10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 1994 Commission File Number: 1-5646 CLARK EQUIPMENT COMPANY (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of 38-0425350 incorporation or organization) (IRS Employer Identification No.) 100 North Michigan Street 46634 P.O. Box 7008 (Zip Code) South Bend, Indiana (Address of Principal (219) 239-0100 Executive Offices) (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, $7.50 Par Value New York Stock Exchange, Inc. Securities registered pursuant to Section 12 (g) of the Act: None Indicate by a check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] As of March 13, 1995, the aggregate market value of the voting stock held by nonaffiliates of the Registrant was $857,428,172, based on the closing price of the stock as reported on the Composite Transaction Reporting System by the New York Stock Exchange on March 13, 1995. (Number includes the shares held by the Registrant's Leveraged Employee Stock Ownership Plan.) As of March 13, 1995, there were 17,132,696 shares of Registrant's $7.50 Par Value Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1994 ("Annual Report") are incorporated by reference in Parts I and II of this Form 10-K. Portions of Registrant's Proxy Statement for the 1995 Annual Meeting of Stockholders ("Proxy Statement") are incorporated by reference into Part III of this Form 10-K. PART I ITEM 1. BUSINESS Clark Equipment Company, a Delaware corporation, is the successor to certain corporations the first of which was organized on December 24, 1902. Unless the context otherwise indicates, the terms "Registrant", "Clark" and "Company" when used in this Form 10-K refer to Clark Equipment Company and its consolidated subsidiaries. Description of Business Clark's business is the design, manufacture and sale of compact construction machinery, asphalt paving equipment, axles and transmissions for off-highway equipment and golf cars and utility vehicles. Skid steer loaders, compact excavators and a limited line of agricultural equipment are manufactured by Clark's Melroe Company Business Unit ("Melroe") which is headquartered in Fargo, North Dakota. Off-highway axles and transmissions are manufactured by the Company's Clark Hurth Components Company Business Unit ("Clark Hurth") which is headquartered in Statesville, North Carolina. Asphalt paving equipment is manufactured by the Company's subsidiary Blaw-Knox Construction Equipment Corporation ("Blaw-Knox") which is headquartered in Mattoon, Illinois. Golf cars and utility vehicles are manufactured by the Company's subsidiary, Club Car, Inc. ("Club Car") which is headquartered in Martinez, Georgia. On March 13, 1995, the Company acquired 9,461,810 shares of Club Car, representing approximately 99% of the outstanding shares, for a cash price of $25 per share pursuant to a tender offer initiated by the Company on February 8, 1995. Club Car is one of the largest manufacturers of golf cars and light utility vehicles in the world and had sales in its fiscal year ending on September 25, 1994 of approximately $186 million. On March 17, 1995, the Company completed a merger of Club Car with another wholly-owned subsidiary of the Company. Upon consummation of the merger, Club Car became a wholly-owned subsidiary of the Company, and the shareholders of Club Car who did not tender their shares became entitled to receive $25 per share. The total purchase price for Club Car was approximately $242.6 million, after taking into account amounts paid with respect to certain outstanding stock options, tax benefits related to these stock options and certain transaction expenses. The financial statements which are included in this Form 10-K do not include Club Car. The Company acquired Blaw-Knox on May 13, 1994 from White Consolidated Industries, Inc. for a purchase price of approximately $145 million. The Balance Sheet and results of operations of Blaw-Knox are included in the consolidated accounts of the Company subsequent to the acquisition date. On May 13, 1994, the Company completed the initial public offering of the stock of Clark Automotive Products Corporation ("CAPCO"). CAPCO was engaged in the business of manufacturing transmissions, primarily for on-highway applications, for sale in Brazil and North America. The Company sold approximately 91 percent of its interest in CAPCO and received net proceeds of approximately $103 million, resulting in a gain of approximately $33 million. The results of CAPCO have been deconsolidated to reflect the operations of this segment on a discontinued basis in the Statements of Income contained in this Form 10-K for all periods presented. -2- VME Group N.V. ("VME") is a joint venture owned 50% by the Company and 50% by A.B. Volvo of Sweden ("Volvo"). It is engaged in the manufacture and sale of construction and earthmoving equipment. On March 5, 1995, the Company entered into an agreement to sell all of its shares of VME to Volvo for a cash purchase price of $560 million. In addition, immediately prior to the sale, VME will pay a cash dividend to the Company of $13 million. The sale of the Company's VME shares to Volvo is expected to close early in April of 1995. VME is reflected as a discontinued operation in the Statements of Income which are included in this Form 10-K for all periods presented. On July 31, 1992, the Company sold all of the outstanding stock of Clark Material Handling Company ("CMHC"), and certain other subsidiaries which comprised its material handling equipment business, to Terex Corporation ("Terex") for approximately $91 million. A gain of $8.5 million was recognized on the sale which has been included in discontinued operations. CMHC is reflected as a discontinued operation in the Statements of Income which are filed as a part of this Form 10-K. As a part of the sale, Terex and CMHC assumed substantially all of the obligations of the Company relating to the CMHC operation. In the event that Terex and CMHC fail to perform or are unable to discharge any of the assumed obligations, the Company could be required to discharge such obligations. This issue is discussed in more detail in the footnote captioned "Contingencies" in that portion of the Company's Annual Report to Stockholders which is attached hereto as Exhibit 13. Backlog Orders The approximate dollar backlog of orders believed to be firm was $221 million (which includes $20 million for Blaw-Knox but does not include Club Car) at December 31, 1994 and $125 million at December 31, 1993. Generally, Clark's customers may cancel their orders without incurring significant cancellation charges, and, therefore, Clark's backlog is essentially a report of the recorded intentions to purchase its products, which could change before the sales are completed. The backlog figures stated above are based on orders to Clark's factories or warehouses from Clark's independent dealers and other customers who buy directly from Clark's factories or warehouses. Manufacturing Melroe products are manufactured in the United States for sale throughout the world to a wide variety of users and industries, including the construction and agricultural industries. These products are distributed under the trademarks "Melroe" and "Bobcat". In addition, Melroe products are manufactured by a licensee in Australia. Clark Hurth products are manufactured in the United States, Belgium and Italy for sale throughout the world primarily to the construction, mining and material handling equipment industries. In addition, Clark Hurth products are manufactured by licensees in South Africa and Brazil. Blaw-Knox products are manufactured in the United States and England for sale throughout the world primarily to the highway construction and asphalt paving industries. Club Car products are manufactured in the United States for sale throughout the world in the golf, recreational, commercial and industrial markets. -3- Distribution Clark Hurth products are sold directly to customers by employee sales representatives and through manufacturers representatives and independent distributors. Melroe and Blaw-Knox products are sold primarily through independent dealers. Club Car products are sold directly to customers by employee sales representatives and through independent distributors and dealers. Clark maintains a large modern central parts warehouse in Chicago, which, in conjunction with a communications network and electronic data processing equipment, provide expeditious shipment of customers' and dealers' orders for repair and replacement parts for Melroe and VME products. Clark Hurth, Blaw-Knox and Club Car parts are distributed from their respective manufacturing facilities. Operations Outside the United States Operations outside the United States are subject to, among other things, the laws and regulations of foreign governments relating to investments, operations and currency restrictions, import and export duties and revaluations and fluctuations of currencies. Operations outside the United States are also subject to changes in governments and economic policies. License fees from licensees outside the United States and Canada, other than from consolidated subsidiaries, and dividends from associated companies aggregated approximately $0.8 million in 1994, approximately $0.3 million in 1993 and approximately $0.4 million in 1992. Raw Materials and Components The principal raw materials and components purchased by the Company are steel; castings; engines and accessories; hydraulic motors, pumps, valves and cylinders; fabricated metal parts; fabricated plastic parts; tires and tubes; electrical equipment; drive train components; brakes and brake components; bearings; forgings; fasteners; bushings; electric motors; gears and gear blanks; screw machine products; seals; clutch plates; torque convertors; synchronizer rings; steering arms; CV joints; cardan shafts; seats; paint; sealants and adhesives; antifreeze; batteries; radiators; oil coolers; springs; shocks; chain; sprockets; glass; filters; fabricated plastic parts; injection molded plastics; control cables; aluminum extrusions; and rotational and vacuum formed plastics. The items described above are purchased from a number of different suppliers, both on an individual purchase commitment basis and on a one-year blanket order basis. Multiple sources for most items are available, but substitution of engines and accessories, hydraulic motors, electrical equipment, brake assemblies, pumps, and valves, in the event they were to become unavailable from the usual sources, would in some instances require engineering modifications to the product in which they are used. Energy Clark's manufacturing operations and those of its suppliers depend to a substantial extent upon the availability of natural gas, fuel oil, propane, electricity, coal, uranium and generating capacity. Clark presently expects that its plants will be able to operate with little or no interruption resulting out of scarcity of energy