an increase in interest rates could adversely affect our ability
to make the required interest and principal payments on our debt.
Our inability to comply with the restrictive debt covenants contained in the
Indenture for the notes could lead to an acceleration of our debt under our debt
agreements and possibly bankruptcy.
The indenture for the notes and our other existing debt agreements contain
a number of significant covenants. These covenants limit our ability to, among
other things, borrow additional money, make capital expenditures, pay dividends,
dispose of assets and acquire new businesses. These covenants also require us to
meet certain financial tests. Specifically, some of our financial tests include
a pro forma consolidated leverage ratio test, a consolidated interest ratio
test, a consolidated fixed charge ratio test, a pro forma consolidated senior
secured debt leverage ratio test and a capital expenditures test, as such tests
are defined in our existing debt agreements. While we are currently in
compliance with all of the foregoing tests, increases in our debt or decreases
in our earnings could cause us to be in default of our covenants related to a
pro forma consolidated leverage ratio test, a pro forma consolidated senior
secured debt leverage ratio test, a consolidated interest ratio test and a
consolidated fixed charge ratio test, as defined and included in our debt
agreements. In addition, changes in economic or business conditions, results of
operations or other factors could cause us to default under our debt agreements.
If we are unable to comply with these covenants, there would be a default under
our debt agreements. A default, if not waived by our lenders, could result in
acceleration of our debt and possibly bankruptcy.
Since the notes are senior subordinated debt, there may not be sufficient assets
to pay amounts owed on the notes if a default occurs.
The notes will be subordinated to the prior payment in full of all existing
and future senior indebtedness and equal in right of payment with all other
existing and future senior subordinated indebtedness. The guarantees of our
subsidiaries will be subordinated to the prior payment in full of all senior
indebtedness of each subsidiary that is a guarantor of the notes, including
obligations under our bank credit facility, and equal in right of payment with
all other existing and future senior subordinated indebtedness of each such
subsidiary. Because of the subordination provisions of the notes, in the event
of our bankruptcy, liquidation or reorganization, our assets and the assets of
any of our subsidiaries that are guarantors of the notes would be available to
pay obligations on the notes only after all payments have been made on our
senior indebtedness and the senior indebtedness of such subsidiary guarantors.
We cannot assure you that there will be sufficient assets remaining after
all payments have been made to pay amounts due on the notes then outstanding. As
of December 31, 2003, we had (i) approximately $564 million of senior
indebtedness outstanding (excluding unused commitments), (ii) approximately $798
million of senior subordinated indebtedness outstanding and (iii) approximately
$1,362 million of total indebtedness outstanding, and the subsidiary guarantors
had approximately $477 million of indebtedness outstanding, all of which is
senior indebtedness. In addition, certain events of default under our senior
indebtedness would prohibit us from making any payments on the notes, including
payments on interest when due. The term "senior indebtedness" is defined in the
"Description of the Notes" section of this prospectus. We are permitted to incur
substantial additional indebtedness, some or all of which may be senior
indebtedness.
Some but not all of our subsidiaries will guarantee the notes. Claims of
creditors of any subsidiaries which do not guarantee the notes, including trade
creditors, secured creditors and creditors holding indebtedness and guarantees
issued by such subsidiaries, will generally have priority with respect to the
assets and earnings of such subsidiaries over our claims or those of our
creditors, including holders of the notes, even if the obligations of those
subsidiaries do not constitute senior indebtedness. As of December 31, 2003, our
subsidiaries that are not guarantors had approximately $78 million of
indebtedness outstanding.
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In addition to being subordinated to all of our senior indebtedness, the
notes will not be secured by any of our assets or the assets of the subsidiaries
that are guarantors of the notes. Our obligations and the obligations of the
subsidiary guarantors under our bank credit facility are secured by a security
interest in substantially all of our property and such subsidiary guarantors,
including inventory, equipment, receivables and intangible assets such as
licenses, trademarks and customer lists. If we become insolvent or are
liquidated, or if payment under our bank credit facility is accelerated, lenders
under the bank credit facility would be entitled to exercise the remedies
available to a secured lender. Therefore, our bank lenders will have a claim on
such assets before the holders of the notes. We cannot assure you that the
liquidation value of our assets would be sufficient to repay in full the
indebtedness under the bank credit facility and our other indebtedness,
including the notes.
As a result of fraudulent conveyance laws, a court could void a guarantee of a
subsidiary, in which event noteholders would cease to have a claim against such
subsidiary guarantor.
Although laws differ among various jurisdictions, in general, under
fraudulent conveyance laws, a court could subordinate or void any guarantee and
require noteholders to return payments received from guarantors if it found that
the guarantee was incurred with actual intent to hinder, delay or defraud
creditors or the guarantor did not receive fair consideration or reasonably
equivalent value for the guarantee and the guarantor was any of the following:
o insolvent or was rendered insolvent because of the guarantee,
o engaged or about to engage in a business or transaction for which its
remaining assets constituted unreasonably small capital, or
o intended to incur, or believed or reasonably should have believed that
it would incur, debts beyond its ability to pay at maturity.
If a court avoided a guarantee as a result of fraudulent conveyance, or
held it unenforceable for any other reason, noteholders would cease to have a
claim is against this guarantor and would be solely creditors of the Company.
It may not be possible for us to purchase notes on the occurrence of a change of
control.
Upon the occurrence of a change in control, you may require us to purchase
all or a portion of your notes, and the holders of our currently outstanding
$200 million 9-1/4% Senior Subordinated Notes due 2011 and our $300 million
10-3/8% Senior Subordinated Notes due 2011 may require us to repurchase all or
any portion of their notes. If a change in control were to occur, we may not
have enough funds to pay the purchase price for all tendered notes. Any future
credit agreements or other agreements relating to our indebtedness may contain
provisions that prohibit the purchase of the notes and the currently outstanding
senior subordinated notes upon a change in control or may provide that a change
in control constitutes an event of default under that agreement. If a change in
control occurs at a time when we are prohibited from purchasing the notes and
the currently outstanding senior subordinated notes, we could seek the consent
of our lenders to purchase the notes and the currently outstanding senior
subordinated notes or could attempt to refinance this debt. If we do not obtain
a consent, we could not purchase the notes and the currently outstanding senior
subordinated notes. Our failure to purchase tendered notes and the currently
outstanding senior subordinated notes would constitute an event of default under
the indenture, which might constitute a default under the terms of our other
debt. In such circumstances, or if a change in control would constitute an event
of default under our senior indebtedness, the subordination provisions of the
indenture would restrict payments to you. The term "change in control" is
limited to certain specified transactions and may not include other events that
may harm our financial condition. Our obligation to offer to purchase the notes
upon a change in control would not necessarily afford you protection in the
event of a highly leveraged transaction, reorganization, merger or similar
transaction involving us. The term "change of control" is defined in the
"Description of the Notes--Certain Definitions" section.
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You cannot be sure that an active trading market will develop for the new notes.
The new notes are being offered to the holders of the old notes. The old
notes were issued on November 25, 2003 to a small number of institutional
investors and overseas investors and are eligible for trading in the Private
Offering, Resale and Trading through Automated Linkages (PORTAL) Market, the
National Association of Securities Dealers' screenbased, automated market for
trading of securities eligible for resale under Rule 144A. To the extent that
old notes are tendered and accepted in the exchange offer, the trading market
for the remaining untendered old notes could be adversely affected. There is no
existing trading market for the new notes. We do not intend to apply for listing
or quotation of the new notes on any exchange. Therefore, we do not know the
extent to which investor interest will lead to the development of a trading
market or how liquid that market might be, nor can we make any assurances
regarding the ability of new note holders to sell their new notes or the price
at which the new notes might be sold. Although the initial purchasers of the old
notes (the "initial purchasers") have informed us that they currently intend to
make a market in the new notes, they are not obligated to do so, and any such
market making may be discontinued at any time without notice. As a result, the
market price of the new notes could be adversely affected. Historically, the
market for non-investment grade debt, such as the new notes, has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. Any such disruptions may have an adverse effect on holders of the
new notes.
Risks Related to Our Business
Our business is highly cyclical.
The demand for our products depends upon the general economic conditions of
the markets in which we compete. Downward economic cycles result in reductions
in sales of our products, which may reduce our profits. We have taken a number
of steps to reduce our fixed costs and diversify our operations to decrease the
negative impact of these cycles. There can be no assurance, however, that these
steps will prevent the negative impact of poor economic conditions.
We operate in a highly competitive industry.
We compete in a highly competitive industry. To compete successfully, our
products must excel in terms of quality, price, product line, ease of use,
safety and comfort, and we must also provide excellent customer service. The
greater financial resources of certain of our competitors may put us at a
competitive disadvantage.
We may face limitations on our ability to integrate acquired businesses.
We expect to continue our strategy of identifying and acquiring businesses
with complementary products and services which we believe will enhance our
operations and profitability. We may pay for future acquisitions from internally
generated funds, bank borrowings, public offerings, private sales of stock or
bonds, or some combination of these methods. However, we cannot give any
assurance that we will be able to continue to find suitable businesses to
purchase or that we will be able to raise the money necessary to complete future
acquisitions.
In addition, we cannot guarantee that we will be able to successfully
integrate any business we purchase into our existing business or that any
acquired businesses will be profitable. The successful integration of new
businesses depends on our ability to manage these new businesses and cut excess
costs. Further, in connection with acquisitions, we may need to consolidate or
restructure our newly acquired or existing facilities, which may require
expenditures for severance obligations related to reductions in workforce and
other charges resulting from the consolidations or restructurings, such as
write-down of inventory and lease termination costs. If we are unable to
complete the integration of new businesses in a timely manner, it could have a
materially adverse effect on our results of operations and financial condition.
For example, in 2002 we acquired Demag Mobile Cranes GmbH & Co. KG, a
manufacturer of cranes, and Genie Holdings, Inc., a manufacturer of aerial work
platform equipment. After comparing these acquired businesses with our existing
businesses and considering how best to integrate their operations and products
with our operations and products, we initiated a series of restructuring
projects aimed at addressing product, channel and production
11
overlap. These projects included eliminating certain product lines and closure
of certain facilities. As a result of these restructuring projects, we recorded
charges in the fourth quarter of 2002 of $22.8 million for restructuring actions
related to the acquisition of Demag and $1.9 million for restructuring actions
related to the acquisition of Genie. These charges included employee termination
costs, costs associated with asset disposals and facility exit costs.
We rely on key management.
We rely on the management and leadership skills of Ronald M. DeFeo,
Chairman of the Board, President and Chief Executive Officer. Mr. DeFeo has an
employment agreement with us which expires on December 31, 2004. The loss of his
services could have a significant, negative impact on our business.
Some of our customers rely on financing with third parties to purchase our
products.
We rely on sales of our products to generate cash from operations. A
significant portion of our sales are financed by third party finance companies
on behalf of our customers. The availability of financing by third parties is
affected by general economic conditions, the credit worthiness of our customers
and the estimated residual value of our equipment. Deterioration in the credit
quality of our customers or the estimated residual value of our equipment could
negatively impact the ability of such customers to obtain the resources needed
to make purchases of our equipment. In addition, as a result of the current
economic climate, the availability of third party financing has been limited for
some of our customers, which has had a negative effect on such customers'
ability to arrange third party financing.
Our Genie subsidiary provides financing for some of our Aerial Work Platform
customers.
Our Terex Aerial Work Platforms segment, directly and through joint
ventures, provides financing for some of its customers, primarily in Europe and
the United States, to purchase its equipment. For the most part, this financing
represents sales type leases and operating leases. It has been the Terex Aerial
Work Platforms segment's policy to provide such financing to its customers in
situations where it anticipates that it will be able to sell the financing
obligations to a third party financial institution within a short period of
time. However, until such financing obligations are sold to a third party or if
the Terex Aerial Work Platforms segment is unable to sell such obligations to a
third party, the Terex Aerial Work Platforms segment retains the risks resulting
from such customer financing. The results of our Terex Aerial Work Platforms
segment, and the Company, could be adversely affected in the event that such
customers default on their contractual lease payments to the Company. The
results of our Terex Aerial Work Platforms segment, and the Company, also could
be adversely affected if the residual values of such leased equipment declines
below its original estimated values and the Company is forced to subsequently
sell such equipment at a loss.
We are subject to currency fluctuations and other risks from our international
operations.
Our products are sold in over 100 countries around the world. Thus, our
revenues are generated in foreign currencies, including the Euro, British Pound
Sterling, Australian Dollar and the Czech Koruna, while costs incurred to
generate those revenues are only partly incurred in the same currencies. Since
our financial statements are denominated in U.S. Dollars, changes in currency
exchange rates between the U.S. Dollar and other currencies have had, and will
continue to have, an impact on our earnings. To date, this impact has not been
material on our earnings. To reduce this currency exchange risk, we may buy
protecting or offsetting positions (known as "hedges") in certain currencies to
reduce the risk of an adverse currency exchange movement. We have not engaged in
any speculative or profit motivated hedging activities. Although we partially
hedge our revenues and costs, currency fluctuations will impact our financial
performance in the future.
Our international operations are also subject to a number of potential
risks. Such risks include, among others, currency exchange controls, labor
unrest, regional economic uncertainty, political instability, restrictions on
the transfer of funds into or out of a country, export duties and quotas,
domestic and foreign customs and tariffs, current and changing regulatory
environments, difficulty in obtaining distribution support and potentially
adverse tax consequences. These factors may have an adverse effect on our
international operations in the future.
12
Compliance with environmental and other governmental regulations could be costly
and require us to make significant expenditures.
We generate hazardous and nonhazardous wastes in the normal course of our
manufacturing operations. As a result, we are subject to a wide range of
federal, state, local and foreign environmental laws and regulations. These laws
and regulations govern actions that may have adverse environmental effects and
also require compliance with certain practices when handling and disposing of
hazardous and nonhazardous wastes. These laws and regulations also impose
liability for the costs of, and damages resulting from, cleaning up sites, past
spills, disposals and other releases of hazardous substances, should any of such
events occur. No such incidents have occurred which required us to pay material
amounts to comply with such laws and regulations.
Compliance with these laws and regulations has, and will continue to
require, us to make expenditures. We do not expect that these expenditures will
have a material adverse effect on our business or profitability.
FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled "Prospectus Summary" and
"Risk Factors," contains forward-looking statements that involve risks and
uncertainties. Generally, the words "may," "expects," "intends," "anticipates,"
"plans," "projects," "estimates" or similar words are intended to identify
forward-looking statements. However, the absence of these words does not mean
that the statement is not forward-looking. We have based these forward-looking
statements on our current expectations and projections about future events.
These statements are not guarantees of future performance. It is possible that
actual events and results will differ materially as future events are difficult
to predict. In addition, many of the risks, uncertainties and assumptions about
us are beyond our control. Some of these risks, uncertainties and assumptions
are:
o our business is highly cyclical and weak general economic conditions
may affect the sales of our products and our financial results;
o the sensitivity of construction, infrastructure and mining activity
and products produced for the military to interest rates and
government spending;
o our ability to successfully integrate acquired businesses;
o the retention of key management personnel;
o our businesses are in very competitive industries and may be affected
by pricing, product and other actions taken by our competitors;
o changes in laws and regulations;
o we manufacture and sell our products in many countries and we may be
affected by changes in exchange rates between currencies, as well as
international politics;
o our ability to manufacture and deliver our products to customers on a
timely basis;
o dependence of some of our customers relying on third party financing
to purchase our products;
o the ability of our suppliers to supply us with parts and components at
competitive prices on a timely basis;
o we have a significant amount of debt and our debt agreements contain a
number of restrictive covenants; and
o we are subject to various environmental laws and regulations.
13
The forward-looking statements made in this prospectus reflect our
expectations and projections as of the date of this prospectus. We do not
undertake any obligation to update publicly any forward-looking statement which
may result from changes in events, conditions, circumstances or expectations on
which we have based any forward-looking statement.
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The old notes were sold by us on November 25, 2003 to the initial
purchasers with further distribution permitted only to (i) qualified
institutional buyers under Rule 144A under the Securities Act and (ii) persons
in offshore transactions in reliance on Regulation S under the Securities Act.
In connection with the sale of the old notes, we and the initial purchasers
entered into a Registration Rights Agreement which requires us to file with the
Securities and Exchange Commission the registration statement of which this
prospectus is a part within 60 days of the date of the issuance of the old notes
(the "Issuance Date") with respect to a registered offer to exchange the old
notes for new notes, identical in all material respects to the old notes, and to
use its best efforts to cause such registration statement to become effective
under the Securities Act within 150 days of the Issuance Date. We will keep the
exchange offer open for not less than 30 days after the date notice of the
exchange offer is mailed to the holders. A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this prospectus is a part. The exchange offer is being made pursuant to the
Registration Rights Agreement to satisfy our obligations thereunder.
Resale of New Notes
We believe that, except as described below, the new notes issued pursuant
to the exchange offer in exchange for old notes may be offered for resale,
resold and otherwise transferred by any holder of the new notes (other than any
holder which is a broker-dealer or an "affiliate" of ours within the meaning of
Rule 405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that:
(i) you acquired such new notes in the ordinary course of your
business;
(ii) you have no arrangement or understanding with any person to
participate in the distribution of such new notes; and
(iii) you are not engaged in, and do not intend to engage in, a
distribution of such new notes.
By tendering old notes for new notes, you will represent to us, that:
(i) the new notes issued in the exchange offer are being acquired in
the ordinary course of business of the person receiving the new
notes, whether or not such person is the holder;
(ii) neither you nor any such other person is engaging in or intends
to engage in a distribution of such new notes;
(iii) neither you nor any such other person has an arrangement or
understanding with any person to participate in the distribution
of such new notes within the meaning of the Securities Act; and
(iv) neither you nor any such other person is an affiliate of ours.
In the event that you cannot make the requisite representations to us, you
cannot rely on such interpretation by the staff of the Securities and Exchange
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. Unless an exemption from registration is otherwise available, any
such resale transaction should be covered by an effective registration
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statement containing the selling security holders information required by Item
507 of Regulation S-K under the Securities Act. This prospectus may be used for
an offer to resell, resale or other retransfer of new notes only as specifically
set forth herein.