through 1995. -4- Engineering and Product Development An engineering staff is maintained at each of the principal manufacturing facilities of Clark. These staffs are supplemented by laboratories which provide technical support for product testing, materials research and process development. Approximately 225 engineering employees (engineers, designers, draftsmen and technicians) are presently engaged full time in engineering and product development activities. Approximately $15.6 million in 1994, $17.0 million in 1993 and $14.7 million in 1992 was spent on Company-sponsored activities relating to the development of new products and the improvement of existing products for Clark's continuing operations. Approximately 47 employees of Club Car are presently engaged full time in engineering and product development activities. Club Car spent approximately $2.2 million, $2 million and $1.9 million on Company- sponsored engineering and product development activities during its fiscal years ending on September 25, 1994, September 26, 1993 and September 27, 1992 respectively. Although Clark owns numerous patents and has patent applications pending, its business is not materially dependent upon patent protection. Competition Clark conducts its domestic and foreign operations under highly competitive conditions and its business is subject to cyclical influences and other factors. The customers for most of Clark's products are commercial, industrial or farm users who use the products in business for profit. Product performance and parts and service availability are primary considerations for these customers in the choice among competing products. Availability of rental and financing programs and warranty policies are also important considerations. In making a purchase decision, the above factors, plus the initial selling price, the date on which delivery can be made, and the general product reputation will be considered by the purchaser, and the order will normally be placed with the seller who comes closest to satisfying the purchaser's particular requirements of all of these factors. Melroe is the leading producer of skid steer loaders in the United States and has approximately 9 significant competitors worldwide. Melroe also has approximately 6 significant competitors in its excavator line and 3 significant competitors in its agricultural spraying equipment product line. Clark Hurth has approximately 19 significant competitors and is also subject to potential competition from its customers. Blaw-Knox is the leading producer of asphalt paving equipment in the United States and has approximately 5 significant competitors in North America and 18 significant competitors in the rest of the world. Club Car is one of the two largest manufacturers of golf cars and utility vehicles in the world and has approximately 5 significant competitors in each product line. -5- Customers The Company is not dependent upon a single customer or a few customers, the loss of any one or more of which would have a material adverse effect on its operations. Seasonality Although Clark experiences slight seasonal variations in its sales of Melroe, Clark Hurth and Blaw-Knox products, Clark does not consider any material part of those businesses to be seasonal. Club Car's peak sales of golf cars occur during the months of February through June when units are shipped to golf clubs at the beginning of their golf season. Warm weather states, such as California and Florida, have golf seasons beginning in the fall which stimulate fleet and retail sales during the fall. Sales of Club Car's utility vehicle products occur year-round but are heavier in the spring. Environmental Compliance Clark's facilities are subject to environmental regulation by federal, state and local authorities. In 1994, the Company spent approximately $2.1 million in connection with environmental compliance and cleanup activities. Capital expenditures for environmental control activities are not expected to be material for the remainder of 1995 and 1996. Clark is also involved in environmental cleanup activities or litigation in connection with former waste disposal sites and current and former plant locations. The Company has and will continue to make provisions for these cleanup costs as necessary and when the Company's liability can be reasonably estimated. As of December 31, 1994, the Company had reserves of $16 million for potential future environmental cleanup costs. Although the Company cannot determine whether or not a material effect on future operations is reasonably likely to occur, it believes that the recorded reserve levels are appropriate estimates of its potential liability for environmental cleanup costs. The Company further believes that the additional maximum exposure level in excess of the recorded reserve level would not be material to the financial condition of the Company. Although settlement of the reserves will cause future cash outlays, it is not expected that such outlays will materially impact the Company's liquidity position. Employees As of December 31, 1994, Clark employed 2,919 persons in North America and 1,491 persons outside North America. A portion of Clark's production, maintenance and warehouse employees in the United States are represented by local unions affiliated with the International Brotherhood of Teamsters, the United Automobile, Aerospace and Agricultural Implement Workers of America and the United Paperworkers International Union, which are affiliated with the AFL-CIO. At the end of its fiscal year ending on September 25, 1994, Club Car had 683 full time and 160 temporary employees, none of whom were covered by a collective bargaining agreement. Industry Segment and Geographic Area Discussion Incorporated by reference to pages 38 and 39 of that portion of the Company's Annual Report which is attached hereto as Exhibit 13. -6- ITEM 2. PROPERTIES Clark or a subsidiary of Clark owns the following principal facilities in fee, except where a lease is indicated: Total Floor Space Leased Floor Space Principal Products Approximate Sq.Ft. Approximate Sq. Ft. Manufactured Plant Office Plant Office (in thousands) (in thousands) Melroe Bismarck, ND 375 48 - - Gwinner, ND 420 99 - 54 Fargo, ND - 22 - 22 Lot, Belgium 144 38 - - Other Melroe - 4 - 4 Clark Hurth Bruges, Belgium 312 19 - - Statesville, NC 423 60 18 - Buchanan, MI 52 10 13 - Arco, Italy 199 78 - - Valsugana, Italy 83 7 - - Rovereto, Italy 35 3 35 3 Blaw-Knox Mattoon, IL 347 47 - - Rochester, England 216 47 - - Manchester, England 7 - - - Coatbridge, Scotland 6 - - - Club Car Martinez, GA 273 60 - - Other - 86 - 86 Other Business Locations Corporate Headquarters- - 36 - 36 South Bend, IN Records Retention- - 15 - 15 South Bend, IN Clark Distribution Services- Chicago, IL 507 58 - - Bedford Park, IL 91 2 91 2 3,490 739 157 222 Clark owns the production equipment and machines at its plants, except for an insignificant number of items which are leased. All of Clark's principal plants and warehouse facilities are in good operating condition. In 1994, Clark sold idle facilities in Georgetown, Kentucky, Atlanta, Georgia and South Bend, Indiana. In 1994 Clark's manufacturing plants (not including Club Car) operated at approximately 91% of capacity. ITEM 3. LEGAL PROCEEDINGS In the Matter of Industrial Pretreatment Violations at Melroe Company, Gwinner, North Dakota On October 5, 1992, the United States Environmental Protection Agency ("EPA") issued a Finding of Violation and Order for Compliance ("Order") which alleges that the Company has failed to comply with the pretreatment regulations promulgated pursuant to Section 306 and 307 of the -7- Clean Water Act. The Order alleges that certain metal finishing wastewaters generated at the Company's Melroe facility in Gwinner, North Dakota were discharged into the Publicly Owned Treatment Works operated by the City of Gwinner in violation of the applicable pretreatment regulations. The Order also alleges that the Company failed to comply with certain reporting requirements set forth in the pretreatment regulations. The Order requires the Company to comply with the discharge limitations for metal finishing wastewater and all related reporting requirements. The Company has taken all actions required of it under the Order. On April 29, 1994, the U.S. filed suit against the Company in the United States District Court for the District of North Dakota. The complaint seeks (i) to permanently enjoin the Company to comply fully with all applicable requirements of the Act and Regulations and (ii) civil penalties against the Company of up to $25,000 per day for each violation for (a) alleged discharges of pollutants in violation of the effluent limitations contained in the pretreatment regulations, (b) failure to submit timely and complete reports and (c) a failure to sample and analyze its regulated wastewater prior to discharge into the POTW. This case is now in the discovery phase. The Company believes that its liability, if any, in connection with this lawsuit is adequately covered by its reserve for environmental liabilities. The Company does not expect that this lawsuit will have a material adverse effect on the Company's financial condition, results of operations or liquidity position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None -8- EXECUTIVE OFFICERS OF THE REGISTRANT Name of Officer and Age as of Principal Occupation Positions/Offices March 1, Date First and Employment During Presently Held 1995 Elected Past Five Years Leo J. McKernan* 57 5/22/86 Chairman, President and Chairman, President Chief Executive Officer of and Chief Executive Clark Equipment Company. Officer Frank M. Sims* 62 3/17/87 Senior Vice President of Senior Vice President Clark Equipment Company. Paul R. Bowles 57 9/22/89 Vice President - Corporate Vice President Development of Clark Equipment Company. Thomas L. Doepker 51 7/13/84 Vice President and Vice President and Treasurer of Clark Treasurer Equipment Company. William N. Harper 50 12/09/86 Vice President and Vice President and Controller of Clark Controller Equipment Company. Bernard D. Henely 51 7/13/84 Vice President and Vice President, General Counsel of General Counsel and Clark Equipment Company. Secretary David D. Hunter 54 10/24/94 President of Blaw-Knox Vice President Construction Equipment Corporation, a Business Unit of Clark Equipment Company. Prior to October 1994, Managing Director of European Operations of Clark Hurth Components Company. Prior to April 1992, Executive Vice President of Talley Industries Inc. James D. Kertz 58 2/9/93 President of Melroe Company, Vice President a Business Unit of Clark Equipment Company. Prior to September 1992, Executive Vice President of Melroe Company. John J. Reynolds 61 8/13/91 President of Clark Hurth Vice President Components Company, a Business Unit of Clark Equipment Company. Prior to April 1991, President of Cherry-Burrell Corporation- automatic packaging and processing equipment. * Member of the Board of Directors of the Company. Each officer's term expires at the annual meeting of the Board of Directors on May 9, 1995. -9- PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Incorporated by reference to page 41 of that portion of the Company's Annual Report which is attached hereto as Exhibit 13. ITEM 6. SELECTED FINANCIAL DATA Incorporated by reference to page 45 of that portion of the Company's Annual Report which is attached hereto as Exhibit 13. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Incorporated by reference to pages 1 through 11 of that portion of the Company's Annual Report which is attached hereto as Exhibit 13. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Incorporated by reference to pages 12 through 38, 40 and 41 of that portion of the Company's Annual Report which is attached hereto as Exhibit 13. Also see Index to Financial Statements on page 13 of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding the directors of the Registrant is incorporated by reference to the section in the Company's Proxy Statement which is captioned "Identification of Nominees for Director". Information regarding the executive officers of the Registrant is set forth in Part I of this report under the caption "Executive Officers of the Registrant". -10- ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference to the sections in the Company's Proxy Statement which are captioned "Executive Compensation", "Stock Option/SAR Tables", "Executive Employment Contracts", "Retirement Program", "Director Compensation Arrangements", and "Stock Acquisition Plan for Non-Employee Directors". ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference to the section in the Company's Proxy Statement which is captioned "Security Ownership of Certain Beneficial Owners and Management". ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Financial Statements: Incorporated by reference to pages 12 through 45 of that portion of the Company's Annual Report which is attached hereto as Exhibit 13. 2. Financial Statement Schedule (see index on page 13 of this report). 3. Exhibits: See Exhibit List and Index attached. Exhibits numbered (10)(a) through (10)(aa) are management contracts and compensatory plans or arrangements. (b) Reports on Form 8-K: 1. The Registrant filed a Form 8-K dated October 26, 1994 reporting on Item 5, OTHER EVENTS, and Item 7, FINANCIAL STATEMENTS AND EXHIBITS. -11- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 31st day of March 1995. CLARK EQUIPMENT COMPANY By /s/ Leo J. McKernan Leo J. McKernan Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. Each person whose signature appears below hereby authorizes B. D. Henely and John J. Moran, Jr. and each of them severally, with full power in each to act without the other and with full power of substitution and resubstitution, to execute in the name of each such person, and to file any amendments to this report as the registrant deems appropriate, and appoints such persons as attorneys-in-fact to sign on his behalf individually, and in each capacity stated below, and file all amendments to this report. SIGNATURE TITLE DATE /s/ Leo J. McKernan Chairman, President, Chief March 31, 1995 Leo J. McKernan Executive Officer and Director (Principal Executive Officer) /s/ William N. Harper Vice President and Controller March 31, 1995 William N. Harper (Principal Financial Officer and Principal Accounting Officer) Directors /s/ James C. Chapman James C. Chapman Director ) /s/ Donald N. Frey Donald N. Frey Director ) /s/ James A.D. Geier James A.D. Geier Director ) /s/ Gaynor N. Kelley Gaynor N. Kelley Director ) March 31, 1995 /s/ Ray B. Mundt Ray B. Mundt Director ) /s/ Frank M. Sims Frank M. Sims Director ) -12- CLARK EQUIPMENT COMPANY INDEX TO FINANCIAL STATEMENTS The financial statements of Clark Equipment Company and its consolidated subsidiaries, together with the report thereon of Price Waterhouse LLP dated March 6, 1995, appearing on pages 12 through 45 of that portion of the Company's 1994 Annual Report which is attached hereto as Exhibit 13, are incorporated by reference in this Form 10-K Annual Report. The following additional financial data should be read in conjunction with such financial statements. Schedules not included with this additional financial data have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. The consolidated financial statements of VME Group N.V. (VME) and its subsidiaries have been incorporated beginning on page 16 of this report. VME, at December 31, 1994, was a joint venture owned 50 percent each by Clark Equipment Company and A.B. Volvo of Sweden. The Company has agreed to sell its shares of VME to A.B. Volvo and the sale is expected to close in early April 1995. Financial statements of other unconsolidated majority owned subsidiaries and 50% or less owned persons have been omitted because the proportionate share of the pre-tax income and total assets of each such company is less than 20% of the respective amounts for the registrant and its consolidated subsidiaries, and the investment in and advances to each company is less than 20% of total assets of the registrant and its consolidated subsidiaries. Additional Information: Page Report of Independent Accountants on Financial Statement Schedule 14 Clark Equipment Company and Consolidated Subsidiaries- Schedule II 15 VME Group N.V. and its subsidiaries Consolidated Financial Statements and Notes to Consolidated Financial Statements 16 through 43 Report of KPMG Bohlins AB on the Financial Statements of VME Holding Sweden AB 44 AND 45 -13- REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE Board of Directors Clark Equipment Company South Bend, Indiana Our audits of the consolidated financial statements referred to in our report dated March 6, 1995 appearing in the 1994 Annual Report to Stockholders of Clark Equipment Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, the Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ Price Waterhouse Price Waterhouse South Bend, Indiana March 6, 1995 -14- CLARK EQUIPMENT COMPANY AND CONSOLIDATED SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Amounts in Thousands)
Effect of Balance at Charged to Exchange Balance at Beginning of Costs and 1/ Rate End of Period Expenses Deductions Changes Period Year Ended December 31, 1994 Allowance for Doubtful Accounts $ 5,485 $ 1,463 $ (1,122) $ 189 $ 6,015 Year Ended December 31, 1993 Allowance for Doubtful Accounts $ 4,735 $ 905 $ 23 $ (178) $ 5,485 Year Ended December 31, 1992 Allowance for Doubtful Accounts $ 8,671 $ 1,028 $ (4,754) $ (210) $ 4,735 1/ Represents losses incurred on write-offs less amounts recovered. The 1992 amount includes reductions of $3,472 due to the sale of Clark Material Handling Company to the Terex Corporation on July 31, 1992. -15-
VME GROUP N.V. CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994 -16- VME GROUP N.V. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS * Report of Independent Accountants. * Consolidated Balance Sheet as of December 31, 1994 and 1993. * Consolidated Statement of Operations for each of the years in the three year period ended December 31, 1994. * Consolidated Statement of Cash Flows for each of the years in the three year period ended December 31, 1994. * Notes to Consolidated Financial Statements. SUPPLEMENTAL SCHEDULE II Valuation and Qualifying Accounts SCHEDULES OMITTED * Other schedules required by Regulation S-X are omitted because of absence of the conditions under which they are required or because information called for is shown in the financial statements and notes thereto. -17- BP America Building Telephone 216 781 3700 200 Public Square 27th Floor Cleveland, Ohio 44114-2301 Price Waterhouse LLP Report of Independent Accountants To the Board of Directors and Shareholders of VME Group N.V. In our opinion, based upon our audits and the report of other auditors, the accompanying consolidated balance sheet and the related consolidated statements of operations and of cash flows present fairly, in all material respects, the financial position of VME Group N.V. and its subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain subsidiaries, which statements reflect total assets of $489,725,000 and $412,300,000 at December 31, 1994 and 1993, respectively, and total revenues of $648,270,000, $511,000,000 and $586,800,000 for the three years in the period ended December 31, 1994, respectively. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for these subsidiaries, is based solely on the report of the other auditors. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for the opinion expressed above. As discussed in Notes 3 and 19, the Company changed its method of accounting for income taxes and postretirement benefits effective January 1, 1993. /s/ Price Waterhouse LLP Cleveland, Ohio February 27, 1995, except as to Note 24, which is as of March 6, 1995 -18- VME GROUP N.V. CONSOLIDATED BALANCE SHEET (Amounts in millions, except share and per share amounts) December 31, 1994 1993 ASSETS Current assets: Cash and cash equivalents $ 58.9 $ 36.2 Receivables 213.0 167.9 Inventories 319.7 271.2 Other assets 68.8 48.0 Total current assets 660.4 523.3 Long-term assets: Property, plant and equipment, net 158.9 152.8 Other assets 13.8 17.9 Goodwill 120.0 84.3 Total assets $ 953.1 $ 778.3 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 142.2 $ 90.3 Short-term debt 16.5 52.2 Current portion of long-term debt 8.3 4.3 Other liabilities 242.1 152.1 Total current liabilities 409.1 298.9 Long-term liabilities: Debt 54.5 127.1 Shareholders' loans 70.0 70.0 Pension liability 58.6 80.9 Other 40.4 23.0 Total liabilities 632.6 599.9 Commitments and contingencies Minority interests 10.1 20.0 Shareholders' equity: Common stock: $516 par value - 129.0 129.0 authorized 600,000 shares; issued and outstanding 250,000 shares Paid in capital 80.9 80.9 Retained earnings (deficit) 97.9 (34.2) Cumulative translation adjustments 26.1 7.0 Pension adjustments (23.5) (24.3) Total shareholders' equity 310.4 158.4 ________ ________ Total liabilities and shareholders' equity $ 953.1 $ 778.3 ======== ======== The accompanying notes are an integral part of these financial statements. -19- VME GROUP N.V. CONSOLIDATED STATEMENT OF OPERATIONS (Amounts in millions, except per share amounts) Year Ended December 31, 1994 1993 1992 Sales $1,566.0 $1,239.3 $1,357.3 Cost of sales (1,141.8) (958.0) (1,169.3) Gross profit 424.2 281.3 188.0 Selling, general and administrative expense (226.8) (211.3) (237.4) Restructuring cost - - (18.7) Other income (expense) 12.6 (5.3) (6.6) Operating income (loss) 210.0 64.7 (74.7) Financial income and expense : Interest income 7.7 5.8 8.4 Interest expense (18.0) (32.2) (47.0) Interest expense, net (10.3) (26.4) (38.6) Income (loss) before income taxes, minority interests and effect of change in accounting 199.7 38.3 (113.3) Benefit (provision) for income taxes (66.5) (17.9) 23.4 Income (loss) before