We base our belief on interpretations by the Securities and Exchange
Commission staff in no action letters issued to other issuers in exchange offers
like ours. We have not, however, asked the Securities and Exchange Commission to
consider this particular exchange offer in the context of a no action letter.
Therefore, you cannot be sure that the Securities and Exchange Commission will
treat this exchange offer in the same way it has treated other exchange offers
in the past. If our belief is wrong, you could incur liabilities under the
Securities Act. We will not protect you against any loss incurred as a result of
this liability under the Securities Act.
Each broker-dealer that receives new notes for its own account in exchange
for old notes, where such old notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such new
notes, and that it has not entered into any arrangement or understanding with us
or any affiliate of ours to distribute new notes in connection with any resale
of such new notes. See "Plan of Distribution."
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the Letter of Transmittal, we will accept for exchange any and all old
notes properly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. We will issue $1,000 principal amount of new notes
in exchange for each $1,000 principal amount of outstanding old notes
surrendered pursuant to the exchange offer. Old notes may be tendered only in
integral multiples of $1,000.
The form and terms of the new notes will be the same as the form and terms
of the old notes except the new notes will be registered under the Securities
Act and hence will not bear legends restricting the transfer thereof. The new
notes will evidence the same debt as the old notes. The new notes will be issued
under and entitled to the benefits of the Indenture, which also authorized the
issuance of the old notes, such that both series will be treated as a single
class of debt securities under the Indenture.
As of the date of this prospectus, $300 million aggregate principal amount
of the old notes are outstanding. This prospectus, together with the Letter of
Transmittal, is being sent to all registered holders of old notes. There will be
no fixed record date for determining registered holders of old notes entitled to
participate in the exchange offer. The exchange offer is not conditioned with
any minimum principal amount of old notes being tendered for exchange. However,
the obligation to accept old notes for exchange pursuant to the exchange offer
is subject to certain conditions, as described under " -Conditions."
We intend to conduct the exchange offer in accordance with the provisions
of the Registration Rights Agreement and the applicable requirements of the
Exchange Act, and the rules and regulations of the Commission thereunder. Old
notes which are not tendered for exchange in the exchange offer will remain
outstanding and continue to accrue interest and will be entitled to the rights
and benefits such holders have under the Indenture and the Registration Rights
Agreement.
We will be deemed to have accepted for exchange properly tendered old notes
when, as and if we have given oral or written notice thereof to the exchange
agent and complied with the provisions of the Indenture. The exchange agent will
act as agent for the tendering holders for the purposes of receiving the new
notes from us.
If you tender old notes in the exchange offer you will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of old notes
pursuant to the exchange offer. We will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the exchange offer.
See " -Fees and Expenses."
15
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean 5:00 p.m., New York City time on May
17, 2004, unless we, in our sole discretion, extend the exchange offer, in which
case the term "Expiration Date" shall mean the latest date to which the exchange
offer is extended. If the exchange offer is not completed by May 24, 2004, the
interest rate on the old notes shall be increased by one half of one percent
(0.5%) per year until the exchange offer is completed.
In order to extend the exchange offer, we will notify the exchange agent of
any extension by oral or written notice and will mail to the holders an
announcement thereof, prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
We reserve the right, in our sole discretion, (i) to delay accepting any
old notes, to extend the exchange offer or to terminate the exchange offer and
not permit acceptance of old notes not previously accepted, if any of the
conditions set forth below under " -Conditions" have not been satisfied, by
giving oral or written notice of the delay, extension or termination to the
exchange agent or (ii) to amend the terms of the exchange offer in any manner
which, in our good faith judgment, is advantageous to the holders of the old
notes, whether before or after any tender of the new notes. Any delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the holders. If the exchange
offer is amended in a manner determined by us to constitute a material change,
we will promptly notify holders of the amendment by means of a prospectus
supplement that will be distributed to the registered holders, if required by
law, and we will extend the exchange offer for a period of five to ten business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered holders, if the exchange offer would otherwise
expire during such five to ten business day period.
Without limiting the manner in which we may choose to make a public
announcement of any delay, extension, termination or amendment of the exchange
offer, we will have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones news service.
Interest on the New Notes
The new notes will bear interest at 7-3/8% per annum from the date of
original issue. Interest on the new notes will be payable semi-annually, in
arrears, on January 15 and July 15 of each year, commencing on July 15, 2004.
Holders of new notes will receive interest on July 15, 2004 from the date of
initial issuance of the new notes, plus an amount equal to the accrued interest
on the old notes from January 15, 2004 to the date of exchange for new notes.
Interest on the old notes accepted for exchange will cease to accrue upon
issuance of the new notes.
Conditions
We will not be required to accept for exchange, or exchange any new notes
for, any old notes, and may terminate the exchange offer before the acceptance
of any old notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer which, in
our sole judgment, might materially impair our ability to proceed with the
exchange offer, or
(b) any law, statute, rule or regulation is proposed, adopted or enacted,
or any existing law, statute, rule or regulation is interpreted by the staff of
the Commission, which, in our sole judgment, might materially impair our ability
to proceed with the exchange offer, or
(c) any governmental approval has not been obtained, which approval we
shall, in our sole discretion, deem necessary for the consummation of the
exchange offer as contemplated hereby.
If we determine in our sole discretion that any of these conditions are not
satisfied, we may (i) refuse to accept any old notes and return all tendered old
notes to the tendering holders, (ii) extend the exchange offer and
16
retain all old notes tendered prior to the expiration of the exchange offer,
subject, however, to the rights of holders who tendered such old notes to
withdraw their tendered old notes, or (iii) waive such unsatisfied conditions
with respect to the exchange offer and accept all properly tendered old notes
which have not been withdrawn.
The foregoing conditions are for the sole benefit of us and may be asserted
by us regardless of the circumstances giving rise to any such condition or may
be waived by us in whole or in part at any time and from time to time in our
sole discretion. The failure by us at any time to exercise any of our rights
shall not be deemed a waiver of any such right, and each such right, will be
deemed an ongoing right which may be asserted at any time and from time to time.
Procedures for Tendering
Only a holder of old notes may tender such old notes in the exchange offer.
To tender in the exchange offer, you must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver the Letter
of Transmittal or such facsimile, together with the old notes and any other
required documents, to the exchange agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) old notes must be received
by the exchange agent along with the Letter of Transmittal, or (ii) a timely
confirmation of book-entry transfer (a "Book-Entry Confirmation") of such old
notes, if such procedure is available, into the exchange agent's account at the
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below must be received by the
exchange agent prior to the Expiration Date, or (iii) you must comply with the
guaranteed delivery procedures described below. To be tendered effectively, the
old notes, Letter of Transmittal and other required documents must be received
by the exchange agent at the address set forth below under " -Exchange Agent".
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and us in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
The method of delivery of old notes, the letter of transmittal and all
other required documents to the exchange agent is at the election and risk of
the holders. If such delivery is by mail, it is recommended that registered
mail, properly insured, with return receipt requested, be used. In all cases,
sufficient time should be allowed to assure delivery to the exchange agent
before the expiration date. No letter of transmittal or old notes should be sent
to us. Holders may request their respective brokers, dealers, commercial banks,
trust companies or nominees to effect the above transactions for and on behalf
of such holders.
Any beneficial owner whose old notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender such old notes should contact the registered holder promptly and
instruct such holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on its own behalf, such owner must, prior to
completing and executing the Letter of Transmittal and delivering its old notes,
either make appropriate arrangements to register ownership of the old notes in
its name or obtain a properly completed bond power from the registered holder.
The transfer of registered ownership may take considerable time and may not be
able to be completed prior to the Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any Eligible Institution (as defined below)
unless the old notes tendered pursuant thereto are tendered (i) by a holder who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. In the event that signatures on a Letter of Transmittal
or a notice of withdrawal, as the case may be, are required to be guaranteed,
such guarantor must be a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act which is a member of one of the recognized signature
guarantee programs identified in the Letter of Transmittal (each, an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the holder of
any old notes listed therein, the old notes must be endorsed or accompanied by a
properly completed bond power, in satisfactory form as determined
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by us in our sole discretion, signed by the holder as the holder's name appears
on the old notes with the signature thereon guaranteed by an Eligible
Institution.
If the Letter of Transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, these
persons should so indicate when signing, and unless waived by us, evidence
satisfactory to us of their authority to so act must be submitted with the
Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered old notes and withdrawal of tendered old notes
will be determined by us in our sole discretion, which determination will be
final and binding. We reserve the absolute right to reject any and all old notes
not properly tendered or any old notes our acceptance of which would, in the
opinion of counsel for us, be unlawful. We also reserve the right to waive any
defects, irregularities or conditions of tender as to particular old notes. Our
interpretation of the terms and conditions of the exchange offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of old notes must be cured within such time as we shall determine. Although we
intend to notify holders of defects or irregularities with respect to tenders of
old notes, neither we, the exchange agent nor any other person will incur any
liability for failure to give such notification. Tenders of old notes will not
be deemed to have been made until the defects or irregularities have been cured
or waived. Any old notes received by the exchange agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the exchange agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
While we have no present plan to acquire any old notes that are not
tendered in the exchange offer, we reserve the right in its sole discretion to
(i) purchase or make offers for any old notes that remain outstanding subsequent
to the Expiration Date, (ii) as set forth above under "-Conditions," to
terminate the exchange offer, or (iii) redeem the old notes as a whole or in
part at any time and from time to time, as set forth under "Description of New
Notes-Optional Redemption," or (iv) to the extent permitted by applicable law,
purchase old notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers could differ from the terms
of the exchange offer.
In all cases, issuance of new notes for old notes that are accepted for
exchange pursuant to the exchange offer will be made only after timely receipt
by the exchange agent of certificates for such old notes or a timely Book-Entry
confirmation of such old notes into the exchange agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered old notes are not
accepted for exchange for any reason set forth in the terms and conditions of
the exchange offer, or if old notes are submitted for a greater principal amount
than the holder desires to exchange, the unaccepted or non exchanged old notes
will be returned without expense to the tendering holder thereof (or, in the
case of old notes tendered by book-entry transfer into the exchange agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described below, the non exchanged old notes will be credited to an
account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of the exchange offer.
Book-Entry Transfer
The exchange agent will make a request to establish an account with respect
to the old notes at the Book-Entry Transfer Facility for purposes of the
exchange offer within two business days after the date of this prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make Book-Entry delivery of old notes by causing the
Book-Entry Transfer Facility to transfer such old notes into the exchange
agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of old notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the exchange agent at the address
set forth below under "- Exchange Agent" on or prior to the Expiration Date or,
if the guaranteed delivery procedures described below are to be complied with,
within the time period provided under such procedures. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the exchange
agent.
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Guaranteed Delivery Procedures
If you wish to tender your old notes and (i) your old notes are not
immediately available or (ii) you cannot deliver your old notes, the Letter of
Transmittal or any other required documents to the exchange agent prior to the
Expiration Date, you may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the exchange agent receives from an
Eligible Institution a properly completed and duly signed Letter of Transmittal
and the Notice of Guaranteed Delivery, substantially in the form provided by us
(by facsimile transmission, mail or hand delivery) setting forth your name and
address, the registered number(s) of the old notes and the principal amount of
old notes tendered, stating that the tender is being made by guaranteed delivery
and guaranteeing that, within three New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof) together
with the old notes or a Book-Entry Confirmation, as the case may be, and any
other documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the exchange agent; and
(c) Properly completed and signed Letter of Transmittal (or facsimile
thereof), as well as all tendered old notes in proper form for transfer or a
Book-Entry Confirmation, and all other documents required by the Letter of
Transmittal, are received by the exchange agent within five New York Stock
Exchange trading days after the Expiration Date. Upon request of the exchange
agent, a Notice of Guaranteed Delivery will be sent to holders who wish to
tender their old notes according to the guaranteed delivery procedures set forth
above.
Withdrawal of Tender
Except as otherwise provided herein, you may withdraw tenders of old notes
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of old notes in the exchange offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must:
(i) specify the name of the person having deposited the old notes to
be withdrawn (the "Depositor");
(ii) identify the old notes to be withdrawn (including the principal
amount of the old notes and, in the case certificates
representing the old notes have been tendered, registered number
or numbers and or, in the case of old notes transferred by
book-entry transfer, the name and number of the account at the
Book-Entry Transfer Facility to be credited);
(iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which the old notes
were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have The Bank
of New York, the trustee with respect to the old notes, register
the transfer of such old notes into the name of the person
withdrawing the tender; and
(iv) specify the name in which any such old notes are to be
registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by us, whose determination will be
final and binding on all parties. Any old notes so withdrawn will be deemed not
to have been validly tendered for purposes of the exchange offer and no new
notes will be issued with respect thereto unless the old notes so withdrawn are
validly re-tendered. Any old notes which have been tendered but which are not
accepted for payment will be returned to the holder thereof without cost to the
holder (or, is the case of old notes tendered by book-entry transfer into the
exchange agent's account at the Book-Entry Transfer
19
Facility pursuant to the book-entry transfer procedures described above, such
old notes will be credited to an account maintained with such Book-Entry
Transfer Facility) as soon as practicable after withdrawal, rejection of tender
or termination of the exchange offer. Properly withdrawn old notes may be
retendered by following one of the procedures described above under
"--Procedures for Tendering" and "--Book-Entry Transfer" at any time prior to
the Expiration Date.
Exchange Agent
HSBC Bank USA has been appointed as exchange agent of the exchange offer.
Questions and requests for assistance, requests for additional copies of this
prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the exchange agent addressed as
follows:
---------------------------------- ---------------------------------------------
By Registered or Certified Mail: By Overnight Courier and By Hand Delivery
After 4:30pm on Expiration Date:
---------------------------------- ---------------------------------------------
HSBC Bank USA HSBC Bank USA
Issuer Services Operations Issuer Services Operations
One Hanson Place One Hanson Place
Lower Level Lower Level
Brooklyn, New York 11243 Brooklyn, New York 11243
Attention: Paulette Shaw Attention: Paulette Shaw
---------------------------------- ---------------------------------------------
By Hand Delivery to 4:30pm: By Facsimile:
(718) 488-4488
---------------------------------- ---------------------------------------------
HSBC Bank USA
Issuer Services Operations Confirm by telephone:
One Hanson Place (718) 488-4475
Lower Level
Brooklyn, New York 11243
Attention: Paulette Shaw
---------------------------------- ---------------------------------------------
Fees and Expenses
The expenses of soliciting tenders will be paid by us. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telegraph, telephone, facsimile, or in person by officers and regular
employees of ours and our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. We, however, will pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection therewith. We may also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of the prospectus
and related documents to the beneficial owners of the old notes and in handling
or forwarding tenders for exchange.
The cash expenses to be incurred in connection with the exchange offer will
be paid by us and are estimated in the aggregate to be approximately $150,000.
Such expenses include fees and expenses of the exchange agent and Trustee,
accounting and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of old
notes pursuant to the exchange offer. If, however, new notes or old notes for
principal amounts not tendered or accepted for exchange are to be delivered to,
or are to be issued in the name of, any person other than the holder of the old
notes tendered, or if tendered old notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a transfer
tax is imposed for any reason other than the exchange of old notes pursuant to
the exchange offer, then the amount of any transfer taxes (whether imposed on
the holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption from such payment is
not
20
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
Consequences of Failure to Exchange
Holders of old notes who do not exchange their old notes for new notes
pursuant to the exchange offer will continue to be subject to the restrictions
on transfer of such old notes as set forth in the legend on the old notes and in
the Indenture as a result of the issuance of the old notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities law.
Accordingly, the old notes may be resold only (i) to us (upon redemption thereof
or otherwise), (ii) pursuant to an effective registration statement under the
Securities Act, (iii) so long as the old notes are eligible for resale pursuant
to Rule 144A, to a qualified institutional buyer within the meaning of Rule 144A
under the Securities Act in a transaction meeting the requirements of Rule 144A,
or (iv) pursuant to another available exemption from the registration
requirements of the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States. We do not
currently anticipate that we will register under the Securities Act the resale
of any old notes that remain outstanding after consummation of the exchange
offer. However, generally, (i) if any Initial Purchaser so requests with respect
to old notes not eligible to be exchanged for Exchange Notes in the exchange
offer and held by it following consummation of the exchange offer or (ii) if any
holder of old notes is not eligible to participate in the exchange offer or, in
the case of any holder of old notes that participates in the exchange offer,
does not receive freely tradeable Exchange Notes in exchange for old notes, we
are obligated to file a registration statement on the appropriate form under the
Securities Act relating to the old notes held by such persons.
Accounting Treatment
The new notes will be recorded at the same carrying value as the old notes
as reflected in our accounting records on the date of the exchange. Accordingly,
no gain or loss for accounting purposes will be recognized by us. The expenses
of the exchange offer will be amortized over the term of the new notes.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our unaudited historical ratios of earnings
to fixed charges for the periods indicated below:
Year Ended December 31,
---------------------------------
1999 2000 2001 2002 2003
Ratio of earnings ---- ---- ---- ---- ----
to fixed charges...................2.1x 2.5x 1.2x (1) (1)
------------------
(1) For the years ended December 31, 2002 and 2003, fixed charges exceeded
earnings by $28.2 million and $35.3 million, respectively.
In calculating the ratio of earnings to fixed charges, earnings consist of
income (loss) from continuing operations before income taxes and extraordinary
items plus fixed charges. Fixed charges consist of interest expense, preferred
stock accretion, amortization of indebtedness issuance costs, and rental expense
representative of the interest factor.
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new notes
offered hereby. In consideration for issuing the new notes as contemplated in
this prospectus, we will receive in exchange old notes in like principal
amount, the forms and terms of which are identical, in all material respects, to
the new notes. The old notes surrendered in exchange for new notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the new
notes will not result in any increase in our indebtedness. Proceeds from the
sale of the privately placed old notes were used to repay indebtedness and for
fees and expenses in connection with the sale of the old notes.
21
CAPITALIZATION
The following table shows our capitalization as of December 31, 2003.
As of December 31, 2003
(dollars in millions)
Cash and cash equivalents............................... $ 467.5
==========
Debt:
Bank credit facility - revolving debt................. $ 35.1
Bank credit facility - term debt...................... 378.2
10-3/8% Senior Subordinated Notes due April 1, 2011... 300.0
9-1/4% Senior Subordinated Notes due July 15, 2011.... 200.0
7-3/8% Senior Subordinated Notes due January 15, 2014. 297.3
Other................................................. 151.0
----------
Total debt......................................... 1,361.6
-------
Stockholders' equity:
Common stock, $0.01 par value--authorized
$150.0 million shares; 50.0 million shares issued... 0.5
Additional paid-in capital............................ 795.1
Retained earnings..................................... 41.9
Accumulated other comprehensive income (loss)......... 57.0
Less cost of shares of common stock in treasury
(1.2 million shares)......................... ........ (17.8)
----------
Total stockholders' equity.......................... 876.7
----------
Total capitalization................................ $2,238.3
==========
22
DESCRIPTION OF THE NEW NOTES
The old notes were, and the new notes will be, issued under an Indenture,
dated as of November 25, 2003 (the "Indenture") among the guarantors named
therein (the "Subsidiary Guarantors"), HSBC Bank USA, as trustee, and us.
The following is a summary of certain provisions of the Indenture and the
notes. The following summary of certain provisions of the Indenture and the
notes does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Indenture and the notes,
including the definitions of certain terms therein and those terms made a part
thereof by the Trust Indenture Act. We urge you to read the Indenture and form
of notes because they, not this description, define your rights as holders of
these notes. You may request copies of these documents at our address set forth
under the heading "Where You can Find More Information."
In this section, entitled "Description of the Notes," when we refer to
"Terex," "we," "our" or "us," we are referring to Terex Corporation and not its
subsidiaries.
General
Principal of, premium, if any, and interest on the notes will be payable,
and the notes may be exchanged or transferred, at the office or agency of Terex
in the Borough of Manhattan, the City of New York (which initially shall be the
corporate trust office of the trustee, at 452 Fifth Avenue, New York, New York
10018, Attention: Issuer Services), except that, at the option of Terex, payment
of interest may be made by check mailed to the address of the holders as such
address appears in the note register.
The notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. See "--Book-Entry,
Delivery and Form." No service charge shall be made for any registration or
exchange of notes, but Terex may require payment of a sum sufficient to cover
any transfer tax or other similar governmental charge payable in connection
therewith.
Terms of the New Notes
The new notes:
o will be unsecured senior subordinated obligations of Terex maturing on
January 15, 2014;
o will be subordinate in right of payment to certain other debt
obligations of Terex; and
o will bear interest at 7-3/8% per annum from their date of original
issuance and will be paid semiannually.
Subject to compliance with the covenant described under "Certain
Covenants--Limitation on Indebtedness," we may issue additional notes under the
Indenture in a principal amount not to exceed $200 million in the aggregate (the
"additional notes"). The new notes will be subordinate in right of payment to
certain of our other debt obligations. The new notes will be payable
semiannually to holders of record at the close of business on January 1 or July
1 immediately preceding the interest payment date on January 15 and July 15 of
each year, commencing July 15, 2004. We will pay interest on overdue principal
at 1% per annum in excess of such rate, and will pay interest on overdue
installments of interest at such higher rate to the extent lawful. Interest on
the notes will be computed on the basis of a 360-day year of twelve 30-day
months.
Optional Redemption
Except as set forth in the following paragraph, we will not be entitled to
redeem the notes at our option prior to January 15, 2009. Thereafter, we will be
entitled at our option to redeem all or a portion of the notes, in whole or in
part, at any time or from time to time, upon not less than 30 nor more than 60
days prior notice mailed by first-class mail to each holder's registered
address, at the following redemption prices (expressed in percentages
23
of principal amount), plus accrued interest to the redemption date (subject to
the right of holders of record on the relevant record date to receive interest
due on the relevant interest payment date), if redeemed during the 12-month
period commencing on January 15, of the years set forth below:
Redemption Period Price
----------------- -----
2009 103.688%
2010 102.458%
2011 101.229%
2012 and thereafter 100.000%
In addition, before January 15, 2007, we may at our option on one or more
occasions redeem in the aggregate up to 35.0% of the original principal amount
of the notes (including the original principal amount of any additional notes)
with the proceeds of one or more Public Equity Offerings, at a redemption price
(expressed as a percentage of principal amount) of 107.375% plus accrued
interest to the redemption date (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date); provided, however, that at least 65% of the aggregate principal
amount of the notes originally outstanding remains outstanding (including the
original principal amount of any additional notes) after each such redemption.
In the case of any partial redemption, we will select the notes for
redemption in accordance with the requirements of the principal national
securities exchange, if any, on which the notes are listed or, if the notes are
not listed on a securities exchange, the trustee will select the notes on a pro
rata basis, by lot or by such other method as the trustee in its sole discretion
shall deem to be fair and appropriate, although no note in original principal
amount of $1,000 or less shall be redeemed in part. If any new note is to be
redeemed in part only, the notice of redemption relating to such note shall
state the portion of the principal amount thereof to be redeemed. A new note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original note.
The notes will not have the benefit of a sinking fund.
Subsidiary Guarantees
Our obligations pursuant to the notes, including the repurchase obligation
resulting from a Change of Control, will be unconditionally guaranteed, jointly
and severally, on a senior subordinated basis, by each of the Subsidiary
Guarantors. Each Subsidiary Guarantee will not exceed the maximum amount that
can be guaranteed by the applicable Subsidiary Guarantor without rendering the
Subsidiary Guarantee, as it relates to such Subsidiary Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally. If a Subsidiary
Guarantee were to be rendered voidable, a court could deem it unenforceable or
subordinate it to all other indebtedness (including guarantees and other
contingent liabilities) of the applicable Subsidiary Guarantor, and, depending
on the amount of such indebtedness, a Subsidiary Guarantor's liability on its
Subsidiary Guarantee could be reduced to zero. See "Risk Factors--Since the
notes are senior subordinated debt, there may not be sufficient assets to pay
amounts owed on the notes if a default occurs" and "Risk Factors--As a result of
fraudulent conveyance laws, a court could void a guarantee of a subsidiary, in
which event noteholders would cease to have a claim against such subsidiary
guarantor."
Pursuant to the Indenture, a Subsidiary Guarantor may consolidate with,
merge with or into, or transfer all or substantially all its assets to any other
Person to the extent described below under "Certain Covenants--Merger and
Consolidation"; provided, however, that if such other Person is not Terex or
another Subsidiary Guarantor, such Subsidiary Guarantor's obligations under its
Subsidiary Guarantee must be expressly assumed by such other Person. However,
generally upon the sale or other disposition (including by way of consolidation
or merger) of a Subsidiary Guarantor or the sale or disposition of all or
substantially all the assets of a Subsidiary Guarantor (in each case other than
to us or any of our Affiliates) permitted by the Indenture (including pursuant
to the exercise of remedies in respect of any Lien on the capital stock of a
Subsidiary Guarantor, which Lien secures outstanding Bank Indebtedness), such
Subsidiary Guarantor will be released and relieved from all its obligations
under its Subsidiary Guarantee.
24
Subordination
The indebtedness evidenced by the notes will be our senior subordinated
obligations. The payment of the principal of, premium (if any), and interest on
the notes is contractually subordinated in right of payment as set forth in the
Indenture, to the prior payment in full of all of our Senior Indebtedness.
The obligations of a Subsidiary Guarantor under its Subsidiary Guarantee
will be a senior subordinated obligation of such Subsidiary Guarantor. As such,
the rights of noteholders to receive payment by a Subsidiary Guarantor pursuant
to its Subsidiary Guarantee will be contractually subordinated in right of
payment to the rights of holders of Senior Indebtedness of such Subsidiary
Guarantor. The terms of the subordination provisions described herein with
respect to our obligations under the notes apply equally to a Subsidiary
Guarantor and the obligations of such Subsidiary Guarantor under its Subsidiary
Guarantee.
Our indebtedness and indebtedness of the Subsidiary Guarantors that
constitutes Senior Indebtedness will rank senior to the notes and the relevant
Subsidiary Guarantee in accordance with the provisions of the Indenture. The
notes will in all respects rank pari passu with all of our other Senior
Subordinated Indebtedness and the Subsidiary Guarantees will in all respects
rank pari passu with all other Senior Subordinated Indebtedness of the
Subsidiary Guarantors. Furthermore, the notes will rank senior to all of our
other Subordinated Obligations and the Subsidiary Guarantees will rank senior to
all other Subordinated Obligations of the Subsidiary Guarantors. See "
Subsidiary Guarantees," "Risk Factors--Since the notes are senior subordinated
debt, there may not be sufficient assets to pay amounts owed on the notes if a
default occurs" and "Risk Factors--As a result of fraudulent conveyance laws, a
court could void a guarantee of a subsidiary, in which event noteholders would
cease to have a claim against such subsidiary guarantor."
As of December 31, 2003, (i) the Senior Indebtedness of Terex and the
Subsidiary Guarantors, to which the notes are contractually subordinated, was
approximately $564 million, consisting principally of approximately $413 million
of Indebtedness Incurred under the Credit Facility, (ii) there was approximately
$500 million of Senior Subordinated Indebtedness of Terex or the Subsidiary
Guarantors ranking pari passu with the notes or the Subsidiary Guarantees,
consisting of the Existing Notes and the subsidiary guarantees thereof, and
(iii) there were no Subordinated Obligations ranking junior to the notes or the
Subsidiary Guarantees.
In addition, claims of creditors of our subsidiaries, including trade
creditors, secured creditors and creditors holding indebtedness and guarantees
issued by such subsidiaries, and claims of preferred stockholders (if any) of
such subsidiaries, generally will have priority with respect to the assets and
earnings of such subsidiaries over the claims of our creditors, including the
holders of the notes, even if such obligations do not constitute Senior
Indebtedness. The notes therefore will be effectively subordinated to existing
and future liabilities of our subsidiaries, except to the extent that the
Subsidiary Guarantees may be enforceable by holders of the notes against the
Subsidiary Guarantors.
We and the Subsidiary Guarantors have agreed in the Indenture that none of
us will Incur any Indebtedness that is expressly by its terms subordinate or
junior in right of payment to any Senior Indebtedness of Terex or any Subsidiary
Guarantor, and senior in any respect in right of payment to the notes, in the
case of Terex, or to the applicable Subsidiary Guarantee, in the case of a
Subsidiary Guarantor. Unsecured Indebtedness is not deemed to be subordinated or
junior to Secured Indebtedness merely because it is unsecured.
We may not pay principal of, premium (if any) or interest on, the notes or
make any deposit pursuant to the provisions described under "Defeasance" below
and may not repurchase, redeem or otherwise retire any notes (collectively, "pay
the notes") if (i) any amount of principal, interest or other payments due under
the Designated Senior Indebtedness has not been paid when due and remains
outstanding or (ii) any other default on Designated Senior Indebtedness occurs
and the maturity of such Designated Senior Indebtedness is accelerated in
accordance with its terms unless, in either case, the default has been cured or
waived and any such acceleration has been rescinded or such Designated Senior
Indebtedness has been paid in full. However, we may pay the notes without regard
to the foregoing if we and the trustee receive written notice approving such
payment from the Representative of the Designated Senior Indebtedness with
respect to which either of the events set forth in clause (i) or (ii) of the
immediately preceding sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or (ii)
of the second preceding sentence) with respect to any Designated Senior
25
Indebtedness pursuant to which the maturity thereof may be accelerated either
immediately without further notice (except such notice as may be required to
effect such acceleration) or upon the expiration of any applicable grace
periods, we may not pay the notes for a period (a "Payment Blockage Period") (a)
commencing upon the receipt by the trustee (with a copy to us) of written notice
(a "Blockage Notice") of such default from the Representative of the holders of
such Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and (b) ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated (i) by written notice to the trustee and Terex
from the Person or Persons who gave such Blockage Notice, (ii) because the
default giving rise to such Blockage Notice is no longer continuing (solely as
evidenced by written notice to the trustee by the Representative of such
Designated Senior Indebtedness which notice shall be promptly delivered) or
(iii) because such Designated Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions described in the first sentence of this
paragraph), unless the holders of such Designated Senior Indebtedness or the
Representative of such holders have accelerated the maturity of such Designated
Senior Indebtedness, we may resume payments on the notes after the end of such
Payment Blockage Period. The notes will not be subject to more than one Payment
Blockage Period in any consecutive 360-day period, irrespective of the number of
defaults with respect to Designated Senior Indebtedness during such period.
Upon any payment or distribution of the assets of either us or any
Subsidiary Guarantor upon a total or partial liquidation or dissolution or
reorganization of or similar proceeding, or any bankruptcy, insolvency,
receivership or similar proceeding, relating to either us or any Subsidiary
Guarantor or its property or an assignment for the benefit of creditors or
marshalling of assets and liabilities of ours or any Subsidiary Guarantor: (i)
the holders of Senior Indebtedness will be entitled to receive payment in full
of such Senior Indebtedness before the noteholders are entitled to receive any
payment, and (ii) until the Senior Indebtedness is paid in full, any payment or
distribution to which noteholders would be entitled but for the subordination
provisions of the Indenture will be made to holders of such Senior Indebtedness
as their interests may appear. If a payment or distribution is made to
noteholders that, due to the subordination provisions, should not have been made
to them, such noteholders are required to hold it in trust for the holders of
Senior Indebtedness and pay it over to them as their interests may appear.
If payment of the notes is accelerated because of an Event of Default, we
or the trustee will promptly notify the holders of Designated Senior
Indebtedness or the Representative of such holders of the acceleration.
Under the terms of the Indenture, in the event of insolvency: (i) our
creditors or the creditors of a Subsidiary Guarantor who are holders of Senior
Indebtedness of Terex or such Subsidiary Guarantor, as the case may be, may
recover more, ratably, than the noteholders, and (ii) our creditors or the
creditors of such Subsidiary Guarantor who are not holders of Senior
Indebtedness may recover less, ratably, than holders of Senior Indebtedness and
may recover more, ratably, than the noteholders.
The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in trust
by the trustee for the payment of principal of and interest on the notes
pursuant to the provisions described under "Defeasance."
Change of Control
If we undergo a Change of Control, each holder shall have the right to
require us to repurchase all or any part of such holder's notes at a purchase
price in cash equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date).
Within 15 Business Days following any Change of Control, we will mail a
notice to the trustee and to each holder stating, among other things:
(1) that a Change of Control has occurred and that such holder has the
right to require us to purchase such holder's notes at a purchase price in
cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (subject to
the right of holders of record on the relevant record date to receive
interest on the relevant interest payment date);
26
(2) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of
Control);
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by us, consistent with the covenant
described hereunder, that a holder must follow in order to have its notes
purchased.
We will comply in all material respects, to the extent applicable, with the
requirements of Section 14(e) of the Securities Exchange Act of 1934, as
amended, and any other securities laws or regulations in connection with the
repurchase of notes as a result of a Change in Control. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
the covenant described hereunder, we will comply with the applicable securities
laws and regulations and shall not be deemed to have breached our obligations
under the covenant described hereunder by virtue of our compliance with such
securities laws or regulations.
Subject to the limitations discussed below, we could, in the future, enter
into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect our capital structure or credit ratings.
Restrictions on our ability to Incur additional Indebtedness are contained in
the covenants described under " Certain Covenants--Limitation on Indebtedness"
and " Limitation on Indebtedness and Preferred Stock of Restricted
Subsidiaries." Such restrictions can only be waived with the consent of the
holders of a majority in principal amount of the notes then outstanding. Except
for the limitations contained in such covenants, however, the Indenture will not
contain any covenants or provisions that may afford holders protection in the
event of a highly leveraged transaction.
If a Change of Control offer is made, we can not assure the holders that we
will have available funds sufficient to pay the purchase price for all of the
notes that might be delivered by holders seeking to accept the Change of Control
offer. Our failure to make or consummate the Change of Control offer or pay the
purchase price when due will give the trustee and the holders the rights
described under "Defaults."
The existence of a holder's right to require us to offer to repurchase such
holder's notes upon a Change of Control may deter a third party from acquiring
Terex in a transaction which constitutes a Change of Control.
The Credit Facility, under certain circumstances, prohibits us from
purchasing any notes prior to its expiration, and will also provide that the
occurrence of certain change of control events with respect to Terex would
constitute a default thereunder. In the event a Change of Control occurs at a
time when we are prohibited from purchasing notes, we may (but are not required
to) seek the consent of our lenders to the purchase of notes or may (but are not
required to) attempt to refinance the borrowings that contain such prohibition.
Future Indebtedness that we may Incur may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require such Indebtedness to be repaid or repurchased upon a Change of Control.
Moreover, the exercise by the holders of their right to require us to repurchase
the notes could cause a default under such Indebtedness, even if the Change of
Control itself does not, due to the financial effect of such repurchase on us.
Finally, our ability to pay cash to the holders following the occurrence of a
Change of Control may be limited by our then existing financial resources. We
can not assure the holders that sufficient funds will be available when
necessary to make any required repurchases.
The provisions under the Indenture relating to our obligation to make an
offer to repurchase the notes as a result of a Change of Control may be waived
or modified with the written consent of each holder of notes then outstanding.
27
Certain Covenants
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness
(a) Terex will not Incur, directly or indirectly, any Indebtedness
(including Acquired Indebtedness) unless, on the date of such Incurrence, and
after giving pro forma effect thereto, (i) no Default or Event of Default shall
have occurred and be continuing or would occur and (ii) the Consolidated Cash
Flow Coverage Ratio at the date of such issuance exceeds 2.0 to 1.0.