minority interests and effect of change in accounting 133.2 20.4 (89.9) Minority interests (1.1) (2.7) (3.7) Income (loss) before effect of change in accounting 132.1 17.7 (93.6) Effect of change in accounting for income taxes - 12.3 - Net income (loss) $ 132.1 $ 30.0 $ (93.6) ======== ======== ======== Per share information : Income (loss) before effect of change in accounting $ 528.40 $ 70.95 $(374.47) Effect of change in accounting for income taxes - 49.14 - Net income (loss) $ 528.40 $120.09 $(374.47) ========= ========= ========= The accompanying notes are an integral part of these financial statements. -20- VME GROUP N.V. CONSOLIDATED STATEMENT OF CASH FLOWS (Amounts in millions) Year Ended December 31, 1994 1993 1992 Cash flows from operating activities: Net income (loss) $ 132.1 $ 30.0 $ (93.6) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 31.0 31.5 42.5 Effect of change in accounting for income taxes - (12.3) - (Gain) loss on sale of fixed assets and subsidiaries (1.1) 0.3 (5.3) Minority interest in net income 1.1 2.7 3.7 Undistributed losses of affiliates - 0.3 0.2 Increase (decrease) in cash flow from changes in: Receivables (12.7) (32.9) 10.0 Inventories (23.3) 21.0 75.8 Accounts payable 16.2 25.6 23.5 Accrued expenses 80.9 16.8 (11.4) Pension liability (27.9) 5.6 9.8 Deferred taxes 5.4 3.7 (36.1) Other (9.5) (6.8) 0.7 Net cash provided by operating activities 192.2 85.5 19.8 Cash flows from investing activities: Proceeds from sale of fixed assets 2.6 14.1 19.2 Capital expenditures (24.7) (21.3) (29.8) Contribution received for joint venture interest 3.2 6.0 - Sale of subsidiaries - - 2.6 Purchase of minority interest in Zettelmeyer (39.9) - - Decrease (increase) in other assets 5.2 7.4 (16.9) Net cash provided by (used in) investing activities (53.6) 6.2 (24.9) Cash flows from financing activities: Net payments on line of credit borrowings (39.8) (178.7) (21.5) Proceeds from issuance of debt 0.1 73.0 - Debt repayment (80.9) (46.2) (59.5) Proceeds from financing arrangements - - 59.1 Proceeds from shareholders' loans - - 70.0 Capital contribution - - 30.0 Net cash provided by (used in) financing activities (120.6) (151.9) 78.1 Effect of exchange rate changes on cash 4.7 (4.9) (4.9) Net increase (decrease) in cash and cash equivalents 22.7 (65.1) 68.1 Cash and cash equivalents, beginning of year 36.2 101.3 33.2 Cash and cash equivalents, end of year $ 58.9 $ 36.2 $ 101.3 ======= ======= ======= The accompanying notes are an integral part of these financial statements. -21- Page 1 VME GROUP N.V. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in millions) Note 1 - Basis of Presentation and Principles of Consolidation VME Group N.V. (the Company, VME) is a Netherlands holding company formed on March 28, 1985 to hold, together with Clark Equipment Company (Clark) and AB Volvo, the common stock of its two significant operating subsidiaries, VME Americas Inc. (VMEA), a Delaware Corporation, and VME Holding Sweden AB (VMEHS), a Swedish corporation. AB Volvo and Clark until December 22, 1993, held equal cross-ownership positions in VMEA and VMEHS. On December 22, 1993, Clark and AB Volvo contributed their respective ownership interests in VMEA and VMEHS to VME Group N.V., which resulted in VMEA and VMEHS becoming wholly-owned subsidiaries of the Company. Such contributions were accounted for as transactions between entities under common control. Accordingly, financial statements of the Company have been prepared on a historical cost basis and reflect such contributions on a retroactive basis for all periods presented. Investments and results of operations of companies in which the Company holds more than 50% of the issued capital stock, are included in the consolidated accounts. Companies in which the Company holds investments between 20% and 50% are accounted for utilizing the equity method of accounting and investments below 20% are accounted for at cost. All material balances and transactions between the entities comprising the Company have been eliminated. Note 2 - Description of Business The Company is engaged in the design, manufacture and marketing of off-highway construction and earth-moving equipment in most world markets. This equipment is comprised of wheel loaders, articulated and rigid haulers and hydraulic excavators. The majority of sales are made to end users through a worldwide network of affiliated and independent distributors. The Company does not have significant exposure to any individual customer or distributor. The sale of replacement parts is an important component of the Company's business. Note 3 - Summary of Significant Accounting Policies Revenue Recognition Revenues are recognized upon shipment of units and service parts. A provision is made for discounts, returns and recourse obligations under dealer financing arrangements. Inventories Inventories of non-U.S. operations are valued at the lower of cost utilizing the first-in, first-out (FIFO) method or market. Substantially all U.S. owned inventories are valued at the lower of cost utilizing the last-in, first-out (LIFO) method or market. -22- Page 2 Note 3 - Summary of Significant Accounting Policies (cont'd) Properties and Depreciation Property, plant and equipment are carried at cost. Expenditures for maintenance and repairs are charged to income as incurred and expenditures for major renewals and betterments are capitalized. Depreciation is provided over the useful lives of the assets using primarily the straight-line method. Properties retired or sold are removed from the property accounts with gains or losses on disposal included in income. The useful lives of the assets are primarily as follows : Years Buildings 25 - 50 Machinery and equipment 5 - 10 Motor vehicles 5 Furniture and fixtures 3 Goodwill Goodwill represents the excess of the total costs of businesses acquired over the fair market value of their net assets. Goodwill is being amortized on the straight-line method over a period of 40 years. Accumulated amortization expense was $10.4 in 1994 and $6.3 in 1993. Management periodically assesses the need to record provisions for the impairment of long-lived assets by comparing their best estimate of undiscounted future cash flows before interest payments to the net book value of significant assets or businesses, including goodwill. Management considers current business plans, the cyclical nature of the global earth-moving and construction equipment industry and other factors. If projected cash flows are less than the assets' recorded value, impairment would be recorded using a fair value concept. Fair value is computed utilizing a discounted cash flow model. Management also periodically considers the appropriateness of the remaining economic life of goodwill. Warranties Provision is made currently for estimated future costs that are expected to be incurred under product warranties presently in force. Pension Plans The Company accrues the cost of pension and retirement plans which cover substantially all employees. Benefits are based on employees' years of service and compensation. Pension costs, for defined benefit plans, are primarily computed using the unit credit method. Non-U.S. plans are funded in accordance with local laws and income tax regulations. The board of directors adopted a plan in 1994 to substantially decrease its underfunded U.S. pension status by 1996. U.S. plans' assets are invested primarily in listed stocks, guaranteed investment contracts and corporate bonds. Product Liability The Company accrues its best estimate of the most likely amount of settlement or claim liability for all asserted claims. For unasserted claims, the Company records an estimate of liability for incurred but not reported claims based on historical amounts of claims and settlements and reporting lag time. -23- Page 3 Note 3 - Summary of Significant Accounting Policies (cont'd) Income Taxes In January 1993, the Company adopted Statement of Financial Accounting Standard No. 109 (FAS 109) "Accounting for Income Taxes". The adoption of FAS 109 changes the method of accounting for income taxes from the deferred method (APB 11) to an asset and liability approach. Previously, the Company deferred the past tax effects of timing differences between financial reporting and taxable income. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences or temporary differences between the carrying amount and the tax bases of assets and liabilities. The adoption resulted in the recognition of a net tax benefit of $12.3. No provision for income taxes is made on $160.4 of undistributed earnings from consolidated subsidiaries, which have been or will be reinvested, and it is not practicable to quantify the amount of such taxes if remitted. Derivative Financial Instruments The Company attempts to limit its financial exposure to the effects of potential currency exchange rate fluctuations on balance sheet positions and cash flows corresponding to expected cross border transactions. The Company utilizes currency swap contracts to hedge balance sheet positions, and forward exchange and purchased option contracts to hedge future cash flows and avoid speculative positions which may impact expected profitability. The Company limits its use of financial instruments so that it is reasonably assured that the transactions it intends to protect will occur. Because the Company bases its hedging on expected net currency cash flows and does not designate its currency contracts as hedges of specific balance sheet items or firm currency commitments, it does not achieve hedge accounting treatment. Accordingly, all exchange contracts are marked to market each period end and recognized as Other income (expense). Fair Value of Financial Instruments Pursuant to Financial Accounting Standard No. 107, "Disclosures about Fair Value of Financial Instruments", the carrying amount of cash, trade receivables and payables approximates fair value because of the short maturity of those instruments. The carrying value of the Company's long-term debt is considered to approximate the fair value of these instruments based on the borrowing rates currently available to the Company for loans with similar terms and maturities. The fair value of derivatives, which is equal to their carrying amount, generally reflects the estimated amounts that the Company would receive or pay to terminate the contracts at year end, thereby taking into account the current unrealized gains or losses of open contracts. Market quotes are available for all of the Company's derivative financial instruments. -24- Page 4 Note 3 - Summary of Significant Accounting Policies (cont'd) Foreign Currency Translation Foreign currency translation of substantially all assets and liabilities of non-U.S. affiliates is computed using period end currency exchange rates; equity is translated utilizing historical rates. Income and expenses are tranlated using average exchange rates for the period. For subsidiaries whose