(b) Notwithstanding paragraph (a), Terex may Incur the following
Indebtedness:
(1) Indebtedness Incurred pursuant to the Credit Facility, together
with all Indebtedness then outstanding and Incurred pursuant to clause (1)
of "Limitation on Indebtedness and Preferred Stock of Restricted
Subsidiaries" below, not to exceed in outstanding principal amount the
greater of (1) $950 million at any time outstanding and (2) the sum of (x)
80% of the consolidated book value of the net accounts receivable of Terex
and (y) 50% of the consolidated book value of the inventory of Terex, in
each case determined in accordance with GAAP;
(2) Indebtedness owed to and held by a Restricted Subsidiary;
provided, however, that any subsequent issuance or transfer of any Capital
Stock that results in such Subsidiary ceasing to be a Restricted
Subsidiary, or any transfer of such Indebtedness (other than to a
Restricted Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by Terex;
(3) the old notes and the new notes (other than additional notes);
(4) Indebtedness (other than Indebtedness described in clause (1),
(2), or (3) above) outstanding on November 25, 2003 (including the Existing
Notes);
(5) any Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (3), (4) or (8) or this
clause (5) or pursuant to clause (5) of the covenant described under
"--Limitation on Indebtedness and Preferred Stock of Restricted
Subsidiaries" below;
(6) obligations of Terex pursuant to (A) Interest Rate Protection
Agreements in respect of Indebtedness of Terex that is permitted by the
terms of the Indenture to be outstanding to the extent the notional
principal amount of such obligation does not exceed the aggregate principal
amount of the Indebtedness to which such Interest Rate Protection
Agreements relate, (B) Currency Agreement Obligations in respect of foreign
exchange exposures Incurred by Terex in the ordinary course of its business
and (C) commodity agreements of Terex to the extent entered into in the
ordinary course of business to protect Terex from fluctuations in the
prices of raw materials used in its business;
(7) Indebtedness of Terex consisting of obligations in respect of
purchase price adjustments in connection with the acquisition or
disposition of assets by Terex or any Restricted Subsidiary permitted under
the Indenture;
(8) Capital Lease Obligations, Purchase Money Indebtedness and
Acquired Indebtedness (to the extent not Incurred in connection with, or in
anticipation or contemplation of, the relevant transaction) in an aggregate
principal amount, together with the principal amount of Indebtedness
Incurred pursuant to clause (9) of "--Limitation on Indebtedness and
Preferred Stock of Restricted Subsidiaries," not exceeding $25 million at
any one given time outstanding;
(9) performance bonds, surety bonds, insurance obligations or bonds
and other similar bonds or obligations incurred by Terex in the ordinary
course of business consistent with past practice;
28
(10) Floor Plan Guarantees;
(11) Indebtedness resulting from endorsement of negotiable instruments
for collection in the ordinary course of business;
(12) Indebtedness arising under indemnity agreements to title insurers
to cause such title insurers to issue to the Collateral Agent mortgagee
title insurance policies; and
(13) Obligations of Terex pursuant to Interest Rate Protection
Agreements in respect of Indebtedness of Terex that is permitted by the
terms of the Indenture to be outstanding to the extent the notional
principal amount of such obligation does not exceed the aggregate principal
amount of the Indebtedness to which such Interest Rate Protection
Agreements relate; and
(14) Indebtedness in an aggregate principal amount which, together
with all other Indebtedness of Terex then outstanding (other than
Indebtedness permitted by paragraph (a) or clauses (1) through (13) of this
paragraph (b)) does not exceed $25 million (less the amount of any
Subsidiary Indebtedness and Preferred Stock then outstanding and Incurred
pursuant to clause (12) of "--Limitation on Indebtedness and Preferred
Stock of Restricted Subsidiaries").
(c) Except to the extent that such Indebtedness is permitted to be Incurred
pursuant to paragraphs (a) and (b) above and the provisions of "--Limitation on
Indebtedness and Preferred Stock of Restricted Subsidiaries," Terex will not,
and will not permit any Restricted Subsidiary to, Incur any Indebtedness if the
proceeds thereof are used, directly or indirectly, to repay, prepay, redeem,
defease, retire, refund or refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the notes or the relevant Subsidiary
Guarantee, as applicable, to at least the same extent as such Subordinated
Obligations.
(d) For purposes of determining compliance with the covenants entitled
"--Limitation on Indebtedness" and "--Limitation on Indebtedness and Preferred
Stock of Restricted Subsidiaries," in the event that an item of Indebtedness
meets the criteria of more than one of the types of Indebtedness described
above, Terex, in its sole discretion, will classify such item of Indebtedness
and only be required to include the amount and type of such Indebtedness in one
of the above clauses.
(e) For purposes of determining amounts of Indebtedness under the covenants
entitled "--Limitation on Indebtedness" and "--Limitation on Indebtedness and
Preferred Stock of Restricted Subsidiaries," Indebtedness resulting from
security interests granted with respect to Indebtedness otherwise included in
the determination of Indebtedness, and Guarantees (and security interests with
respect thereof) of, or obligations with respect to letters of credit
supporting, Indebtedness otherwise included in the determination of Indebtedness
shall not be included in the determination of Indebtedness.
(f) Indebtedness of any Person which is outstanding at the time such Person
becomes a Restricted Subsidiary of Terex (including upon designation of any
subsidiary or other person as a Restricted Subsidiary) or is merged with or into
or consolidated with Terex or a Restricted Subsidiary of Terex shall be deemed
to have been Incurred at the time such Person becomes such a Restricted
Subsidiary of Terex or merged with or into or consolidated with Terex or a
Restricted Subsidiary of Terex, as applicable.
Limitation on Indebtedness and Preferred Stock of Restricted Subsidiaries
Terex will not permit any Restricted Subsidiary to Incur, directly or
indirectly, any Indebtedness or Preferred Stock (except that a Subsidiary
Guarantor shall be permitted to issue Preferred Stock) except for the following:
(1) Indebtedness Incurred pursuant to the Credit Facility, together
with the aggregate amount of all Indebtedness then outstanding and issued
pursuant to clause (b)(1) of "--Limitation on Indebtedness" above, not to
exceed in outstanding principal amount the greater of (1) $950 million at
any time outstanding and (2) the sum of (x) 80% of the consolidated book
value of the net accounts receivable of
29
Terex and (y) 50% of the consolidated book value of the inventory of Terex,
in each case determined in accordance with GAAP;
(2) Indebtedness or Preferred Stock issued to and held by Terex or a
Restricted Subsidiary; provided, however, that (A) any subsequent issuance
or transfer of any Capital Stock that results in any such Subsidiary
ceasing to be a Restricted Subsidiary or (B) any subsequent transfer of
such Indebtedness or Preferred Stock (other than to Terex or a Restricted
Subsidiary) shall be deemed, in each case, to constitute the Incurrence of
such Indebtedness or Preferred Stock by the issuer thereof;
(3) Acquired Indebtedness (to the extent not Incurred in connection
with, or in anticipation or contemplation of, the relevant transaction) of
such Restricted Subsidiary; provided that after giving effect to the
Incurrence of such Acquired Indebtedness, Terex could incur $1.00 of
Indebtedness pursuant to paragraph (a) under "--Limitation on
Indebtedness";
(4) Indebtedness or Preferred Stock (other than any described in
clause (1), (2) or (3)) outstanding on November 25, 2003 (including
Guarantees in respect of the Existing Notes);
(5) Refinancing Indebtedness Incurred in respect of Indebtedness or
Preferred Stock referred to in clause (3), (4) or (9) or this clause (5);
provided, however, that to the extent such Refinancing Indebtedness
Refinances Acquired Indebtedness or Preferred Stock of a Restricted
Subsidiary that is not a Wholly Owned Subsidiary, such Refinancing
Indebtedness shall be Incurred only by such Restricted Subsidiary;
(6) Obligations of a Restricted Subsidiary pursuant to (A) Interest
Rate Protection Agreements in respect of Indebtedness of the Restricted
Subsidiary that is permitted by the terms of the Indenture to be
outstanding to the extent the notional principal amount of such obligation
does not exceed the aggregate principal amount of the Indebtedness to which
such Interest Rate Protection Agreements relate, (B) Currency Agreement
Obligations in respect of foreign exchange exposures Incurred by the
Restricted Subsidiary in the ordinary course of its business and (C)
commodity agreements of the Restricted Subsidiary to the extent entered
into in the ordinary course of business to protect the Restricted
Subsidiary from fluctuations in the prices of raw materials used in its
business;
(7) Indebtedness consisting of the Subsidiary Guarantees (other than
in respect of additional notes);
(8) Indebtedness of any Restricted Subsidiary consisting of
Obligations in respect of purchase price adjustments in connection with the
acquisition or disposition of assets by any Restricted Subsidiary permitted
under the Indenture;
(9) Capital Lease Obligations, Purchase Money Indebtedness and
Acquired Indebtedness (to the extent not Incurred in connection with, or in
anticipation or contemplation of, the relevant transaction) in an aggregate
principal amount not exceeding, together with the principal amount of
Indebtedness Incurred pursuant to clause (b)(8) of "--Limitation on
Indebtedness," $25 million at any one given time outstanding;
(10) performance bonds, surety bonds, insurance obligations or bonds
and other similar bonds or obligations incurred by a Restricted Subsidiary
in the ordinary course of business consistent with past practice;
(11) Floor Plan Guarantees; and
(12) Indebtedness and Preferred Stock in an aggregate principal amount
which, together with any other Indebtedness or Preferred Stock of
Restricted Subsidiaries then outstanding (other than Indebtedness or
Preferred Stock permitted by clauses (1) through (11) of this Section) does
not exceed $25
30
million (less the amount of any Indebtedness then outstanding and Incurred
pursuant to clause (b)(14) of "--Limitation on Indebtedness").
Limitation on Liens Securing Subordinated Indebtedness
Terex will not, and will not permit any Restricted Subsidiary to, create,
Incur, assume or suffer to exist any Liens of any kind (other than Permitted
Liens) upon any of their respective assets or properties now owned or acquired
after the date of the Indenture or any income or profits therefrom securing
either:
(1) any Indebtedness of Terex or a Restricted Subsidiary which is
expressly by its terms subordinate or junior in right of payment to any
other Indebtedness of Terex or such Restricted Subsidiary, as the case may
be, unless the notes or the relevant Subsidiary Guarantee, as the case may
be, are equally and ratably secured for so long as such Indebtedness is so
secured; provided that, if such Indebtedness which is expressly by its
terms subordinate or junior in right of payment to any other Indebtedness
of Terex or a Restricted Subsidiary is expressly subordinate or junior to
the notes or the relevant Subsidiary Guarantee, as the case may be, then
the Lien securing such subordinated or junior Indebtedness shall be
subordinate and junior to the Lien securing the notes or the relevant
Subsidiary Guarantee, as the case may be, with the same relative priority
as such subordinated or junior Indebtedness shall have with respect to the
notes or the relevant Subsidiary Guarantee, as the case may be, or
(2) any assumption, guarantee or other liability of Terex or any
Restricted Subsidiary in respect of any Indebtedness of Terex or a
Restricted Subsidiary which is expressly by its terms subordinate or junior
in right of payment to any other Indebtedness of Terex or such Restricted
Subsidiary, unless the notes or the relevant Subsidiary Guarantee, as the
case may be, are equally and ratably secured for so long as such
assumption, guaranty or other liability is so secured; provided that, if
such subordinated Indebtedness which is expressly by its terms subordinate
or junior in right of payment to any other Indebtedness of Terex or a
Restricted Subsidiary is expressly by its terms subordinate or junior to
the notes or the relevant Subsidiary Guarantee, as the case may be, then
the Lien securing the assumption, guarantee or other liability of such
Subsidiary shall be subordinate and junior to the Lien securing the notes
or the relevant Subsidiary Guarantee, as the case may be, with the same
relative priority as such subordinated or junior Indebtedness shall have
with respect to the notes or the relevant Subsidiary Guarantee, as the case
may be.
Limitation on Other Senior Subordinated Indebtedness
Terex will not, and will not permit any Restricted Subsidiary Guarantor to,
create, Incur, assume, guarantee or in any other manner become liable with
respect to any Indebtedness that is expressly by its terms subordinate or junior
in right of payment to any Senior Indebtedness of Terex or any Subsidiary
Guarantor and senior in any respect in right of payment to the notes, in the
case of Terex, or to the applicable Subsidiary Guarantee in the case of a
Subsidiary Guarantor.
Limitation on Restricted Payments
(a) Terex will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any distribution
on or in respect of its Capital Stock (including any payment in connection with
any merger or consolidation involving Terex) or to the direct or indirect
holders of its Capital Stock in their capacities as such (except dividends or
distributions payable solely in Capital Stock (other than Disqualified Stock) or
in options, warrants or other rights to purchase its Capital Stock (other than
Disqualified Stock) and except dividends or distributions payable to Terex or
any Restricted Subsidiary (and, if the Restricted Subsidiary making such
dividends or distributions has any stockholders other than Terex or another
Restricted Subsidiary, to such stockholders on no more than a pro rata basis,
measured by value)), (ii) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of Terex, any Restricted Subsidiary or any other
Affiliate of Terex, (iii) purchase, repurchase, redeem, defease or otherwise
acquire or retire for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment, any Subordinated Obligations or (iv) make any
Restricted Investment (any such dividend, distribution, purchase, redemption,
repurchase, defeasance, other acquisition,
31
retirement or Restricted Investment being herein referred to as a "Restricted
Payment") if at the time Terex or such Restricted Subsidiary makes such
Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom); or
(2) Terex would not be permitted to issue an additional $1.00 of
Indebtedness pursuant to paragraph (a) under "--Limitation on Indebtedness"
after giving pro forma effect to such Restricted Payment; or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since March 31, 1998 would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the first full
fiscal quarter commencing after March 31, 1998 to the end of the most
recent fiscal quarter for which financial statements are available (or, in
case such Consolidated Net Income shall be a deficit, minus 100% of such
deficit) plus
(B) the aggregate Net Cash Proceeds received by Terex from (x) the
issue or sale of its Capital Stock (other than Disqualified Stock)
subsequent to March 31, 1998 (other than an issuance or sale to a
Subsidiary or an employee stock ownership plan or similar trust in the
benefit of employees) and (y) the issue or sale (other than an issuance or
sale to a Subsidiary or an employee stock ownership plan or similar trust
in the benefit of employees) after March 31, 1998 of Disqualified Stock or
debt securities that have been converted or exchanged in accordance with
their terms for Capital Stock of Terex (other than Disqualified Stock), in
each case to the extent such proceeds are not used to redeem, repurchase,
retire or otherwise acquire Capital Stock or any Indebtedness of Terex or
any Restricted Subsidiary or to make any Investment pursuant to clause (8)
of the definition of "Permitted Investment."
(b) The provisions of clauses (2) and (3) of paragraph (a) shall not
prohibit:
(1) any purchase or redemption of Capital Stock or Subordinated
Obligations of Terex made by exchange for, or out of the proceeds of the
substantially concurrent sale or issuance of, Capital Stock of Terex (other
than Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary or an employee stock ownership plan); provided, however, that
the Net Cash Proceeds from such sale shall be excluded from clause (3)(B)
of paragraph (a);
(2) dividends paid within 60 days after the date of declaration if at
such date of declaration such dividend would have complied with this
provision; provided, however, that such dividend shall be deducted in the
calculation of the amount of Restricted Payments available to be made
referred to in clause (3) of paragraph (a) above;
(3) the repurchase of shares of, or options to purchase shares of,
Capital Stock of Terex or any of its Subsidiaries from employees, former
employees, directors or former directors of Terex or any of its
Subsidiaries (or permitted transferees of such employees, former employees,
directors or former directors), pursuant to the terms of the agreements
(including employment agreements) or plans (or amendments thereto) approved
by the Board of Directors under which such individuals purchase or sell or
are granted the option to purchase or sell, shares of such common stock;
provided, however, that the aggregate amount of any repurchases pursuant to
this clause (3) and any purchases pursuant to clause (4) below shall not
exceed $5 million per year;
(4) provided that no Default or Event of Default shall have occurred
or be continuing at the time of such payment or after giving effect
thereto, the purchase by Terex of shares of its common stock (for not more
than fair market value) in connection with the delivery of such stock to
grantees under any stock option plan (upon the exercise by such grantees of
their stock options) or any other deferred compensation plan of Terex
approved by the Board of Directors; provided, however, that the aggregate
32
amount of any purchases pursuant to this clause (4) and any repurchases
pursuant to clause (3) above shall not exceed $5 million per year;
(5) the redemption, purchase, retirement or other payoff of any
Subordinated Obligations with the proceeds of any Refinancing Indebtedness
permitted to be incurred pursuant to the terms of clause (b)(5) of
"--Certain Covenants--Limitation on Indebtedness" and clause (5) of
"--Limitation on Indebtedness and Preferred Stock of Restricted
Subsidiaries"; and
(6) provided that no Default or Event of Default shall have occurred
or be continuing at the time of such payment or after giving effect
thereto, other Restricted Payments in an aggregate amount not to exceed $10
million; provided, however, that such payment shall be deducted in the
calculation of the amount of Restricted Payments available to be made
referred to in clause (3) of paragraph (a) above.
Limitation on Restrictions on Distributions from Restricted Subsidiaries
Terex will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, create or permit to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (a) pay dividends or
make any other distributions on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits to Terex or a
Restricted Subsidiary or pay any Indebtedness or other obligation owed to Terex
or a Restricted Subsidiary, (b) make any loans or advances to Terex or any other
Restricted Subsidiary or (c) transfer any of its property or assets to Terex or
any other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of:
(1) the Credit Facility as in effect on November 25, 2003, and any
amendments, restatements, renewals, replacements or refinancings thereof;
provided, however, that such amendments, restatements, renewals,
replacements or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Credit
Facility (or, if more restrictive, than those contained in the Indenture)
immediately prior to any such amendment, restatement, renewal, replacement
or refinancing,
(2) applicable law,
(3) any instrument governing Indebtedness or Capital Stock of an
Acquired Person acquired by Terex or any of its Restricted Subsidiaries as
in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition); provided, however, that (A) such restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Acquired Person, and (B) the consolidated net income of an
Acquired Person for any period prior to such acquisition shall not be taken
into account in determining whether such acquisition was permitted by the
terms of the Indenture,
(4) by reason of customary non-assignment provisions in leases or
other agreements entered into the ordinary course of business and
consistent with past practices,
(5) Purchase Money Indebtedness for property acquired in the ordinary
course of business that only impose restrictions on the property so
acquired,
(6) an agreement for the sale or disposition of the Capital Stock or
assets of such Restricted Subsidiary; provided, however, that such
restriction is only applicable to such Restricted Subsidiary or assets, as
applicable, and such sale or disposition otherwise is permitted under
"--Limitation on Sales of Assets and Subsidiary Stock" below; provided,
further, however, that such restriction or encumbrance shall be effective
only for a period from the execution and delivery of such agreement through
a termination date not later than 270 days after such execution and
delivery, or
(7) Refinancing Indebtedness permitted under the Indenture; provided,
however, that the restrictions contained in the agreements governing such
Refinancing Indebtedness are no more restrictive in
33
the aggregate than those contained in the agreements governing the
Indebtedness being refinanced immediately prior to such refinancing.
Notwithstanding the foregoing, neither (a) customary provisions restricting
subletting or assignment of any lease entered into in the ordinary course of
business, consistent with past practice, nor (b) Liens permitted under the
Indenture, shall in and of themselves be considered a restriction on the ability
of the applicable Restricted Subsidiary to transfer such agreements or assets,
as the case may be.
Limitation on Sales of Assets and Subsidiary Stock
(a) Terex will not, and will not permit any Restricted Subsidiary to, make
any Asset Disposition unless:
(1) Terex or such Restricted Subsidiary receives consideration at the
time of such Asset Disposition at least equal to the fair market value, as
determined in good faith by the Board of Directors (including as to the
value of all non-cash consideration), of the shares and assets subject to
such Asset Disposition and at least 75% of the consideration thereof
received by Terex or such Restricted Subsidiary, as the case may be, is in
the form of cash or Cash Equivalents, and
(2) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by Terex (or such Restricted Subsidiary, as the case
may be):
(A) first, (x) to the extent Terex elects (or is required by the
terms of any Senior Indebtedness), to prepay, repay or purchase Senior
Indebtedness of Terex within 360 days of such Asset Disposition, (y)
at Terex's election to the investment by Terex or any Wholly Owned
Subsidiary or such Restricted Subsidiary in long-term assets to
replace the assets that were the subject of such Asset Disposition or
a long-term asset that (as determined in good faith by the Board of
Directors) is directly related to the business of Terex and the
Restricted Subsidiaries existing on November 25, 2003, in each case
within 360 days from the date of such Asset Disposition, or (z) a
combination of the foregoing purposes within such 360-day period;
(B) second, to the extent of the balance of such Net Available
Cash after application in accordance with clause (A), to make a pro
rata offer to purchase notes at par (and, to the extent required by
the instrument governing such Indebtedness, any other Senior
Subordinated Indebtedness designated by Terex, at a price no greater
than par) plus accrued and unpaid interest, and
(C) third, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A) and (B), for
general corporate purposes otherwise permitted under the Indenture;
provided, however, that in connection with any prepayment, repayment
or purchase of Indebtedness pursuant to clause (A) or (B) above, Terex
or such Subsidiary shall retire such Indebtedness and cause the
related loan commitment (if any) to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this Section, Terex and
its Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance with this Section except to the extent
that the aggregate Net Available Cash from all Asset Dispositions
(including any Asset Dispositions made since November 25, 2003) which
are not applied in accordance with this Section exceeds $25 million.
Pending application of Net Available Cash pursuant to this Section,
such Net Available Cash shall be used to temporarily reduce Senior
Indebtedness or invested in Cash Equivalents.
For the purposes of this covenant, the following is deemed to be cash or
Cash Equivalents: the express assumption of Indebtedness (other than any
Indebtedness that is by its terms subordinated to the notes) of Terex or any
Restricted Subsidiary, but only to the extent that such assumption is effected
on a basis under which there is no further recourse to Terex or any of the
Restricted Subsidiaries with respect to such liabilities.
34
(b) In the event of an Asset Disposition that requires the purchase of the
notes (and other Senior Subordinated Indebtedness) pursuant to clause (a)(2)(B)
above, Terex will purchase notes tendered pursuant to an offer by Terex for the
notes (and, to the extent required, other Senior Subordinated Indebtedness) at a
purchase price of 100% of their principal amount (without premium) plus accrued
but unpaid interest (or, in respect of such other Senior Subordinated
Indebtedness, such lesser price, if any, as may be provided for by the terms of
such Senior Subordinated Indebtedness) in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture which will include, among other things, that the offer shall remain
open for 20 Business Days following its commencement. If the aggregate purchase
price of notes (and, to the extent required, any other Senior Subordinated
Indebtedness) tendered pursuant to such offer is less than the Net Available
Cash allotted to the purchase thereof, Terex will be required to apply the
remaining Net Available Cash in accordance with clause (a)(2)(C) above. Terex
will not be required to make such an offer to purchase notes (and other Senior
Subordinated Indebtedness) pursuant to this covenant if the Net Available Cash
available therefor is less than $10 million (which lesser amount shall be
carried forward for purposes of determining whether such an offer is required
with respect to any subsequent Asset Disposition).
(c) Terex will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, Terex will comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under this clause by virtue thereof.
Limitation on Affiliate Transactions
(a) Terex will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, conduct any business or enter into any transaction or
series of similar transactions (including the purchase, sale, lease or exchange
of any asset or property or the rendering of any service) with any Affiliate of
Terex (other than any employee stock ownership plan for the benefit of Terex's
or a Restricted Subsidiary's employees) unless the terms of such business,
transaction or series of transactions are:
(1) as favorable to Terex or such Restricted Subsidiary as terms that
would be obtainable at the time for a comparable transaction or series of
similar transactions in arms length dealings with an unrelated third
Person; and
(2) if such business, transaction or series of similar transactions
involves an amount in excess of $5 million, the terms of such business,
transaction or series of similar transactions shall be in writing and a
majority of the disinterested members of the Board of Directors shall have,
by resolution, determined in good faith that such business or transaction
or series of transactions meets the criteria set forth in (1) above;
provided, however, that if such business, transaction or series of similar
transactions involves an amount in excess of $15 million, Terex shall also
obtain from a nationally recognized independent investment banking firm,
accounting firm or appraisal firm with experience in evaluating the terms and
conditions of such type of business or transactions an opinion that such
transaction is fair from a financial point of view to Terex or its Restricted
Subsidiary, as the case may be; provided, further, however, that the provisions
of both clause (2) above and the preceding proviso shall not apply with respect
to any such business, transaction or series of transactions between Terex or any
Subsidiary Guarantor, on the one hand, and any Restricted Subsidiary, on the
other hand, which business, transaction or series of transactions is entered
into in the ordinary course of business.
(b) The provisions of the foregoing paragraph (a) shall not apply to:
(1) any Restricted Payment permitted to be made pursuant to the
covenant described under "--Limitation on Restricted Payments," or any
payment or transaction specifically excepted from the definition of
Restricted Payment;
(2) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership
35
plans entered into in the ordinary course of business and approved by a
majority of the entire Board of Directors or by a majority of the
disinterested members of the Board of Directors or a majority of the entire
board of directors or a majority of the disinterested members of the board
of directors of the relevant Restricted Subsidiary;
(3) the grant of stock options or similar rights to employees and
directors pursuant to plans approved by a majority of the entire Board of
Directors or by a majority of the disinterested members of the Board of
Directors or a majority of the entire board of directors or a majority of
the disinterested members of the board of directors of the relevant
Restricted Subsidiary;
(4) loans or advances to officers, directors or employees in the
ordinary course of business;
(5) the payment of reasonable fees to directors of Terex and its
Restricted Subsidiaries who are not employees of Terex or its Restricted
Subsidiaries;
(6) any Affiliate transaction between Terex and a Subsidiary
Guarantor, between Subsidiary Guarantors, or between Restricted
Subsidiaries (neither of which is a Subsidiary Guarantor);
(7) indemnification or insurance provided to officers or directors of
Terex or any Subsidiary approved in good faith by the Board of Directors;
(8) payment of compensation and benefits to directors, officers and
employees of Terex and its Subsidiaries approved in good faith by the Board
of Directors; and
(9) the purchase of or the payment of Indebtedness of or monies owed
by Terex or any of its Restricted Subsidiaries for goods or materials
purchased, or services received, in the ordinary course of business.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries
Terex will not sell or otherwise dispose of any Capital Stock of a
Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly
or indirectly, to issue or sell or otherwise dispose of any of its Capital Stock
except (1) to Terex or a Wholly Owned Subsidiary, (2) if, immediately after
giving effect to such issuance, sale or other disposition, neither Terex nor any
of its Subsidiaries own any Capital Stock of such Restricted Subsidiary, (3)
Preferred Stock of a Subsidiary Guarantor, or (4) directors qualifying shares.
Merger and Consolidation
Terex will not, in a single transaction or a series of related
transactions, consolidate with or merge with or into, or convey, transfer or
lease all or substantially all its assets (computed on a consolidated basis) to,
any Person or group of affiliated Persons, unless:
(1) the resulting, surviving or transferee Person shall be Terex or,
if not Terex, shall be a corporation organized and existing under the laws
of the United States of America, any State thereof or the District of
Columbia (the "Successor Company"), and such Successor Company shall
expressly assume, by an indenture supplemental to the Indenture, executed
and delivered to the trustee, all the obligations of Terex under the notes
and this Indenture (and the Subsidiary Guarantees shall be confirmed as
applying to such Person's obligations);
(2) at the time of and immediately after giving effect to such
transaction or transactions on a pro forma basis (and treating any
Indebtedness which becomes an obligation of the resulting, surviving or
transferee Person or any Subsidiary as a result of such transaction as
having been Incurred by such Person or such Subsidiary at the time of such
transaction), no Default or Event of Default shall have occurred and be
continuing;
36
(3) immediately after giving effect to such transaction, the
resulting, surviving or transferee Person would be able to Incur at least
$1.00 of Indebtedness pursuant to paragraph (a) of the "--Limitation on
Indebtedness"; and
(4) Terex shall have delivered to the trustee an Officers Certificate
and if a supplemental indenture is required, an Opinion of Counsel, each
stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture.
The Successor Company will be the successor to Terex and shall succeed to,
and be substituted for, and may exercise every right and power of, Terex under
the Indenture, and the predecessor company, in the case of a conveyance,
transfer or lease, shall be released from the obligation to pay the principal of
and interest on the notes.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise) of all or substantially all of the properties and assets of one or
more Subsidiaries, Terex's interest in which constitutes all or substantially
all of the properties and assets of Terex will be deemed to be the transfer of
all or substantially all of the properties and assets of Terex.
Terex will not permit any Subsidiary Guarantor to consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to, any Person unless:
(1) the resulting, surviving or transferee Person shall be Terex or a
Subsidiary Guarantor or, if not Terex or such a Subsidiary Guarantor, shall
be a corporation organized and existing under the laws of the jurisdiction
under which such Subsidiary was organized or under the laws of the United
States of America, or any State thereof or the District of Columbia, and
such Person shall expressly assume, by executing a Subsidiary Guarantee,
all the obligations of such Subsidiary, if any, under its Subsidiary
Guarantee;
(2) immediately after giving effect to such transaction or
transactions on a pro forma basis (and treating any Indebtedness which
becomes an obligation of the resulting, surviving or transferee Person as a
result of such transaction as having been issued by such Person at the time
of such transaction), no Default or Event of Default shall have occurred
and be continuing;
(3) immediately after giving effect to such transaction, Terex would
be able to Incur at least $1.00 of Indebtedness pursuant to the
"--Limitation on Indebtedness"; and
(4) Terex delivers to the trustee an Officers Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or
transfer and such Subsidiary Guarantee, if any, complies with the
Indenture.
The provisions of clauses (1), (2) and (3) above shall not apply to any one
or more transactions which constitute (a) an Asset Disposition subject to the
applicable provisions of the covenant described under "--Limitation on Sales of
Assets and Subsidiary Stock" above or (b) the grant of any Lien on the assets of
a Restricted Subsidiary to secure outstanding Bank Indebtedness, which Lien is
otherwise permitted by the terms of the Indenture, or any conveyance or transfer
of such assets resulting from an exercise of remedies in respect of any such
Lien.
Notwithstanding the foregoing, Terex may merge with or into, or convey,
transfer or lease all or substantially all of its assets to, any Subsidiary
Guarantor, and a Subsidiary Guarantor may merge with or into, or convey,
transfer or lease all or substantially all of its assets to, any other
Subsidiary Guarantor.
The phrase "all or substantially all" of the assets of Terex or a
Subsidiary Guarantor will likely be interpreted under applicable state law and
will be dependent upon particular facts and circumstances. As a result, there
may be a degree of uncertainty in ascertaining whether a sale or transfer of
"all or substantially all" of the assets of Terex or a Subsidiary Guarantor has
occurred.
37
Future Subsidiary Guarantors
The Indenture provides that Terex and each Subsidiary Guarantor will cause
each Restricted Subsidiary of Terex organized or existing under the laws of the
United States, any state thereof or the District of Columbia of Terex which,
after November 25, 2003 (if not then a Subsidiary Guarantor), becomes a
Restricted Subsidiary to execute and deliver an indenture supplemental to the
Indenture and thereby become a Subsidiary Guarantor which shall be bound by the
Subsidiary Guarantee of the notes in the form set forth in the Indenture
(without such future Subsidiary Guarantor being required to execute and deliver
the Subsidiary Guarantee endorsed on the notes). In addition, the Indenture
provides that Terex will not permit any Restricted Subsidiary that is not a
Subsidiary Guarantor to Guarantee any other Indebtedness of Terex or any
Subsidiary Guarantor unless such Restricted Subsidiary simultaneously executes a
supplemental indenture to the Indenture providing for the Guarantee of the
payment of the notes by such Restricted Subsidiary, which Guarantee of the
payment of the notes shall be subordinated to the Guarantee of such other
Indebtedness to the same extent as the notes or the Subsidiary Guarantees, as
applicable, are subordinated to such other Indebtedness; provided, however, that
such Restricted Subsidiary shall not be required to so Guarantee the payment of
the notes to the extent that such other Indebtedness does not exceed $1 million
individually or, together with any other Indebtedness of Terex or any Subsidiary
Guarantor Guaranteed by such Restricted Subsidiary, $3 million in the aggregate.
Such Restricted Subsidiary shall be deemed released from its obligations under
the Guarantee of the payment of the notes at any such time that such Restricted
Subsidiary is released from all of its obligations under its Guarantee of such
other Indebtedness unless such release results from the payment under such
Guarantee of other Indebtedness.
Limitation on Lines of Business
The Indenture provides that neither Terex nor any of its Subsidiaries or
Unrestricted Subsidiaries shall directly or indirectly engage to any substantial
extent in any line or lines of business activity other than that which, in the
reasonable good faith judgment of the Board of Directors, is a Related Business.
Limitation on Designations of Unrestricted Subsidiaries
The Indenture provides that Terex may designate any Subsidiary of Terex
(other than a Subsidiary Guarantor) as an "Unrestricted Subsidiary" under the
Indenture (a "Designation") only if:
(1) no Default shall have occurred and be continuing at the time
of or after giving effect to such Designation; and
(2) either (x) Terex's Investment in such Subsidiary does not exceed
$1,000 or (y) Terex would be permitted under the Indenture to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the "Designation Amount") equal to the fair
market value of Terex's Investment in such Subsidiary on such date.
In the event of any such Designation, Terex shall be deemed to have made an
Investment constituting a Restricted Payment pursuant to the covenant described
under "--Limitation on Restricted Payments" for all purposes of the Indenture in
the Designation Amount. The Indenture will further provide that Terex will not,
and will not permit any Restricted Subsidiary to, at any time:
(1) provide credit support for, or a guarantee of, any Indebtedness of
any Unrestricted Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness);
(2) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary; or
(3) be directly or indirectly liable for any Indebtedness which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a
default with respect to any Indebtedness of any Unrestricted Subsidiary
(including any right to take enforcement
38
action against such Unrestricted Subsidiary), except to the extent
permitted under the covenant described under "--Limitation on Restricted
Payments."
The Indenture will further provide that Terex may revoke any Designation of
a Subsidiary as an Unrestricted Subsidiary (a "Revocation") if:
(1) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(2) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of the
Indenture and for all purposes of the Indenture shall be deemed to have
been Incurred at such time.
All Designations and Revocations must be evidenced by an Officers
Certificate delivered to the trustee attaching a certified copy of the
resolutions of the Board of Directors giving effect to such Designation or
Revocation, as applicable, and certifying compliance with the foregoing
provisions.
Notwithstanding the foregoing, no Subsidiary that was a Subsidiary
Guarantor as of November 25, 2003 shall be permitted to become an Unrestricted
Subsidiary.
SEC Reports
Notwithstanding that Terex may not be subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act, Terex will file with the SEC and
provide within 15 days to the trustee and noteholders such annual reports and
such information, documents and other reports as are specified in Sections 13
and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to
such Sections, such information, documents and other reports to be so filed and
provided at the times specified for the filing of such information, documents
and reports under such Sections.