business activities are based mainly on the U.S. dollar or who operate in a "highly inflationary economy", the financial statements are remeasured into U.S. dollars using: (1) current exchange rates at the balance sheet date for all liabilities and current assets except inventories and prepaid expenses, (2) exchange rates at the time of acquisition for prepaid expenses, inven- tories and properties, and (3) weighted average monthly exchange rates for the year for income and expense amounts, except depreciation and cost of goods sold. The resulting translation gains and losses are included in income. The dollar is the functional currency for the U.S., Canadian and Brazilian subsidiaries. For all other subsidiaries, the local currency of the country in which the subsidiary operates and transacts its principal business is the relevant functional currency. Such countries include Sweden, Germany, Great Britain, France and Spain. Exchange (gains) and losses included in the Consolidated Statement of Operations were $(3.0), $18.8 and $15.9 in 1994, 1993 and 1992, respectively. Reclassifications Certain reclassifications have been made for all years presented in the Consolidated Financial Statements to conform to the classifications adopted in 1994. Note 4 - Acquisitions and Dispositions On January 1, 1994, the Company increased its holding in Zettelmeyer Baumaschinen GmbH (Zettelmeyer) to 100% by acquiring the remaining 30% minority interest for $39.9. The fair value of the assets acquired and obligations assumed approximated their net book values; accordingly, the additional purchase consideration was charged principally to goodwill. During 1993, the Company contributed stock and the book value of specific assets and liabilities in return for an 80.5% ownership interest in a company established as a joint venture with Hitachi Construction Machinery Company, Ltd (HCMC). HCMC contributed cash equal to 19.5% of the total net assets. The joint venture company, Euclid-Hitachi Heavy Equipment, Inc (Euclid-Hitachi), is consolidated in the Company's financial statements. HCMC will increase its ownership interest in Euclid-Hitachi by purchasing additional shares from the Company and subscribing for new shares of Euclid-Hitachi prior to December 31, 1996. The terms of the joint venture agreement limit HCMC to an ownership interest of less than 50% in Euclid-Hitachi. -25- Page 5 Note 5 - Statement of Cash Flows VME considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The following payments were made for: Year Ended December 31, 1994 1993 1992 Interest $ 18.4 $ 35.2 $ 63.7 Income taxes 9.1 6.3 6.4 Note 6 - Supplementary Information to Statement of Operations Costs and expenses include : Year Ended December 31, 1994 1993 1992 Research and development $ 49.3 $ 38.5 $ 59.9 Maintenance and repairs 26.3 21.8 28.0 Other Income (expense) includes : 1994 1993 1992 Exchange gains (losses) $ 10.0 $ (0.9) $ (11.3) Gain (loss) on sales of assets 1.1 (0.3) 5.3 Other 1.5 (4.1) (0.6) $ 12.6 $ (5.3) $ (6.6) ====== ====== ======= A charge in 1992 for restructuring costs of $18.7 has been made in costs and expenses relating to the decision to restructure the Group's distribution organization and production facilities in North America, to improve cost efficiency and increase the manufacturing productivity and to relocate the German distribution company. The remaining restructuring reserve relating to these activities was $4.3 and $5.9 at year end 1994 and 1993, respectively. The restructuring reserve relating to Akermans Verkstad AB aggregated $1.3 and $1.4 at year end 1994 and 1993, respectively. Note 7 - Distributor Financing Arrangements As a service to distributors in selected geographic areas, the Company has financing agreements with certain financial institutions to assist in the financing of distributor inventory. In general, these agreements require the Company to make monthly interest payments to the financial institutions for a predetermined period or until the inventory is sold by the distributor, whichever occurs first. Financing expenses incurred in conjunction with the above agreements were $8.7, $5.7 and $5.5 in 1994, 1993 and 1992, respectively, and were reflected in selling expenses. The interest rates charged on the above agreements are adjusted based on changes in the prime rate. The financial institutions' aggregate distributor receivable balances were $182.8 and $142.2 at December 31, 1994 and 1993, respectively. The Company's credit risk with respect to these receivable balances is not significant. -26- Page 6 Note 8 - Income Taxes The provision for income taxes is based on separate tax computations for each entity. Income (loss) before income taxes and minority interests is reported below: Year Ended December 31, 1994 1993 1992 Netherlands $ 0.9 $ 0.1 $ 0.7 U.S. 15.4 4.1 (16.0) Other, principally Sweden 183.4 34.1 (98.0) $ 199.7 $ 38.3 $(113.3) ======= ======= ======= The provision (benefit) for income taxes consists of the following: Year Ended December 31, Current tax expense: 1994 1993 1992 Netherlands - - - U.S. 3.8 7.9 - Other, principally Sweden 56.1 8.2 13.2 59.9 16.1 13.2 Deferred tax expense (benefit): Netherlands - - - U.S. 4.6 (1.5) - Other, principally Sweden 2.0 3.3 (36.6) 6.6 1.8 (36.6) _______ _______ _______ Total income tax expense (benefit) $ 66.5 $ 17.9 $ (23.4) ======= ======= ======= Tax legislation in Sweden and certain other countries allows companies to reduce their current taxable income through allocations to untaxed reserves at which time, deferred tax provisions are recorded. Reversal of such reserves generates current taxable income and a reduction of the deferred tax liabilities. Deferred income taxes apply to temporary differences primarily resulting from allocations to untaxed reserves (principally inventory and fixed assets related) and other differences between income before income taxes for financial reporting and tax purposes. Deferred tax benefits in 1992 are mainly comprised of the reversal of untaxed reserves of $21.6 and sale and lease-back of property in the amount of $13.3. Following is a reconciliation of income tax expense (benefit) from the U.S. statutory rate to the effective tax rate (the U.S. statutory rate is utilized as the Netherlands holding company does not generate significant taxable income) : Year Ended December 31, 1994 1993 1992 Provision (benefit) for taxes at US statutory rate $ 69.9 $ 13.1 $ (38.5) Effect of permanent differences between tax and financial income (1.6) 2.0 (0.5) Losses with no available tax benefits 1.2 2.0 17.6 Earnings taxed at other than U.S. rate (11.1) 0.1 (6.1) Change in valuation allowance resulting from utilization of net operating loss carryforwards (2.2) (7.5) - Accrual for potential disallowances 11.0 8.3 1.1 Other (0.7) (0.1) 3.0 Provision (benefit) for taxes at effective tax rate $ 66.5 $ 17.9 $ (23.4) ======== ======== ======= -27- Page 7 Note 8 - Income Taxes (continued) Deferred tax assets and liabilities are comprised of the following: 1994 1993 Deferred tax assets relating to : Accounts receivable $ 0.5 $ 0.3 Inventories 6.7 6.0 Fixed assets 8.3 8.0 Pension and postretirement benefits 11.1 14.7 Expense accruals and reserves 13.7 11.5 Net operating loss and credit carryforwards 14.4 17.0 Other 6.1 5.0 Total deferred tax assets before valuation allowance 60.8 62.5 Deferred tax assets valuation allowance (27.2) (31.0) Net tax asset $ 33.6 $ 31.5 ====== ====== Deferred tax liabilties relating to : Accounts receivable $ 0.1 $ - Inventories 7.7 8.0 Fixed assets 13.0 12.7 Pensions 7.6 5.2 Other 11.9 5.2 Gross deferred tax liabilities $ 40.3 $ 31.1 ====== ====== Euclid-Hitachi's Canadian subsidiary has $16 of loss carryforwards, which expire in 1998, available to reduce future taxable income. In addition, for Canadian income tax purposes, this subsidiary has available certain depreciation allowances aggregating $5.7, which may be utilized to reduce future taxable income in succeeding years. The amount of such depreciation allowance that may be deducted in any one specific year is subject to certain limitations. The Company's Brazilian subsidiary has $1.9 in tax credits that can be offset against future income up to 1998. Other subsidiaries in the Company have $6.9 of operating loss carryforwards available to offset future taxable income, most of which expire in the years 1996 through 1998. Note 9 - Receivables December 31, Receivables consist of the following: 1994 1993 Notes receivable - trade $ 24.5 $ 12.4 Trade receivables 196.2 158.8 Other receivables 6.1 6.9 Less: Allowance for doubtful accounts (13.8) (10.2) $ 213.0 $ 167.9 ======= ======= -28- Page 8 Note 10 - Inventories December 31, Inventories consist of the following: 1994 1993 Sales products $ 198.9 $ 187.3 Work in process 80.7 57.4 Raw materials 73.0 59.5 Reserves (32.9) (33.0) $ 319.7 $ 271.2 ======= ======= FIFO values of U.S. inventories exceeded LIFO values by $6.8 in 1994 and $6.9 in 1993. Inventories valued using the LIFO method comprised 20% and 17% of consolidated inventories in 1994 and 1993, respectively. Note 11 - Property, Plant and Equipment Property, plant and equipment consist of the following: December 31, 1994 Accumulated Net Cost Depreciation Book Value Land and land improvements $ 16.1 $ 4.8 $ 11.3 Buildings 120.3 48.5 71.8 Machinery and equipment 260.4 184.6 75.8 $ 396.8 $ 237.9 $ 158.9 ======= ======= ======= December 31, 1993 Accumulated Net Cost Depreciation Book Value Land and land improvements $ 14.6 $ 4.1 $ 10.5 Buildings 110.7 41.2 69.5 Machinery and equipment 234.7 161.9 72.8 $ 360.0 $ 207.2 $ 152.8 ======= ======= ======= Depreciation expense, including amortization on capitalized leases, was $27.8, $29.1 and $39.6 for the years 1994, 1993 and 1992, respectively. -29- Page 9 Note 12 - Short-term Debt Short-term debt consists of the following: December 31, 1994 Line of Interest Credit Amount Currencies Rate * Available Outstanding North America - $ 2.5 $ - Europe USD,FRF,ESP,DEM 7.37% 103.3 8.2 Brazil USD 11.88% 28.0 8.3 Australia - 5.5 - $ 139.3 $ 16.5 ======= ======= December 31, 1993 Line of Interest Credit Amount Currencies Rate * Available Outstanding Europe DEM,USD,ESP,FRF 6.84% $ 83.1 $ 43.6 Brazil USD 8.06% 21.7 5.1 Australia AUD 5.85% 5.5 3.5 $ 110.3 $ 52.2 ======= ======= * Represents weighted average year-end rates. The line of credit arrangements require payment of variable interest rates and commitment fees ranging from zero to 0.75% per year of the individual line of credit. Note 13 - Other Current Liabilities Other current liabilities consist of the December 31, following: 1994 1993 Salaries, wages and other employee costs $ 67.1 $ 50.7 Warranty obligations 35.1 28.7 Dealer discounts 5.8 5.4 Income taxes 71.1 18.1 Accrued expenses and deferred income 40.7 21.9 Other 22.3 27.3 $ 242.1 $ 152.1 ======= ======= -30- Page 10 Note 14 - Long-Term Debt December 31, The following is a summary of long-term debt: 1994 1993 Swedish Kronor Bank notes