Defaults
An "Event of Default" is defined in the Indenture as the following:
(1) a default in the payment of interest on the notes when due,
continued for 30 days (whether or not prohibited by the subordination
provisions of the Indenture);
(2) a default in the payment of principal of any Note when due at its
Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise (whether or not prohibited by the subordination
provisions of the Indenture);
(3) the failure by Terex to comply with its obligations under
"--Certain Covenants--Merger and Consolidation" above;
(4) the failure by Terex to comply for 30 days after notice with any
of its obligations in the covenants described above under "Change of
Control" (other than a failure to purchase notes) or under "--Certain
Covenants--Limitation on Indebtedness," "--Limitation on Indebtedness and
Preferred Stock of Restricted Subsidiaries," "--Limitation on Liens
Securing Subordinated Indebtedness," "--Limitation on Other Senior
Subordinated Indebtedness," "--Limitation on Restricted Payments,"
"--Limitation on Restrictions on Distributions from Restricted
Subsidiaries," "--Limitation on Sales of Assets and Subsidiary Stock"
(other than a failure to purchase the notes), "--Limitation on Affiliate
Transactions," "--Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries," "--Future Subsidiary Guarantors," "--Limitation
on Designations of Unrestricted Subsidiaries," or "--SEC Reports;"
39
(5) the failure by Terex to comply for 60 days after notice with its
other covenants, obligations, warranties or agreements contained in the
Indenture;
(6) Indebtedness of Terex or any Significant Subsidiary is not paid
within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $10 million (the "cross
acceleration provision");
(7) certain events of bankruptcy, insolvency or reorganization of
Terex or any Significant Subsidiary (the "bankruptcy provisions");
(8) any judgment or decree for the payment of money, the portion of
which is not covered by insurance is in excess of $10 million, which is
rendered against Terex or any Subsidiary and is not discharged and either
(A) an enforcement proceeding has been commenced by any creditor upon such
judgment or decree or (B) there is a period of 60 days following such
judgment during which such judgment or decree is not discharged, waived or
the execution thereof stayed (including pending appeal); or
(9) any Subsidiary Guarantee by a Significant Subsidiary ceases to be
in full force and effect or becomes unenforceable or invalid or is declared
null and void (other than in accordance with the terms of the Subsidiary
Guarantee or the Indenture) or any Subsidiary Guarantor that is a
Significant Subsidiary denies or disaffirms its obligations under its
Subsidiary Guarantee.
However, a default under clause (4), (5) or (8) will not constitute an
Event of Default until the trustee or the holders of 25% in principal amount of
the outstanding notes notify Terex of the default and Terex does not cure such
default within the time specified after receipt of such notice.
If an Event of Default (other than the bankruptcy provisions relating to
Terex) occurs and is continuing, the trustee or the holders of at least 25% in
principal amount of the outstanding notes may declare the principal of and
accrued but unpaid interest on all the notes to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately;
provided, however, that for so long as the Credit Facility remains in effect,
such declaration shall not become effective until the earlier of (1) five
Business Days following delivery of notice to the Representative of such
creditors of the intention to accelerate the notes or (2) the acceleration of
any Indebtedness under the Credit Facility. If an Event of Default relating to
the bankruptcy provisions relating to Terex occurs and is continuing, the
principal of and interest on all the notes will ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the trustee or any holders. Under certain circumstances, the holders of a
majority in principal amount of the outstanding notes may rescind any such
acceleration with respect to the notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
trustee, in case an Event of Default occurs and is continuing, the trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders unless such holders
have offered to the trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no holder of a Note may pursue
any remedy with respect to the Indenture or the notes unless:
(1) such holder has previously given the trustee notice that an Event
of Default is continuing;
(2) holders of at least 25% in principal amount of the outstanding
notes have requested the trustee to pursue the remedy;
(3) such holders have offered the trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity; and
40
(5) the holders of a majority in principal amount of the outstanding
notes have not given the trustee a direction inconsistent with such request
within such 60-day period.
Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the trustee
or of exercising any trust or power conferred on the trustee. The trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the trustee reasonably determines is unduly prejudicial to the
rights of any other holder or that would involve the trustee in personal
liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the trustee, the trustee must mail to each holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of or interest on any Note, the trustee may withhold notice if and
so long as the Board of Directors, the executive committee or a committee of its
trust officers reasonably determines that withholding notice is in the best
interest of the holders. In addition, Terex is required to deliver to the
trustee, within 120 days after the end of each fiscal year, a certificate
regarding knowledge of Terex's compliance with all covenants and conditions
under the Indenture. Terex also is required to deliver to the trustee, within 30
days after the occurrence thereof, written notice of any event which would
constitute certain Defaults, their status and what action Terex is taking or
proposes to take in respect thereof.
Amendments and Waivers
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the notes) and, subject to certain exceptions, any past default or
compliance with any provisions may also be waived with the consent of the
holders of a majority in principal amount of the notes then outstanding.
Without the consent of each holder of an outstanding Note affected thereby,
no amendment may:
(1) reduce the amount of notes whose holders must consent to an
amendment or waiver;
(2) reduce the rate of or extend the time for payment of interest on
any Note;
(3) reduce the principal of or extend the Stated Maturity of any Note;
(4) reduce the premium payable upon the redemption of any Note or
change the time at which any Note may be redeemed as described under
"--Optional Redemption" above or alter the provisions (including
definitions) set forth under "Change of Control" above in a manner adverse
to the holders;
(5) make any Note payable in money or payable in a place other than
that stated in the Note;
(6) impair the right of any holder to receive payment of principal of
and interest on such holder's notes on or after the due dates therefor or
to institute suit for the enforcement of any payment on or with respect to
such holder's notes;
(7) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions;
(8) make any change to the subordination provisions (including
definitions) of the Indenture that would adversely affect the holders; or
(9) make any change in any Subsidiary Guarantee that would adversely
affect the holders.
Notwithstanding the preceding, without the consent of any holder, Terex and
the trustee may amend the Indenture:
41
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to provide for the assumption by a successor corporation of the
obligations of Terex under the Indenture;
(3) to provide for uncertificated notes in addition to or in place of
certificated notes (provided that the uncertificated notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated notes are described in Section 163(f)(2)(B) of
the Code);
(4) to add guarantees with respect to the notes, to secure the notes;
(5) to add to the covenants of Terex for the benefit of the holders or
to surrender any right or power conferred upon Terex;
(6) to make any change that does not adversely affect the rights of
any holder; or
(7) to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the Trust Indenture Act.
However, no amendment may be made to the subordination provisions of the
Indenture that adversely affects the rights of any holder of Senior Indebtedness
of Terex or any Restricted Subsidiary then outstanding unless the holders of
such Senior Indebtedness (or their Representative) consent to such change.
The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, Terex is required
to mail to holders a notice briefly describing such amendment. However, the
failure to give such notice to all holders, or any defect therein, will not
impair or affect the validity of the amendment.
Transfer
The registered holder of a Note will be treated as the owner of it for all
purposes. The notes will be issued in registered form and will be transferable
only upon the surrender of the notes being transferred for registration of
transfer. Terex may require payment of a sum sufficient to cover any tax,
assessment or other governmental charge payable in connection with certain
transfers and exchanges.
Defeasance
Terex at its option at any time may terminate all of its obligations under
the notes and the Indenture ("legal defeasance"), except for certain
obligations, including, but not limited to, those respecting the defeasance
trust and obligations to register the transfer or exchange of the notes, to
replace mutilated, destroyed, lost or stolen notes and to maintain a registrar
and paying agent in respect of the notes.
In addition, Terex at its option at any time may terminate its obligations
under "Change of Control" and under the covenants described under "--Certain
Covenants" (other than the covenant described under "--Merger and
Consolidation") (and any omission to comply with such obligations shall not
constitute a Default or Event of Default with respect to the notes), and the
limitations contained in clause (3) of the first paragraph under "--Certain
Covenants--Merger and Consolidation" above ("covenant defeasance"). In the event
that a covenant defeasance occurs, certain events (not including non-payment,
bankruptcy and insolvency events) described under "--Defaults" will no longer
constitute Events of Default with respect to the notes.
Terex may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option. If Terex exercises its legal
defeasance option, payment of the notes may not be accelerated because of an
Event of Default with respect thereto.
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In order to exercise either defeasance option, Terex must irrevocably
deposit in trust (the "defeasance trust") with the trustee money or U.S.
Government Obligations in such amounts as will be sufficient, in the report of a
nationally recognized firm of independent public accountants or a nationally
recognized investment banking firm, to pay and discharge the principal of,
premium, if any, and interest on the outstanding notes to redemption or
maturity, as the case may be, and must comply with certain other conditions,
including delivery to the trustee of an Opinion of Counsel to the effect that
holders will not recognize income, gain or loss for Federal income tax purposes
as a result of such deposit and defeasance and will be subject to Federal income
tax on the same amount and in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred (and, in the
case of legal defeasance only, such Opinion of Counsel must be based on a ruling
of the Internal Revenue Service or other change in applicable Federal income tax
law).
If the funds deposited with the trustee to effect legal defeasance or
covenant defeasance are insufficient to pay the principal of, premium, if any,
and interest on the notes when due, then the obligations of Terex under the
Indenture will be revived and no such defeasance will be deemed to have
occurred.
Concerning the Trustee
HSBC Bank USA is the trustee under the Indenture and has been appointed by
Terex as Registrar and Paying Agent with regard to the notes. Such bank may also
act as a depository of funds for, or make loans to and perform other services
for, Terex or its Affiliates in the ordinary course of business in the future.
The holders of a majority in principal amount of the outstanding notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any holder of notes,
unless such holder shall have offered to the trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture. The trustee may resign at any
time or may be removed by Terex. If the trustee resigns, is removed or becomes
incapable of acting as trustee or if a vacancy occurs in the office of the
trustee for any cause, a successor trustee shall be appointed in accordance with
the provisions of the Indenture.
If the trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and the Indenture. The Indenture also
contains certain limitations on the right of the trustee, as a creditor of
Terex, to obtain payment of claims in certain cases, or to realize on certain
property received by it in respect of any such claims, as security or otherwise.
Governing Law
The Indenture provides that it, the Guarantees and the notes are governed
by, and construed in accordance with, the laws of the State of New York without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
Certain Definitions
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries (the "Acquired Person") (i) existing at the time such Person
becomes a Restricted Subsidiary of Terex or at the time it merges or
consolidates with Terex or any of its Restricted Subsidiaries or (ii) assumed in
connection with the acquisition of assets from such Person.
"Affiliate" of any specified Person means:
(1) any other Person which, directly or indirectly, is in control of,
is controlled by or is under common control with such specified Person; or
43
(2) any other Person who is a director or officer:
(A) of such specified Person;
(B) of any subsidiary of such specified Person; or
(C) any Person described in clause (1) above.
For purposes of this definition, control of a Person means the power, direct or
indirect, to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer, conveyance or other
disposition (or series of related sales, leases, transfers or dispositions) by
Terex or any Restricted Subsidiary, including any disposition by means of a
merger or consolidation (each referred to for the purposes of this definition as
a "disposition"), of:
(1) any shares of Capital Stock of a Restricted Subsidiary (other than
directors qualifying shares or shares required by applicable law to be held
by a Person other than Terex or a Restricted Subsidiary);
(2) all or substantially all the assets of any division or line of
business of Terex or any Restricted Subsidiary; or
(3) any other assets of Terex or any Restricted Subsidiary outside of
the ordinary course of business of Terex or such Restricted Subsidiary
(other than, in the case of (1) and (2) above, a disposition by a
Restricted Subsidiary to Terex or by Terex or a Restricted Subsidiary to a
Wholly Owned Subsidiary; provided, however, that each of (x) the
consummation of any sale or series of related sales of assets or properties
of Terex and the Restricted Subsidiaries by Terex and any Restricted
Subsidiaries having an aggregate fair market value of less than $5 million
in any fiscal year and (y) the discounting of accounts receivable or the
sale of inventory, in each case in the ordinary course of business, shall
not be deemed an Asset Disposition.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing:
(1) the sum of the products of numbers of years from the date of
determination to the dates of each successive scheduled principal payment
of such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment, by
(2) the sum of all such payments.
"Bank Indebtedness" means:
(1) the Indebtedness outstanding or arising under the Credit Facility
up to a maximum principal amount of $950 million;
(2) all obligations and other amounts owing to the holders of such
Indebtedness or any agent or representative thereof outstanding or arising
under the Credit Facility (including, but not limited to, interest
(including interest accruing on or after the filing of any petition in
bankruptcy, reorganization or similar proceeding relating to Terex or any
Restricted Subsidiary, whether or not a claim for such interest is allowed
in such proceeding), fees, charges, indemnities, expense reimbursement
obligations and other claims under the Credit Facility); and (3) all
Hedging Obligations arising in connection therewith with any party to the
Credit Facility.
44
"Board of Directors" means the Board of Directors of Terex or any committee
thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such capital lease prior to
the first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such person, including any Preferred
Stock, but excluding any debt securities convertible into or exchangeable for
such equity.
"Cash Equivalents" means:
(1) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(2) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Rating Services or
Moody's Investors Service, Inc.;
(3) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from Standard & Poor's Rating Services or at least P-1 from
Moody's Investors Service, Inc.;
(4) certificates of deposit or bankers acceptances maturing within one
year from the date of acquisition thereof issued by (x) any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or (y) a commercial banking institution organized and
located in a country recognized by the United States of America, in each
case having at the date of acquisition thereof combined capital and surplus
of not less than $200 million (or the foreign currency equivalents
thereof);
(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (4)
above;
(6) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (1) through
(5) above; and
(7) other short-term investments utilized by foreign Restricted
Subsidiaries in accordance with normal investment practices for cash
management not exceeding $1.0 million in aggregate principal amount
outstanding at any time.
"Cash Flow" for any period means the Consolidated Net Income for such
period, plus the following (but without duplication) to the extent deducted in
calculating such Consolidated Net Income for such period:
(1) income tax expense;
(2) Consolidated Interest Expense;
45
(3) depreciation expense and amortization expense, provided that
consolidated depreciation and amortization expense of a Subsidiary that is
not a Wholly Owned Subsidiary shall only be added to the extent of the
equity interest of Terex in such Subsidiary; and
(4) all other non-cash charges (other than any recurring non-cash
charges to the extent such charges represent an accrual of or reserve for
cash expenditures in any future period).
Notwithstanding clause (4) above, there shall be deducted from Cash Flow in any
period any cash expended in such period that funds a non-recurring, non-cash
charge accrued or reserved in a prior period which was added back to Cash Flow
pursuant to clause (4) in such prior period.
"Change of Control" means the occurrence of any of the following events:
(1) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have beneficial ownership of all shares that such
Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
more than 40% of the total voting power of the Voting Stock of Terex,
whether as a result of issuance of securities of Terex, any merger,
consolidation, liquidation or dissolution of Terex, any direct or indirect
transfer of securities or otherwise;
(2) (A) another corporation merges into Terex or Terex
consolidates with or merges into any other corporation, or
(B) Terex conveys, transfers or leases all or substantially all
its assets (computed on a consolidated basis) to any person or group,
in one transaction or a series of transactions other than any
conveyance, transfer or lease between Terex and a Wholly Owned
Subsidiary of Terex, in each case in one transaction or a series of
related transactions with the effect that either (x) immediately after
such transaction any person or entity or group (as so defined) of
persons or entities shall have become the beneficial owner of
securities of the surviving corporation of such merger or
consolidation representing a majority of the combined voting power of
the outstanding securities of the surviving corporation ordinarily
having the right to vote in the election of directors or (y) the
securities of Terex that are outstanding immediately prior to such
transaction and which represent 100% of the combined voting power of
the securities of Terex ordinarily having the right to vote in the
election of directors are changed into or exchanged for cash,
securities or property, unless pursuant to such transaction such
securities are changed into or exchanged for, in addition to any other
consideration, securities of the surviving corporation that represent
immediately after such transaction, at least a majority of the
combined voting power of the securities of the surviving corporation
ordinarily having the right to vote in the election of directors; or
(3) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of Terex
(together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of
Terex was approved by a vote of 60% of the directors of Terex then
still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board
of Directors of Terex then in office.
The phrase "all or substantially all" of the assets of Terex will likely be
interpreted under applicable state law and will be dependent upon particular
facts and circumstances. As a result, there may be a degree of uncertainty in
ascertaining whether a sale or transfer of "all or substantially all" of the
assets of Terex has occurred.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agent" means Credit Suisse First Boston as collateral agent for
the lenders pursuant to the Amended and Restated Credit Agreement, dated July 3,
2002.
46
"Consolidated Cash Flow Coverage Ratio" as of any date of determination
means the ratio of (a) the aggregate amount of Cash Flow for the period of the
most recent four consecutive fiscal quarters for which financial statements are
available to (b) Consolidated Interest Expense for such four fiscal quarters;
provided, however, that:
(1) if Terex or any Restricted Subsidiary has issued any Indebtedness
since the beginning of such period that remains outstanding or if the
transaction giving rise to the need to calculate the Consolidated Cash Flow
Coverage Ratio is an issuance of Indebtedness, or both, Cash Flow and
Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been issued on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period;
(2) if since the beginning of such period Terex or any Restricted
Subsidiary shall have made any Asset Disposition, the Cash Flow for such
period shall be reduced by an amount equal to the Cash Flow (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to the Cash
Flow (if negative), directly attributable thereto for such period, and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of Terex or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to Terex and its continuing
Restricted Subsidiaries in connection with such Asset Dispositions for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent Terex and its
continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale);
(3) if since the beginning of such period Terex or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of assets (including Capital Stock of a Subsidiary),
including any acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, Cash Flow and
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the issuance of any
Indebtedness) as if such Investment or acquisition occurred on the first
day of such period; and
(4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into
Terex or any Restricted Subsidiary since the beginning of such period)
shall have made any Asset Disposition or any Investment that would have
required an adjustment pursuant to clause (2) or (3) above if made by Terex
or a Restricted Subsidiary during such period, Cash Flow and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition or Investment occurred on the
first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto, and
the amount of Consolidated Interest Expense associated with any Indebtedness
issued in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting officer of Terex. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest of such Indebtedness shall be calculated as if the average
interest rate for the period up to the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Protection Agreement applicable to such Indebtedness if such Interest Rate
Protection Agreement has a remaining term in excess of 12 months). For purposes
of this definition, whenever pro forma effect is to be given to any Indebtedness
Incurred pursuant to a revolving credit facility the amount outstanding under
such Indebtedness shall be equal to the average of the amount outstanding during
the period commencing on the first day of the first of the four most recent
fiscal quarters for which financial statements are available and ending on the
date of determination.
"Consolidated Interest Expense" means, for any period, the total interest
expense of Terex and its consolidated Restricted Subsidiaries, plus, to the
extent not included in such interest expense but Incurred by Terex or its
Restricted Subsidiaries:
47
(1) interest expense attributable to capital leases;
(2) amortization of debt discount;
(3) capitalized interest;
(4) original issue discount and non-cash interest payments or
accruals;
(5) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers acceptance financing;
(6) net costs under Hedging Obligations (including amortization of
fees);
(7) dividends in respect of all Disqualified Stock held by Persons
other than Terex, a Subsidiary Guarantor or a Wholly Owned Subsidiary;
(8) interest Incurred in connection with investments in discontinued
operations;
(9) the interest portion of any deferred payment obligations
constituting Indebtedness; and
(10) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than Terex) in
connection with Indebtedness Incurred by such plan or trust.