with fixed and variable interest rates ranging from 6.8% to 13.2% payable in annual installments over a ten-year period $ 5.0 $ 5.6 Revolving Multi Currency Credit Agreement of $250.0 with variable interest rates ranging from 6.1% to 8.9% and for a term of three years - 44.1 Credit Facility Agreement with a German bank of DEM 45.0 with an interest rate of 10.6% and for a term of three years - 26.0 Capital lease obligations in various currencies with fixed and variable interest rates ranging from 6.8% to 11.8% payable through 2035 14.9 14.4 Financing obligation in Swedish Kronor under sale leaseback transaction to be repaid over 20 years ending August, 2012 bearing interest fixed at 10.05% through 1998 42.9 41.3 Total 62.8 131.4 Less: Current portion of long-term debt (8.3) (4.3) Total long-term debt $ 54.5 $ 127.1 ======= ======= The Company leases buildings, land and equipment under capital lease and financing arrangements. The related net assets of $27.4 and $26.6 in 1994 and 1993, respectively, are recorded in property, plant and equipment. Long-term debt at December 31, 1994 matures as follows: 1995 $ 8.3 1996 4.9 1997 5.0 1998 5.0 1999 5.1 Thereafter 34.5 $ 62.8 ======= On December 22, 1994, the Company signed an unsecured $150 multicurrency revolving credit agreement with a group of banks for a term of five years. Borrowings on this facility will bear interest in a range from LIBOR +0.5% to LIBOR +0.9%. The Company is subject to leverage and cash flow covenants under this facility. In addtion, the Company is obligated to pay a commitment fee ranging from 0.25% to 0.45% on the undrawn and uncancelled amount of the facility. Concurrently, the Company cancelled the $250 revolving credit facility signed on February 22, 1993 and received release of assets pledged as security to this agreement. On December 30, 1994, the Company paid and cancelled the DEM 45 credit facility agreement and thereby obtained release of the pledged shares in Zettelmeyer Baumaschinen GmbH. -31- Page 11 Note 15 - Shareholders' loans Shareholders' loans totalling $70.0 with a term of three years were made by the shareholders to the Company at the end of 1992. The loans were subordinated to the $250.0 Revolving Credit Facility agreement and the DEM 45.0 Credit Facility agreement until 1994, at which time they were no longer subordinated. The loans bear interest of LIBOR plus 1.3% per annum and are due January 31, 1996. Note 16 - Leases and Commitments The Company incurred rent expense of $ 20.1, $17.0 and $22.7 in 1994, 1993 and 1992, respectively. Future minimum rental commitments under noncancellable operating leases at December 31, 1994 are as follows: 1995 $ 20.4 1996 16.5 1997 13.0 1998 6.5 1999 5.9 Thereafter 36.8 The Company rents equipment to others under operating lease agreements. In 1994, 1993 and 1992, the Company received rental income of $14.1, $11.9 and $9.5, respectively. The net book value of property leased to others aggregated $17.6 and $15.4 at December 31, 1994 and December 31, 1993, respectively. Future minimum rental income under noncancellable operating leases at December 31, 1994 is as follows: 1995 $ 10.0 1996 1.4 1997 0.8 1998 0.5 1999 0.3 Thereafter 3.3 Note 17 - Derivative Financial Instruments and Risk Management The Company operates internationally, giving rise to significant exposure to fluctuations in currency exchange rates. Derivative financial instruments are utilized by the Company to reduce those risks. The Company does not hold or issue financial instruments for trading purposes. Counterparty credit risk The risk associated with counterparty default on financial instruments is measured as the cost of replacing, at prevailing market prices, those contracts with a fair value in excess of their contractual amount at period end. The counterparties to the financial instruments listed below are major international financial institutions with high credit ratings. Accordingly, the Company believes its credit risk exposure to be insignificant. -32- Page 12 Note 17 - Derivative Financial Instruments and Risk Management (cont'd) Currency risk management The Company enters into various types of financial instruments in managing its currency exchange risk, as indicated in the following table : December 31, 1994 December 31, 1993 Contract Fair Contract Fair Amount Value Amount Value Forward exchange contracts $ 232.6 $ 3.6 $ 205.0 $ 2.0 Currency options 305.5 10.3 56.0 - Currency swap contracts 135.6 (2.0) 53.4 0.9 See Note 3, "Summary of Significant Accounting Policies - Fair Value of Financial Instruments" for definition of fair value. Positive carrying amounts represent assets which are recorded in other current assets. Negative carrying amounts represent liabilities which are recorded in other current liabilities. There are no deferred gains or losses on the contracts, all of which expire in the next year. The net unrealized currency gain recognized was $1.8 and $2.9 in 1994 and 1993, respectively. Note 18 - Pensions The total pension expense charged to operations for 1994, 1993 and 1992 was $38.0, $33.8 and $47.8, respectively. In Sweden, most of the plans are administered by governmental or quasi-governmental organizations. Such plans are accounted for in accordance with Financial Accounting Standard No. 87 (FAS 87). In Sweden, the Company accrues pension costs, but is only required to fund a portion of these costs. Annual pension costs include an interest factor on the unfunded obligations. Actuarial information, as supplied by the governmental agency for the plans they administer, indicates that the accrued pension costs approximate the actuarially computed value of vested and non-vested plan benefits. Pension expense for the defined contribution plans, principally Swedish, was $28.1, $24.9 and $37.3 in 1994, 1993 and 1992, respectively. Certain employees are also covered by insured plans which supplement the benefits received from the defined contribution plans. In the United States, Canada and for certain employee groups in Europe, principally Sweden, employees are covered by defined benefit plans. -33- Page 13 Note 18 - Pensions (continued) U.S. and European (Principally Swedish) Plans Net periodic pension cost on defined benefit plans consists of the following: Year ended December 31, 1994 1993 1992 Europe U.S. Europe U.S. Europe U.S. Service cost - benefits earned during the period $ 1.1 $ 0.9 $ 0.8 $ 1.0 $ 1.1 $ 0.9 Interest cost on projected benefit obligation 4.4 8.1 5.3 8.3 6.6 8.3 Actual return on plan assets - 0.6 - (5.0) - (3.2) Net amortization and deferral (0.7) (4.3) (0.6) (0.1) (0.7) (2.0) $ 4.8 $ 5.3 $ 5.5 $ 4.2 $ 7.0 $ 4.0 ===== ====== ====== ===== ====== ====== Assumptions used to develop the net periodic pension cost at the beginning of each year were as follows: Year ended December 31, 1994 1993 1992 Europe U.S. Europe U.S. Europe U.S. Discount rate 10.0% 7.5% 10.0% 8.5% 10.0% 8.5% Long term rate of return on plan assets - 9.1 - 9.1 - 9.1 Rate of increase in compensation levels 4.5 4.0 4.5 4.0 6.0 5.5 The following table sets forth the discount rates and funded status of these plans at: Year ended December 31, 1994 1993 Europe U.S. Europe U.S. Weighted average discount rate used in determining the benefit obligations below : 8.5% 8.7% 10.0% 7.5% ==== ==== ===== ==== Actuarial present value of accumulated benefit obligation: Vested benefits $ 43.8 $ 94.7 $ 47.0 $ 99.8 Non-vested benefits - 3.7 - 5.3 Accumulated benefit obligation $ 43.8 $ 98.4 $ 47.0 $105.1 ====== ====== ====== ====== Projected benefit obligation $(47.2)$(101.1) $(47.4)$(109.1) Plan assets at fair value - 75.8 - 69.7 Projected benefit obligation in excess of plan assets (47.2) (25.3) (47.4) (39.4) Unrecognized net loss from actuarial experiences - 26.7 - 29.0 Unrecognized prior service cost - 0.1 - 0.1 Unamortized net(asset) liability existing at date of adoption of FAS 87 (5.5) 5.0 (5.5) 5.5 Liabilities for other plans (2.3) - (3.8) - Adjustment required to recognize minimum liability - (29.1) - (30.6) Total pension liability (55.0) (22.6) (56.7) (35.4) Less: current portion - 19.0 - 11.2 Total long-term pension liability $(55.0) $ (3.6) $(56.7) $(24.2) ====== ======= ======= ======= -34- Page 14 Note 18 - Pensions (continued) Canadian Plans Net periodic pension income included the following : Year ended December 31, 1994 1993 1992 Service cost - benefits earned during the period $ 0.3 $ 0.2 $ 0.3 Interest cost on projected benefit obligation 0.5 0.3 1.0 Actual return on plan assets (0.8) (1.1) (1.5) Net amortization and deferral (0.2) (0.2) (0.3) Net periodic pension income $ (0.2) $ (0.8) $ (0.5) ======= ======= ======= Assumptions used to develop the net periodic pension income at the beginning of each year were as follows : 1994 1993 1992 Discount rate 7.5% 9.5% 9.5% Long-term rate of return on plan assets 7.5% 9.5% 9.5% Rate of increase in compensation levels 4.0% 5.5% 5.5% The following table sets forth the Plans' funded status at: December 31, Actuarial present value of accumulated 1994 1993 benefit obligation : Vested benefits $ 5.3 $ 4.4 Non-vested benefits 0.4 0.3 Accumulated benefit obligation $ 5.7 $ 4.7 ====== ====== Projected benefit obligation $ (6.0) $ (4.9) Plan assets at fair value 10.7 8.2 Plan assets in excess of projected benefit obligation 4.7 3.3 Unrecognized net gain from actuarial experiences (2.3) (1.7) Unrecognized prior service cost 0.9 0.7 Unamortized net asset existing at date of adoption of FAS 87 (0.9) (0.8) Prepaid pension asset $ 2.4 $ 1.5 ====== ====== Other Plans Certain subsidiaries' pension plans and postretirement benefits are funded by a government-administered program. Contributions to the defined contribution pension plans are based on payroll costs and have been fully provided for through December 31, 1994. -35- Page 15 Note 19 - Postretirement and Postemployment Benefits The Company adopted Statement of Financial Accounting Standard No. 106 "Employers Accounting for Postretirement Benefits Other Than Pensions" effective January 1, 1993. This statement requires the Company to recognize, during the working career of those employees who could become eligible for such benefits, the estimated cost of providing certain postretirement benefit costs (other than pensions) for those employees when they retire. The Company and its subsidiaries provide certain health care and life insurance benefits for its U.S. retired employees. Substantially all of the Company's U.S. employees may become eligible for those benefits if they reach normal retirement age while still working for the Company. Those benefits and similar benefits for active employees are provided through an insurance company whose premiums are based on the benefits paid during the year. The total postretirement health care and life insurance expense charged to income was $11.7, $12.1 and $6.7 in 1994, 1993 and 1992, respectively. Annual net postretirement benefit costs under the Company's benefit plan are determined on an actuarial