For purposes of this definition, interest expense attributable to any
Indebtedness represented by the guarantee (other than (a) Guarantees permitted
by the terms of clause (b)(10) of the covenant described under "--Certain
Covenants--Limitation on Indebtedness" and (b)(11) of the covenant described
under "--Limitation on Indebtedness and Preferred Stock of Restricted
Subsidiaries" and (b) Guarantees by Terex of Indebtedness of a consolidated
Restricted Subsidiary or by a consolidated Restricted Subsidiary of Terex or
another consolidated Restricted Subsidiary) by such person or a Subsidiary of
such person of an obligation of another person shall be deemed to be the
interest expense attributable to the Indebtedness guaranteed.
"Consolidated Net Income" means, for any period, the net income or loss of
Terex and its consolidated Subsidiaries; provided, however, that there shall not
be included in such Consolidated Net Income:
(1) any net income of any Person if such Person is not a Restricted
Subsidiary, except that (A) Terex's equity in the net income of any such
Person for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by such Person during
such period to Terex or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to a
Restricted Subsidiary, to the limitations contained in clause (3) below)
and (B) Terex's equity in a net loss of any such Person for such period
shall be included in determining such Consolidated Net Income;
(2) any net income of any Person acquired by Terex or a Subsidiary in
a pooling of interests transaction for any period prior to the date of such
acquisition;
(3) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Subsidiary,
directly or indirectly, to Terex, except that (A) Terex's equity in the net
income of any such Restricted Subsidiary for such period shall be included
in such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Restricted Subsidiary during such period to Terex or
another Restricted Subsidiary as a dividend or other distribution (subject,
in the case of a dividend or other distribution to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) Terex's
equity in a net loss of any such Restricted Subsidiary for such period
shall be included in determining such Consolidated Net income;
48
(4) any gain or loss realized upon the sale or other disposition of
any property, plant or equipment of Terex or its consolidated subsidiaries
(including pursuant to any sale and leaseback arrangement) which is not
sold or otherwise disposed of in the ordinary course of business and any
gain or loss realized upon the sale or other disposition of any Capital
Stock of any Person;
(5) all extraordinary, unusual or non-recurring gains, and any
extraordinary or non-recurring loss as recorded on the statement of
operations in accordance with GAAP;
(6) any goodwill impairment charge pursuant to Financial Accounting
Board Standards No. 142 recorded in the nine months ended September 30,
2003; and
(7) the cumulative effect of a change in accounting principles.
"Credit Facility" means a collective reference to any term loan and
revolving credit facilities (including, but not limited to, the amended and
restated credit agreement, dated July 3, 2002, by and among Terex, certain of
our subsidiaries and certain financial institutions, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such credit facilities and/or related documents may be
further amended, restated, supplemented, renewed, replaced or otherwise modified
from time to time whether or not with the same agent, trustee, representative
lenders or holders and irrespective of any changes in the terms and conditions
thereof. Without limiting the generality of the foregoing, the term "Credit
Facility" shall include agreements in respect of reimbursement of letters of
credit issued pursuant to the Credit Facility and agreements in respect of
Hedging Obligations with lenders party to the Credit Facility and shall also
include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to any Credit Facility and all
refunding, refinancings (in whole or in part) and replacements of any Credit
Facility, including any agreement (i) extending the maturity of any indebtedness
incurred thereunder or contemplated thereby, or (ii) adding or deleting
borrowers or guarantors thereunder, so long as borrowers and issuers include one
or more of Terex and its Restricted Subsidiaries and their respective successors
and assigns.
"Currency Agreement Obligations" means the obligations of any person under
a foreign exchange contract, currency swap agreement or other similar agreement
or arrangement to protect such person against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Depository" means The Depository Trust Company, its nominees and their
respective successors.
"Designated Senior Indebtedness" means (i) so long as any Bank Indebtedness
is outstanding, such Bank Indebtedness and (ii) provided no Bank Indebtedness is
outstanding, any other Senior Indebtedness of Terex permitted to be incurred
under the Indenture which, at the date of determination, has an aggregate
principal amount outstanding of, or under which, at the date of determination,
the holders thereof are committed to lend up to, at least $20 million and is
specifically designated by Terex in the instrument evidencing or governing such
Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the
Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event:
(1) matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise prior to the 91st day after the Stated Maturity of
the notes;
(2) is convertible or exchangeable for Indebtedness or Disqualified
Stock prior to the 91st day after the Stated Maturity of the notes; or
49
(3) is redeemable at the option of the holder thereof, in whole or in
part on or prior to the 91st day after the Stated Maturity of the notes;
provided, however, that any Capital Stock that would not constitute Disqualified
Stock but for provisions thereof giving holders thereof the right to require
such Person to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the first anniversary of
the Stated Maturity of the notes shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are not more favorable to the holders of such Capital Stock than the provisions
described under "--Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock" and "--Certain Covenants--Change of Control."
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Notes" means Terex's $200 million principal amount of 9-1/4%
Senior Subordinated Notes due 2011 issued under the indenture, dated December
17, 2001, among Terex, the guarantors named therein and The Bank of New York, as
trustee, Terex's $150 million principal amount of 8-7/8% Senior Subordinated
Notes due 2008 issued under the Indenture, dated as of March 31, 1998, among
Terex, the guarantors named therein and The Bank of New York, as trustee, as
such may be amended or supplemented from time to time, Terex's $100 million
principal amount of 8-7/8% Senior Subordinated Notes due 2008 issued under the
Indenture, dated as of March 9, 1999, among Terex, the guarantors named therein
and The Bank of New York, as trustee, as such may be amended or supplemented
from time to time, and Terex's $300 million principal amount of 10-3/8% Senior
Subordinated Notes due 2011 issued under the Indenture, dated as of March 29,
2001, among Terex, the guarantors named therein and The Bank of New York, as
trustee, as such may be amended or supplemented from time to time.
"Floor Plan Guarantees" means guarantees (including but not limited to
repurchase or remarketing obligations) by Terex or a Restricted Subsidiary
Incurred in the ordinary course of business consistent with past practice of
Indebtedness Incurred by a franchise dealer, or other purchaser or lessor, for
the purchase of inventory manufactured or sold by Terex or a Restricted
Subsidiary, the proceeds of which Indebtedness is used solely to pay the
purchase price of such inventory to such franchise dealer and any related
reasonable fees and expenses (including financing fees), provided, however, that
(1) to the extent commercially practicable, the Indebtedness so guaranteed is
secured by a perfected first priority Lien on such inventory in favor of the
holder of such Indebtedness and (2) if Terex or such Restricted Subsidiary is
required to make payment with respect to such guarantee, Terex or such
Restricted Subsidiary will have the right to receive either (q) title to such
inventory, (r) a valid assignment of a perfected first priority Lien in such
inventory or (s) the net proceeds of any resale of such inventory.
"GAAP" means generally accepted accounting principles in the United States
of America on November 25, 2003, as defined in Statement on Auditing Standards
No. 69, including those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing in any manner any Indebtedness or other
obligation of any Person and any obligation, direct or indirect, contingent or
otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreement to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise);
or
(2) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in
part);
50
provided, however, that the term "Guarantee" shall not include endorsements of
negotiable instruments for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any interest rate swap agreement, foreign currency exchange
agreement, interest rate collar agreement, option or futures contract or other
similar agreement or arrangement designed to protect such Person against changes
in interest rates or foreign exchange rates.
"holder" or "noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Inactive Subsidiary" means a Subsidiary which at the time of determination
owns assets having a fair market value of less than $50,000, does not conduct
any business activity and is not an obligor with respect to any Indebtedness.
"Incur" means create, issue, assume, Guarantee, incur or otherwise become
liable for, directly or indirectly, or otherwise become responsible for,
contingently or otherwise, Indebtedness or Disqualified Stock; provided,
however, that any Indebtedness or Disqualified Stock of a Person existing at the
time such Person becomes a subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at
the time it becomes a Subsidiary. The term "Incurrence" when used as a noun
shall have a correlative meaning.
"Indebtedness" of any Person means, without duplication, and whether or not
contingent:
(1) the principal of and premium (if any) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable;
(2) all Capital Lease Obligations of such Person;
(3) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
(4) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction;
(5) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock
(measured at the greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends);
(6) to the extent not otherwise included in this definition, all
Hedging Obligations;
(7) all obligations of the type referred to in clauses (1) through (5)
of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee (other than in each case by reason of activities described in the
proviso to the definition of "Guarantee"); and
(8) all obligations of the type referred to in clauses (1) through (7)
of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
For purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified
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Stock as if such Disqualified Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Stock, such fair market value to be determined in good faith by the
Board of Directors. For purposes hereof, the amount of any Indebtedness issued
with original issue discount shall be the original purchase price plus accrued
interest, provided, however, that such accretion shall not be deemed an
incurrence of Indebtedness.
"Interest Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect Terex or any Restricted Subsidiary against
fluctuations in interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable or deposits on the balance sheet of the Person
making the advance or loan, in each case in accordance with GAAP) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person and shall include the designation of a
Restricted Subsidiary as an Unrestricted Subsidiary.
For purposes of the definition of "Unrestricted Subsidiary," the definition
of "Restricted Payment" and the covenant described under "--Certain
Covenants--Limitation on Restricted Payments":
(1) "Investment" shall include the portion (proportionate to Terex's
equity interest in such Subsidiary) of the fair market value of the net
assets of any Subsidiary of Terex at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, Terex shall be
deemed to continue to have a permanent investment in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) Terex's "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to Terex's equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such transfer, in
each case as determined in good faith by the Board of Directors.
Notwithstanding the foregoing, in no event shall any issuance of Capital
Stock (other than Preferred Stock or Disqualified Stock, or Capital Stock
exchangeable, exercisable or convertible for any of the foregoing) of Terex in
exchange for Capital Stock, property or assets of another Person constitute an
Investment by Terex in such Person.
"issue" means issue, assume, Guarantee, Incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
Subsidiary at the time it becomes a Subsidiary; and the term "issuance" has a
corresponding meaning.
"Lien" means any mortgage, pledge, security interest, privilege,
conditional sale or other title retention agreement or other similar lien
(statutory or otherwise), or encumbrance upon or with respect to any property of
any kind, real or personal, moveable or immovable, now owned or hereafter
acquired.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to such properties or assets or received in any other non-cash form) therefrom,
in each case net of:
52
(1) all legal, title and recording tax expenses, commissions and other
fees and expenses Incurred, and all Federal, state, provincial, foreign and
local taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition;
(2) all payments made on any Indebtedness which (A) is secured by any
assets subject to such Asset Disposition, in accordance with the terms of
any lien upon or other security agreement of any kind with respect to such
assets, or (B) which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law be repaid out of
the proceeds from such Asset Disposition;
(3) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of
such Asset Disposition; and
(4) reasonable amounts provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the property
or other assets disposed of in such Asset Disposition and retained by Terex
or any Restricted Subsidiary after such Asset Disposition, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Disposition.
Further, with respect to an Asset Disposition by a Subsidiary which is not
a Wholly Owned Subsidiary, Net Available Cash shall be reduced pro rata for
the portion of the equity of such Subsidiary which is not owned by Terex.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale plus, in the case of an
issuance of Capital Stock upon any exercise, exchange or conversion of
securities (including options, warrants, rights and convertible exchangeable
debt), of Terex that were issued for cash on or after November 25, 2003, the
amount of cash originally received by Terex upon the issuance of such securities
(including options, warrants, rights and convertible or exchangeable debt), net
of attorneys fees, accountants fees, underwriters or placement agents fees,
discounts or commissions and brokerage, consultant and other fees and expenses
actually Incurred or required to be Incurred in connection with such issuance or
sale and also net of taxes paid or payable as a result thereof.
"Obligations" means with respect to any Indebtedness all obligations for
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
and other amounts payable pursuant to the documentation governing such
Indebtedness.
"Permitted Investment" means an Investment by Terex or any Restricted
Subsidiary in:
(1) Terex, a Restricted Subsidiary or a Person that will, upon the
making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a
Related Business;
(2) another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, Terex or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related
Business;
(3) Investments in Cash Equivalents;
(4) receivables owing to Terex or any Restricted Subsidiary if created
or acquired in the ordinary course of business;
(5) loans or advances to employees made in the ordinary course of
business consistent with past practices of Terex or such Restricted
Subsidiary;
(6) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to Terex or any
Restricted Subsidiary or in satisfaction of judgments;
53
(7) any Person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition as permitted
pursuant to the covenant described under "--Certain Covenants--Limitation
on Sales of Assets and Subsidiary Stock";
(8) so long as no Default has occurred and is continuing (or would
result therefrom), any Investment made with the proceeds of a substantially
concurrent sale of Capital Stock (other than Disqualified Stock) of Terex;
provided, however, that the Net Cash Proceeds from such sale shall be
excluded from clause 3(B) of Section (a) of the covenant described under
"--Certain Covenants--Limitation on Restricted Payments";
(9) Investments by Terex or any Restricted Subsidiary, in an aggregate
amount not to exceed $3 million, in an Unrestricted Subsidiary formed
primarily for the purposes of financing purchases and leases of inventory
manufactured by Terex or any Restricted Subsidiary;
(10) Floor Plan Guarantees permitted by the terms of clause (b)(10) of
the covenant described under "--Certain Covenants--Limitation on
Indebtedness" and (b)(11) of the covenant described under "--Limitation on
Indebtedness and Preferred Stock of Restricted Subsidiaries";
(11) Investments in joint ventures in Related Businesses not to exceed
$75 million at any time outstanding; and
(12) other Investments that do not exceed in the aggregate $50 million
at any one time outstanding.
"Permitted Liens" means, with respect to any Person:
(1) pledges or deposits by such Person under workmen's compensation
laws, unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for the
payment of Indebtedness) or leases to which such Person is a party, or
deposits to secure public or statutory obligations of such Person or
deposits or cash or United States government bonds to secure surety or
appeal bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
Incurred in the ordinary course of business;
(2) Liens imposed by law, including carriers , warehousemen's and
mechanics Liens, in each case for sums not yet due or being contested in
good faith by appropriate proceedings; or other Liens arising out of
judgments or awards against such Person with respect to which such Person
shall then be proceeding with an appeal or other proceedings for review;
(3) Liens for taxes, assessments or other governmental charges not yet
subject to penalties for non-payment or which are being contested in good
faith by appropriate proceedings provided appropriate reserves have been
taken on the books of Terex;
(4) Liens to secure the performance of statutory obligations or in
favor of issuers of surety bonds, performance bonds, appeal bonds or
letters of credit or other obligations of a like nature issued pursuant to
the request of and for the account of such Person, in each case in the
ordinary course of its business; provided, however, that such letters of
credit do not constitute Indebtedness;
(5) Liens securing a Hedging Obligation so long as the related
Indebtedness is, and is permitted to be under the Indenture, secured by a
Lien on the same property securing the Hedging Obligation;
(6) Liens for the purpose of securing the payment (or the refinancing
of the payment) of all or a part of any Purchase Money Indebtedness or
Capital Lease Obligations relating to assets or property acquired,
constructed or leased in the ordinary course of business provided that (x)
the aggregate principal amount of Indebtedness secured by such Liens shall
not exceed the cost of the assets or property so
54
acquired or constructed and (y) such Liens shall not encumber any other
assets or property of Terex or any Restricted Subsidiary other than such
Assets or property and assets affixed or appurtenant thereto;
(7) Liens arising from precautionary Uniform Commercial Code financing
statement filings regarding operating leases entered into by Terex and its
Subsidiaries in the ordinary course of business;
(8) Liens in favor of Terex and/or any of its Restricted Subsidiaries,
other than such a Lien with respect to intercompany indebtedness if Terex
or a Subsidiary Guarantor is not the beneficiary of such a Lien;
(9) Liens securing Indebtedness of a Person existing at the time that
such Person is acquired by, merged into or consolidated with Terex or any
Restricted Subsidiary; provided, however, that such Liens were not incurred
in connection with, or in contemplation of, such acquisition, merger or
consolidation, and do not extend to any property or assets other than those
of such Person;
(10) Liens on property or assets existing at the time of acquisition
thereof by Terex or any Restricted Subsidiary; provided, however, that such
Liens were not incurred in connection with, or in contemplation of, such
acquisition, and do not extend to any other property or assets;
(11) Liens existing on November 25, 2003;
(12) Liens arising from the rendering of a final judgment or order
against Terex or any Restricted Subsidiary that does not give rise to an
Event of Default;
(13) encumbrances consisting of zoning restrictions, surety
exceptions, utility easements, licenses, rights of way, easements of
ingress or egress over property of Terex or any Restricted Subsidiary,
rights or restrictions of record on the use of real property, minor defects
in title, landlords and lessors liens under leases on property located on
the rented premises, in each case not interfering in any material respect
with the ordinary conduct of the business of Terex and the Restricted
Subsidiaries;
(14) Liens securing Senior Indebtedness;
(15) Liens with respect to Floor Plan Guarantees permitted by the
terms of clause (b)(10) of the covenant described under "--Certain
Covenants--Limitation on Indebtedness" and (b)(11) of the covenant
described under "--Limitation on Indebtedness and Preferred Stock of
Restricted Subsidiaries"; and
(16) any extension, renewal, refinancing, refunding or replacement of
any Permitted Lien, provided that such new Lien is limited to the property
or assets that secured (or under the arrangement under which the original
Permitted Lien, could secure) the obligations to which such Liens relate.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"Public Equity Offering" means an underwritten primary or combined primary
and secondary public offering of common stock (other than Disqualified Stock) of
Terex pursuant to an effective registration statement under the Securities Act
which public equity offering results in gross proceeds to Terex of not less than
$50 million.
55
"Purchase Money Indebtedness" means any Indebtedness of a Person to any
seller or other Person incurred to finance the acquisition (including in the
case of a Capitalized Lease Obligation, the lease) of any after acquired real or
personal tangible property or assets related to the Business of Terex or the
Restricted Subsidiaries and which is incurred substantially concurrently with
such acquisition and is secured only by the assets so financed.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of Terex or any Restricted Subsidiary existing on November 25, 2003
or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that:
(1) such Refinancing Indebtedness has a Stated Maturity no earlier
than the earlier of (x) the Stated Maturity of the Indebtedness being
Refinanced and (y) the Stated Maturity of the notes;
(2) such Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being Refinanced; and
(3) such Refinancing Indebtedness has an aggregate principal amount
(or if Incurred with original issue discount, an aggregate issue price)
that is equal to or less that the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus unpaid accrued interest) under the
Indebtedness being Refinanced, plus actual fees and expenses Incurred in
connection with the Refinancing;
provided, further, however, that (x) Refinancing Indebtedness shall not include
(1) Indebtedness of a Subsidiary that is not a Wholly Owned Subsidiary or a
Subsidiary Guarantor that Refinances Indebtedness of Terex or (2) Indebtedness
of Terex or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary, (y) if the Indebtedness being Refinanced is not Senior
Indebtedness, then such Refinancing Indebtedness shall rank no more senior than,
and shall be at least as subordinated in right of payment, to the notes as the
Indebtedness being Refinanced and (z) Refinancing Indebtedness shall be secured
only by assets of a similar type and in a similar amount to those that secured
the Indebtedness so refinanced.
"Related Business" means any business which is the same, similar, or
otherwise reasonably related, ancillary or complementary to the businesses in
which Terex and the Restricted Subsidiaries are engaged on November 25, 2003 (it
being understood that Terex and its Restricted Subsidiaries are currently
engaged in the business of manufacturing, renting, assembling, selling and
distributing industrial and commercial equipment).
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; provided that
if, and for so long as, any Designated Senior Indebtedness lacks such a
representative, then the Representative for such Designated Senior Indebtedness
shall at all times be the holders of a majority in outstanding principal amount
of such Designated Senior Indebtedness in respect of any Designated Senior
Indebtedness.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of Terex that is not an
Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of any Person secured by a
Lien.
56
"Senior Indebtedness" means with respect to Terex or any Subsidiary
Guarantor (x) Bank Indebtedness and (y) any other Indebtedness that, by the
terms of the instrument creating or evidencing such Indebtedness, is expressly
made senior in right of payment to the notes or the applicable Guarantee, other
than:
(1) any obligation of such Person to any subsidiary of such Person or
to any officer, director or employee of such Person or any such subsidiary;
(2) any liability of such Person for federal, state, local or other
taxes owed or owing by such Person;
(3) any accounts payable or other liability of such Person to trade
creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities);
(4) any Indebtedness, Guarantee or obligation of such Person which is,
expressly by its terms, subordinate or junior in any respect to any other
Indebtedness, Guarantee or obligation of such Person;
(5) that portion of any Indebtedness of such Person which at the time
of issuance is issued in violation of the Indenture;
(6) Indebtedness of such Person represented by Disqualified Stock; or
(7) Capitalized Lease Obligations.
"Senior Subordinated Indebtedness" means the notes and any other
Indebtedness of Terex that specifically provides that such Indebtedness is to
rank pari passu with the notes in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of Terex
which is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of Terex within the meanings of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the final date
specified in such security as the fixed date on which all outstanding principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of Terex or any Subsidiary
Guarantor (whether outstanding on November 25, 2003 or thereafter Incurred)
which is subordinate or junior in right of payment to the notes or the relevant
Subsidiary Guarantee, as applicable, pursuant to a written agreement to that
effect.
"Subsidiary" means:
(1) any corporation, association, partnership, limited liability
company or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency)
to vote in the election of directors, managers or trustees thereof is at
the time owned or controlled, directly or indirectly, by:
(A) Terex;
(B) Terex and one or more Subsidiaries; or
(C) one or more Subsidiaries; or
(2) any limited partnership of which Terex or any Subsidiary is a
general partner; or
57
(3) any other Person (other than a corporation or limited partnership)
in which Terex, or one or more other Subsidiaries or Terex and one or more
other Subsidiaries, directly or indirectly, has more than 50% of the
outstanding partnership or similar interests or has the power, by contract
or otherwise, to direct or cause the direction of the policies, management
and affairs thereof. Unless the context other wise requires, Subsidiary
means each direct and indirect Subsidiary of Terex.
"Subsidiary Guarantee" means a Guarantee by a Subsidiary Guarantor of
Terex's Obligations with respect to the notes.
"Subsidiary Guarantor" means any Subsidiary of Terex that Guarantees
Terex's Obligations with respect to the notes.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of this Indenture.
"Trustee" means the party named as such in the Indenture until a successor
replaces it and, thereafter, means the successor.
"Unrestricted Subsidiary" means any Subsidiary of Terex (other than a
Subsidiary Guarantor) designated as such pursuant to and in compliance with the
covenant described under "Limitation on Designations of Unrestricted
Subsidiaries." Any such designation may be revoked by a resolution of the Board
of Directors of Terex delivered to the trustee, subject to the provisions of
such covenant.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means Capital Stock of such Person of the class
or classes pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
"Wholly Owned Subsidiary" means:
(1) a Restricted Subsidiary all the Capital Stock of which (other than
directors qualifying shares and shares held by other Persons to the extent
such Shares are required by applicable law to be held by a Person other
than Terex or a Restricted Subsidiary) is owned by Terex or one or more
Wholly Owned Subsidiaries; and
(2) P.P.M. S.A.S., and any future wholly owned subsidiaries of P.P.M.
S.A.S., so long as Terex or one or more Wholly Owned Subsidiaries maintains
a percentage ownership interest in such entity equal to or greater than
such ownership interest (on a fully diluted basis) on the later of (A)
November 25, 2003 or (B) the date such entity is incorporated or acquired
by Terex or one or more Wholly Owned Subsidiaries.
58
Book-Entry, Delivery and Form
General
The notes initially will be issued in the form of one or more fully
registered notes in global form (the "Global Notes"). The Global Notes will be
deposited upon issuance with the Trustee as custodian for DTC and registered in
the name of DTC or its nominee, in each case for credit to the accounts of
institutions that have accounts with DTC or its nominee (the "DTC participants")
and to the accounts of institutions that have accounts with Euroclear or its
nominee participants (the "Euroclear participants" and, collectively with the
DTC participants, the "participants"). Each of DTC and Euroclear is referred to
herein as a "Book-Entry Facility." Ownership of beneficial interests in the
Global Notes will be limited to participants or persons that may hold interests
through participants. Ownership of beneficial interest in the Global Notes will
be shown on, and the transfer of that ownership will be effected only through,
records maintained by a Book-Entry Facility or its nominee (with respect to
participants interests) for such Global Notes or by participants or persons that
hold interests through participants (with respect to beneficial interests of
persons other than participants). The laws of some jurisdictions may require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the Global Notes.
So long as DTC, or its nominee, is the registered holder of the Global
Notes, DTC or such nominee, as the case may be, will be considered the sole
legal owner and holder of such notes represented by such Global Notes for all
purposes under the Indenture and the notes. Except as set forth below, owners of
beneficial interests in the Global Notes will not be entitled to have such
Global Notes or any notes represented thereby registered in their names, will
not receive or be entitled to receive physical delivery or certificated notes in
exchange therefor and will not be considered to be the owners or holders of such
Global Notes or any notes represented thereby for any purpose under the notes or
the Indenture. We understand that under existing industry practice, in the event
an owner of a beneficial interest in a Global Notes desires to take any action
that DTC, as the holder of such Global Notes, is entitled to take, DTC would
authorize the participants to take such action, and that the participants would
authorize beneficial owners owning through such participants to take such action
or would otherwise act upon the instructions of beneficial owners owning through
them.
Any payment of principal or interest due on the notes on any interest
payment date or at maturity will be made available by us to the trustee by such
date. As soon as possible thereafter, the trustee will make such payments to DTC
or its nominee, as the case may be, as the registered owner of the Global Notes
representing such notes in accordance with existing arrangements between the
trustee and the depositary.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest in respect of the Global Notes will credit immediately the accounts
of the related participants with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Notes as
shown on the records of DTC. We also expect that payments by participants to
owners of beneficial interests in the Global Notes held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form of registered in "street name," and will be the responsibility of such
participants.
None of us, the trustee or any payment agent for the Global Notes will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests or for other aspects of the relationship between
the depositary and its participants or the relationship between such
participants and the owners of beneficial interests in the Global Notes owning
through such participants.
Because of time zone differences, the securities account of a Euroclear
participant purchasing an interest in a Global Note from a DTC participant will
be credited, and any such crediting will be reported to the relevant Euroclear
participant, during the securities settlement processing day (which must be a
business day for Euroclear) immediately following the DTC settlement date. Cash
received in Euroclear as a result of sales of interests in a Global Note by or
through a Euroclear participant to a DTC participant will be received with value
on the DTC settlement date but will be available in the relevant Euroclear cash
account only as of the business day following settlement in DTC.
59
As long as the notes are represented by a Global Note, DTC's nominee will
be the holder of such notes and therefore will be the only entity that can
exercise a right to repayment or repurchase of such notes. See "Description of
the Notes--Change of Control" and "--Certain Covenants--Limitation on Sales of
Assets and Subsidiary Stock." Notice by participants or by owners of beneficial
interests in the Global Notes held through such participants of the exercise of
the option to elect repayment of beneficial interests in notes represented by
the Global Note must be transmitted to the relevant Book-Entry Facility in
accordance with its procedures on a form required by the relevant Book-Entry
Facility and provided to participants. In order to ensure that DTC's nominee
will timely exercise a right to repayment with respect to a particular Note, the
beneficial owner of such note must instruct the broker or other participant to
exercise a right to repayment. Different firms have cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner should
consult the broker or other participant through which it holds an interest in a
note in order to ascertain the cut-off time by which such an instruction must be
given in order for timely notice to be delivered to DTC. We will not be liable
for any delay in delivery of notices of the exercise of the option to elect
repayment.
Unless and until exchanged in whole or in part for notes in definitive form
in accordance with the terms of the notes, the Global Notes may not be
transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC
to DTC or another nominee of DTC or by DTC or any such nominee to a successor of
DTC or a nominee of each successor.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among participants of a Book-Entry
Facility, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. None of us or
the trustee will have any responsibility for the performance by a Book-Entry
Facility or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations. We and
the trustee may conclusively rely on, and shall be protected in relying on,
instructions from a Book-Entry Facility for all purposes.
Certificated notes
The Global Notes shall be exchangeable for corresponding notes in
certificated fully registered form ("certificated notes") registered in the name
of persons other than DTC or its nominee only if (A) DTC (i) notifies Terex that
it is unwilling or unable to continue as depositary for the Global Notes or (ii)
at any time ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (B) there shall have
occurred and be continuing an Event of Default (as defined in the Indenture)
with respect to the applicable notes or (C) Terex executes and delivers to the
trustee an order that the Global Notes shall be so exchangeable. Any
certificated notes will be issued only in fully registered form, and shall be
issued without coupons in denominations of $1,000 and integral multiples
thereof. Any certificated notes so issued will be registered in such names and
in such denominations as DTC shall request.
The Clearing System
DTC has advised us as follows: DTC is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and "a clearing agency" registered pursuant to the
provisions of section 17A of the Exchange Act. DTC was created to hold
securities of institutions that have accounts with its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of participants, thereby elimination the need for physical movement of
securities certificates. DTC's participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's book-entry system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, whether directly or
indirectly.
60
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the material United States federal income
tax consequences of the ownership and disposition of the new notes by U.S.
Holders (as defined below) who acquire such securities in the exchange offer
(the "Initial U.S. Holders"). This summary is based on the Internal Revenue Code
of 1986, as amended to the date hereof (the "Code"), administrative
pronouncements, judicial decisions and existing and proposed Treasury
Regulations, changes to any of which subsequent to the date of this prospectus
may affect the tax consequences described herein. This summary discusses only
notes held as capital assets within the meaning of Section 1221 of the Code. It
does not discuss all of the tax consequences that may be relevant to a holder in
light of his particular circumstances or to holders subject to special rules,
such as persons who are not U.S. Holders (as defined below) or Initial U.S.
Holders, certain financial institutions, insurance companies, tax-exempt
entities, dealers in securities or foreign currency and holders who hold the new
notes as part of a straddle, hedging, conversion or other integrated
transaction. Holders of notes should consult their own tax advisors with regard
to the application of the United States federal income tax laws to their
particular situations as well as any tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a note
that, for United States federal income tax purposes, is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate the income of which is subject to
United States federal income taxation regardless of its source, or (iv) a trust,
if a U.S. court is able to exercise primary supervision over the administration
of such trust and one or more U.S. fiduciaries have the authority to control all
substantial decisions of such trust.
Exchange Offer
The exchange of old notes for new notes pursuant to the exchange offer will
not result in any federal income tax consequences to U.S. Holders. When a U.S.
Holder exchanges an old note for a new note pursuant to the exchange offer, the
U.S. Holder will have the same adjusted basis and holding period in the new note
as in the old note immediately before the exchange. There will be no federal
income tax consequences of the exchange offer to Holders who did not exchange
the old notes.
Payment of Interest
Stated interest paid on a new note will generally be taxable as ordinary
income at the time it accrues or is received in accordance with the U.S.
Holder's method of accounting for federal income tax purposes.
Sale, Exchange or Redemption
Upon the sale, exchange or redemption of a new note, a U.S. Holder will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or redemption (excluding amounts attributable to
accrued and unpaid interest, which amounts will be includible as ordinary
interest income) and such U.S. Holder's tax basis in the new note. Gain or loss
realized on the sale, exchange or redemption of a new note will be capital gain
or loss. Capital gains or losses recognized on new notes held more than one year
(including the period of ownership of the old notes) will be treated as
long-term capital gains or losses. The deduction of capital losses is subject to
certain limitations. Holders should consult their own tax advisors regarding the
treatment of capital gains and losses.
THE FOREGOING IS A SUMMARY OF THE PRINCIPAL FEDERAL INCOME TAX CONSEQUENCES
TO A U.S. HOLDER OF A NEW NOTE. EACH HOLDER OF AN OLD NOTE IS URGED TO CONSULT
ITS TAX ADVISOR TO DETERMINE THE SPECIFIC FEDERAL INCOME TAX CONSEQUENCES OF
ACCEPTING THE EXCHANGE OFFER, AS WELL AS THE EFFECT OF STATE, LOCAL AND FOREIGN
INCOME AND OTHER TAX LAWS.
61
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account as a result
of the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for old notes where
such old notes were acquired as a result of market-making activities or other
trading activities. We have agreed that, for a period of 180 days after the
Expiration Date, we will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account as a
result of the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the new notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
the prevailing market prices or negotiated prices. Any of these resales may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any of these
broker-dealers and/or the purchasers of any such new notes. Any broker-dealer
that resells new notes that it received for its own account as a result of the
exchange offer and any broker or dealer that participates in a distribution of
such new notes may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any of these resales of new notes and any
commissions or concessions received by any of these persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, we will send additional
copies of this prospectus and any amendment or supplement to this prospectus to
any broker-dealer that requests such documents in the Letter of Transmittal.
We have agreed to pay all expenses incident to this exchange offer
(including the fees and expenses of one counsel for the holders of the notes)
other than commissions or concessions of any brokers or dealers. We will
indemnify the holders of the new notes (including any broker-dealers) against
some liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the new notes offered hereby will be
passed upon for us by Bryan Cave LLP, New York, New York.
EXPERTS
The consolidated financial statements of Terex Corporation as of December
31, 2003 and 2002 and for each of the three years in the period ended December
31, 2003 incorporated in this prospectus by reference to the Annual Report on
Form 10-K of Terex Corporation for the year ended December 31, 2003 have been so
incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-4 under the Securities Act, to register the new notes
offered hereby. This prospectus does not contain all of the information that you
can in the Registration Statement, as permitted by the rules and regulations of
the Securities and Exchange Commission. As a result, statements in this
prospectus concerning the contents of any contract or other document are not
necessarily complete. You should read the full text of any contract or document
filed as an exhibit to the Registration Statement for a more complete
understanding of the contract or document or matter involved.
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While any notes remain outstanding, we will make available, upon request,
to any holder and any prospective purchaser of notes the information required
pursuant to Rule 144 (d)(4) under the Securities Act of 1933, during any period
in which we are not subject to Section 13 or 15(d) of the Securities Exchange
Act of 1934. Any such request should be directed to the Secretary of Terex.
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission under the Exchange Act.
The Exchange Act file number for our Securities and Exchange Commission filings
is 1-12302. You may read and copy any document we file at the Securities and
Exchange Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
You may obtain information on the operation of the public reference room in
Washington, D.C. by calling the Securities and Exchange Commission at
1-800-SEC-0330. We file information electronically with the Securities and
Exchange Commission. Our Securities and Exchange Commission filings are
available from the Securities and Exchange Commission's Internet site at
http://www.sec.gov, which contains reports, proxy and information statements and
other information regarding issuers that file electronically. You may also
inspect our Securities and Exchange Commission reports and other information at
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
INCORPORATION OF DOCUMENTS BY REFERENCE
We can disclose important information to you by referring you to those
documents that we have previously filed with the SEC or documents that we file
with the SEC in the future. The information incorporated by reference is
considered to be part of this prospectus, and information in documents that we
file later with the SEC will automatically update and supersede information in
this prospectus. We incorporate by reference the documents listed below into
this prospectus, and any future filings made by us with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended,
until our offering is completed or terminated. The documents we incorporate by
reference are:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
2003.
2. Our definitive proxy materials on Schedule 14A as filed with the SEC
on April 13, 2004.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address and number: Terex Corporation,
Attention: Secretary, 500 Post Road East, Suite 320, Westport, Connecticut
06880; telephone (203) 222-7170.
You should rely only on information contained in this document or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
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