basis. The Company's current policy is to pay these benefits as they become due. The Company has elected to recognize the transition obligation of $84.9 over a 20-year period. Net periodic postretirement benefit cost consists of the following : 1994 1993 Service cost $ 0.7 $ 0.7 Interest cost on projected benefit obligations 6.8 7.1 Amortization of transition obligation 4.2 4.3 Total net periodic pension cost $ 11.7 $ 12.1 ======= ======= The accumulated postretirement benefit obligation is comprised as follows: Retired participants $ 70.3 $ 79.3 Fully eligible active plan participants 4.9 6.5 Other active plan participants 7.5 11.6 Total accumulated postretirement benefit obligation $ 82.7 $ 97.4 Unrecognized gain (loss) 5.1 (11.2) Unrecognized transition obligation (76.4) (80.6) Accrued postretirement benefit cost other than pensions $ 11.4 $ 5.6 ====== ======= The discount rate used in determining the accumulated benefit obligation was 8.8%. The assumed health care cost trend rates result in per capita net incurred medical claims increasing 11% under age 65 and 9% over age 65. These rates decrease to 7% for both over and under age 65 by the year 2005. If the assumed health care cost trend rate were increased by 1%, the accumulated postretirement benefit obligation as of December 31, 1994, would increase $10.4. -36- Page 16 Note 19 - Postretirement and Postemployment Benefits (continued) In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accouting Standard No. 112 "Employers' Accounting for Postemployment Benefits". This statement establishes accounting standards for employers who provide benefits such as supplemental unemployment compensation, severance benefits, salary continuation and other benefits to former or inactive employees after employment but before retirement. The Company adopted this statement effective January 1, 1994 and recognized a liability of $0.5 for the year ended December 31, 1994. Note 20 - Shareholders' Equity VME Group N.V. acquired from AB Volvo and Clark Equipment Company all outstanding shares in VMEA and VMEHS on December 22, 1993 in exchange for newly issued shares in VME Group N.V. Shares of common stock in the amount of 250,000 were reflected as if outstanding for all periods reported. Dividends are declared and paid in Dutch guilders. With the approval of the Supervisory Board, the Managing Board may determine that distributions be made payable in another currency. -37- Page 17 Note 20 - Shareholders' Equity (continued) Changes in Shareholders' equity are as follows:
Retained Cumulative Common Paid-In Earnings Tranlation Pension Stock Capital (Deficit) Adjustments Adjustments Total January 1, 1992 $129.0 $ 50.9 $ 29.4 $ 48.4 $ (4.6) $253.1 Capital contribution - 30.0 - - - 30.0 Pension liability in excess of unrecognized prior service cost - - - - (7.4) (7.4) Net loss - - (93.6) - - (93.6) Cumulative Translation Adjustment - - - (27.3) - (27.3) December 31, 1992 $129.0 $ 80.9 $(64.2) $ 21.1 $(12.0) $154.8 Pension liability in excess of unrecognized prior service cost - - - - (12.3) (12.3) Net income - - 30.0 - - 30.0 Cumulative Translation Adjustment - - - (14.1) - (14.1) December 31, 1993 $129.0 $ 80.9 $(34.2) $ 7.0 $(24.3) $158.4 Pension liability in excess of unrecognized prior service cost - - - - 0.8 0.8 Net income - - 132.1 - - 132.1 Cumulative Translation Adjustment - - - 19.1 - 19.1 December 31, 1994 $129.0 $ 80.9 $ 97.9 $ 26.1 $(23.5) $310.4 ====== ====== ====== ====== ====== ====== The capital contribution in 1992 of $30.0 was equally contributed by the two shareholders. -38- /TABLE Page 18 Note 21 - Contingencies The Company is engaged in a number of legal preceedings arising in the ordinary course of business. Of these claims and lawsuits, some involve claims for damages for injury, death or property damage arising from alleged defects in products of the Company or products of Clark Equipment Company or its subsidiaries for which the Company assumed responsibility at the time of its formation. Most of the product-related cases are in varying stages of pretrial completion. The ultimate results of these claims and lawsuits at December 31, 1994, is not determinable, but in the opinion of the management any ultimate loss resulting therefrom will not materially affect the financial position or results of operations of the Company. The U.S. Internal Revenue Service (IRS) has completed its examination of VMEA's federal income tax returns for the years 1988-1991. An examination report which proposed substantial adjustments was issued by IRS in April 1994. During 1994, the Company submitted its protest in challenge to the IRS report. Issues which may give rise to examination adjustments include a worthless stock deduction, acquired inventories and imputed interest on advances to subsidiaries. In addi- tion, the Company has received notice of proposed tax adjustments from the Belgian and Swedish tax authorities. If all of the proposed adjustments were resolved unfavorably to the Company, the Company has estimated its total liability with interest and penalties would be approximately $50. Management believes that the ultimate outcome of those proposed adjustments will not have a material adverse effect on the financial position or results of operations of the Company. The Company has agreements with selected distributors and customers to repurchase a limited volume of parts at pre-established prices and conditions. The liability for parts return was $6.9 and $5.6 at December 31, 1994 and 1993, respectively, and is included in other current liabilities. The Company is also obligated, under certain conditions, to repurchase some dealer or customer inventory and rental assets funded by financial institutions aggregating $12.0 at December 31, 1994. In the opinion of management, adequate provisions have been made for costs which might be incurred in connection with the agreements. The Company has guaranteed secured obligations of others and discounted notes with recourse in an aggregate amount of $65.6 at December 31, 1994. -39- Page 19 Note 22 - Segment Information The Company operates in one industry segment, the manufacturing and marketing of construction equipment and related parts. Intersegment geographic sales to affiliated companies are invoiced at prices estimated to represent fair market value to the affiliated company performing further manufacturing or distribution activities. Following is financial information by geographic segment: North Europe America Other Elimin. Total Sales Year ended December 31, 1994 Sales to unaffiliated customers $1,001.2 $ 429.8 $ 135.0$ - $1,566.0 Intersegment sales 300.9 49.0 0.7 (350.6) - $1,302.1 $ 478.8 $ 135.7$(350.6) $1,566.0 ======== ======= ====== ======= ======== Year ended December 31, 1993 Sales to unaffiliated customers $ 807.2 $ 327.6 $ 104.5$ - $1,239.3 Intersegment sales 185.9 61.1 0.5 (247.5) - $ 993.1 $ 388.7 $ 105.0$(247.5) $1,239.3 ======= ======= ====== ======= ======== Year ended December 31, 1992 Sales to unaffiliated customers $ 936.4 $ 330.4 $ 90.5$ - $1,357.3 Intersegment sales 127.3 56.7 4.1 (188.1) - $1,063.7 $ 387.1 $ 94.6$(188.1) $1,357.3 ======== ======= ====== ======= ======== North Europe America Other Total Income before taxes and effect of change in accounting Year ended December 31, 1994 $ 169.8 $ 17.5 $ 11.3 $ 198.6 Year ended December 31, 1993 29.5 8.7 (2.6) 35.6 Year ended December 31, 1992 (68.3) (37.0) (11.7) (117.0) North Europe America Other Elimin. Total Identifiable assets Year ended December 31, 1994 $1,177.2 $ 212.6 $ 65.1$(501.8) $953.1 Year ended December 31, 1993 990.5 196.6 50.1 (458.9) 778.3 Year ended December 31, 1992 1,042.8 209.4 58.4 (340.7) 969.9 -40- Page 20 Note 23 - Related Party Transactions The following is a summary of related party transactions: AB Volvo and Clark and Subsidiaries Subsidiaries 1994 VME Transactions Sales $ 30 $ - Purchased materials 62 10 Parts distribution service fee - 8 Other expense 7 1 Interest expense 2 2 1994 VME Balances Accounts receivable 5 - Accounts payable 6 - 1993 VME Transactions Sales $ 20 $ - Purchased materials 39 19 Parts distribution service fee - 7 Other expense 10 1 Interest expense 2 2 1993 VME Balances Accounts receivable 6 1 Accounts payable 2 - 1992 VME Transactions Sales $ 18 $ 2 Purchased materials 51 23 Parts distribution service fee - 9 Other expense 13 - 1992 VME Balances Accounts receivable 2 1 Accounts payable 2 2 Note 24 - Subsequent events On March 6, 1995, AB Volvo and Clark Equipment Company announced an agreement whereby Volvo will purchase Clark's 50 percent shareholding in the Company. Approval from the EU commission and Canadian authorities are a prerequisite for the acquisition and the objective is that the acquisition will become effective on March 31, 1995. The Company will thereafter be a fully owned subsidiary of Volvo. -41- Report of Independent Accountants on Financial Statement Schedule To the Board of Directors of VME Group N.V. Our audits of the consolidated financial statements referred to in our report dated February 27, 1995, except as to Note 24, which is as of March 6, 1995 appearing in the 1994 consolidated financial statements of VME Group N.V. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ Price Waterhouse LLP PRICE WATERHOUSE LLP Cleveland, Ohio February 27, 1995, except as to Note 24, which is as of March 6, 1995 -42- SCHEDULE II VME GROUP N.V. VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
Balance at Charged to Beginning of Cost and Other Balance at Description Period Expenses Add (Deduct) End of Period Year ended December 31, 1994: Allowance for doubtful accounts $ 10.2 $ 4.1 $ 0.9 * $ 13.8 (1.4) ** Year ended December 31, 1993: Allowance for doubtful accounts $ 12.2 $ 2.4 $ (1.4) * $ 10.2 (3.0) ** Year ended December 31, 1992: Allowance for doutbful accounts $ 15.4 $ (0.3) $ (2.3) * $ 12.2 (0.6) ** * Primarily represents translation adjustments ** Write-offs and disposals -43-
KPMG Bohlins KPMG Bohlins AB Mail Address Telephone +46(31)614800 Norra Hamngatan 22 P.O. Box 11908 Telefax +46(31)152655 Gothenburg S-404 39 Gothenburg Telex 21762BJGS Sweden Sweden Corporate identity number 556043-4465 Independent Auditor's Report To the Board of Directors of VME Holding Sweden AB: We have audited the consolidated balance sheets of VME Holding Sweden AB and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income (loss) and cash flows for each of the years in the three year period ended December 31, 1994 (expressed in U.S. dollars and not presented separately herein). In connection with our audit of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule II, (expressed in U.S. dollars and not presented separately herein). These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards in Sweden which are similar in all material respects with auditing standards in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures included in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The consolidated financial statements and financial statement schedule have been translated in accordance with the standards set forth in Statement of Financial Accounting Standards No. 52 from Swedish Kronor (the currency of the country where VME Holding Sweden AB is incorporated and in which it operates) into U.S. dollars for purposes of inclusion in the consolidated financial statements of VME Group N.V. In our opinion, for purposes of inclusion in the consolidated financial statements of VME Group N.V., the translated financial statements present fairly, in all material respects, the consolidated financial position of VME Holding Sweden AB and subsidiaries at December 31, 1994 and 1993 and the consolidated results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994 in conformity with generally accepted accounting principles in the United States. Also, -44- in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements, presents fairly in all material respects the information shown therein. Gothenburg, Sweden February 27, 1995 /s/ KPMG Bohlins AB KPMG Bohlins AB Head Office Mail address Tel +46+8+7239100 Member Firm of Tegelbacken 4, P.O. Box 16106 Fax +46+8+105258 Klynveld Peat Marwick Stockholm S-103 23 Stockholm Goerdeler Sweden Sweden -45- EXHIBIT LIST AND INDEX Filed Herewith Unless Exhibit Description Otherwise Indicated (2)(a) Underwriting Agreement Incorporated by reference dated May 6, 1994 among to Exhibit (2)(a) to Automotive Products Company, Registrant's Form 8-K Clark Automotive Products filed on May 27, 1994 Corporation, and Clark with respect to Equipment Company and CS Registrant's disposition First Boston Corporation of Clark Automotive and Merrill, Lynch, Pierce, Products Corporation Fenner & Smith Incorporated as representatives of the Underwriters (2)(b) Subscription Agreement dated Incorporated by reference May 6, 1994 among Automotive to Exhibit (2)(b) to Products Company, Clark Registrant's Form 8-K Automotive Products Corporation, filed on May 27, 1994 Clark Equipment Company, CS with respect to First Boston Limited, Merrill Registrant's disposition Lynch International Limited, ABN of Clark Automotive AMRO Bank N.V., Banque Bruxelles Products Corporation Lambert S.A., Cazenove & Co., Dresdner Bank Aktiengesellschaft and UBS Limited (2)(c) Agreement of Purchase and Sale Incorporated by reference dated April 20, 1994 between to Exhibit (2) to Clark Equipment Company and Registrant's Form 8-K White Consolidated Industries filed on May 27, 1994 Inc. with respect to Registrant's acquisition of Blaw-Knox Construction Equipment Corporation (2)(d) Agreement and Plan of Merger Incorporated by reference dated as of February 3, 1995 by and to Exhibit (c)(1) to the among Clark Equipment Company, Clark Registrant's Schedule Acquisition Sub, Inc. and Club Car, 14D-1 and Schedule 13D Inc. dated February 8, 1995 (2)(e) Stock Purchase Agreement dated as --- of March 5, 1995 by and among Aktiebolaget Volvo, Clark Equipment Company and Clark Hurth Components Marketing Company (3)(a) Restated Certificate of Incorporated by reference Incorporation to Exhibit (3)(a) to Registrant's Form 10-K for the year 1992 -46- Filed Herewith Unless Exhibit Description Otherwise Indicated (3)(b) By-laws, as amended --- (3)(c) Amended and Restated Rights Incorporated by reference Agreement, dated as of to Exhibit (3)(c) to August 14, 1990 between Registrant's Form 10-Q Clark Equipment Company and for the period ended Harris Trust and Savings Bank September 30, 1990 (4)(a) Indenture dated as of August 1, Incorporated by reference 1983 between Clark Equipment to Exhibit (4)(a) to Company and Harris Trust and Registrant's Form 10-K Savings Bank as trustee, as to for the year 1992 which Pittsburgh National Bank is successor trustee, as supplemented by a First Supplemental Indenture dated as of February 1, 1991 and a Second Supplemental Indenture dated as of April 1, 1993 (4)(b) Specimen form of 9-3/4% Note Incorporated by reference issued pursuant to Exhibit to Exhibit (4)(b) to (4)(a) Registrant's Form 10-K for the year 1992 (4)(c) Master Credit Agreement with --- Chemical Bank, as Agent, dated as of April 6, 1994 (4)(d) Amendment No. 1 dated --- February 21, 1995 to Master Credit Agreement with Chemical Bank, as Agent, dated as of April 6, 1994 (4)(e) Registrant is a party to several Pursuant to paragraph other long term debt agreements (4)(iii)(A) of Item under which, in each case, the 601(b) of Regulation total amount of securities S-K, Registrant agrees authorized does not exceed 10% to furnish a copy of of the assets of Registrant and these instruments to its consolidated subsidiaries the Securities and Exchange Commission upon request (10)(a) Employment contract with Leo Incorporated by reference J. McKernan, Chairman, President to Exhibit (10)(a) to and Chief Executive Officer, Registrant's Form 10-K dated November 12, 1992 for the year 1992 (10)(b) Employment contract with Frank --- M. Sims, Director and Senior Vice President, dated February 15, 1995 -47- Filed Herewith Unless Exhibit Description Otherwise Indicated (10)(c) Employment contract with Thomas Incorporated by reference L. Doepker, Vice President and to Exhibit (10)(d) to Treasurer, dated November 12, Registrant's Form 10-K 1992 for the year 1992 (10)(d) Employment contract with Bernard Incorporated by reference D. Henely, Vice President and to Exhibit (10)(e) to General Counsel, dated Registrant's Form 10-K November 12, 1992 for the year 1992 (10)(e) Employment contract with William Incorporated by reference N. Harper, Vice President and to Exhibit (10)(f) to Controller, dated November 12, Registrant's Form 10-K 1992 for the year 1992 (10)(f) Employment contract with Paul Incorporated by reference R. Bowles, Vice President, to Exhibit (10)(i) to dated March 13, 1992 Registrant's Form 10-K for the year 1991 (10)(g) Employment contract with John Incorporated by reference J. Reynolds, Vice President, to Exhibit 10(i) to dated November 14, 1991 Registrant's Form 10-K for the year 1992 (10)(h) 1985 Stock Option Plan Incorporated by reference to Exhibit 10(j) to Registrant's Form 10-K for the year 1991 (10)(i) Stock Purchase Program (adopted Incorporated by reference as of May 10, 1994) to Exhibit (10)(a) to Registrant's Form 10-Q for the period ended June 30, 1994 (10)(j) Stock Acquisition Plan for Incorporated by reference Non-Employee Directors to Exhibit A to Registrant's Proxy Statement for the Annual Meeting of Stockholders held on May 10, 1994 (10)(k) 1994 Long Term Incentive Plan Incorporated by reference to Exhibit B to Registrant's Proxy Statement for the Annual Meeting of Stockholders held on May 10, 1994 -48- Filed Herewith Unless Exhibit Description Otherwise Indicated (10)(l) Incentive Compensation Plan --- for Corporate Office Management (amended and restated effective as of January 1, 1994) (10)(m) Incentive Compensation Plan --- for Business Unit Management (amended and restated effective as of January 1, 1994) (10)(n) Performance Unit Plan Incorporated by reference (effective November 9, 1992) to Exhibit (10)(s) to Registrant's Form 10-K for the year 1992 (10)(o) Form of Grant Letter used to Incorporated by reference award Performance Units to Exhibit (10)(t) to pursuant to the Performance Registrant's Form 10-K Unit Plan (effective for the year 1992 November 9, 1992) (10)(p) Form of Grant Letter used to Incorporated by reference award Performance Units in to Exhibit (10)(u) to 1991 Registrant's Form 10-K for the year 1992 (10)(q) Clark Equipment Company --- Deferred Benefit Trust (10)(r) Clark Equipment Company --- Supplemental Retirement Income Plan for Certain Executives (10)(s) Amendment No. 1 to Clark --- Equipment Company Supplemental Retirement Income Plan for Certain Executives (10)(t) Amendment No. 2 to Clark --- Equipment Company Supplemental Retirement Income Plan for Certain Executives (10)(u) Clark Equipment Company --- Supplemental Executive Retirement Trust (10)(v) Clark Equipment Company --- Supplemental Executive Retirement Plan (10)(w) Amendment No. 1 to Clark --- Equipment Company Supplemental Executive Retirement Plan -49- Filed Herewith Unless Exhibit Description Otherwise Indicated (10)(x) Amendment No. 2 to Clark --- Equipment Company Supplemental Executive Retirement Plan (10)(y) Form of Participation Agreement --- for Clark Equipment Company Supplemental Retirement Income Plan for Certain Executives (10)(z) Form of Participation Agreement --- for Clark Equipment Company Supplemental Executive Retirement Plan (10)(aa) Retirement Plan for Outside --- Directors (13) Portions of Clark Equipment --- Company 1994 Annual Report to Stockholders which are incorporated by reference into this Form 10-K (22) Subsidiaries of Clark Equipment --- Company (23)(a) Consent of Independent Accountants- --- Price Waterhouse LLP (23)(b) Consent of Independent Accountants- --- KPMG Bohlins AB (27) Financial Data Schedules --- (99) Computation of Ratio of Earnings to --- Fixed Charges for the twelve months ended December 31, 1994 -50- EX-2 2 Exhibit 2(e) STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT (this "Agreement") dated as of March 5, 1995 by and among Aktiebolaget Volvo ("Purchaser"), a Swedish corporation, and Clark Equipment Company ("Clark"), a Delaware corporation, and Clark-Hurth Components Marketing Company ("Seller"), a Delaware corporation. W I T N E S S E T H: WHEREAS, Clark, Purchaser and VME Group N.V. (formerly named "VBM (Construction and Mining Equipment) International, N.V.") are parties to that certain Agreement Regarding Exchange of Shares and Relationships Between Shareholders (the "Agreement Between Shareholders"), dated as of March 27, 1985, as amended, relating to the ownership of interests in VME Group N.V. (the "Company"); WHEREAS, Seller is the owner of 125,000 shares (the "Stock") of capital stock of the Company representing one-half of the total issued and outstanding shares of the Company; and WHEREAS, Seller desires to sell, and Purchaser desires to purchase, the Stock pursuant to this Agreement. NOW, THEREFORE, IT IS AGREED: ARTICLE I REPRESENTATIONS OF CLARK AND SELLER Section 1. Representations of Clark and Seller. Clark and Seller jointly and severally represent and warrant to Purchaser as follows: Section 1.1. Ownership of Stock. Seller is the lawful owner of the Stock, free and clear of all liens and encumbrances. Seller has not issued any options, warrants or exchangeable securities, or entered into any other agreements, which currently or upon the payment of money, the passage of time or the occurrence of any other event require or may require Seller to transfer any of the Stock to any person other than Purchaser. When the Stock is transferred to Purchaser at the Closing as contemplated by this Agreement, Purchaser will become the owner of the Stock, free and clear of any liens or encumbrances, other than liens or encumbrances resulting solely from actions of Purchaser. Section 1.2. Existence and Good Standing of Seller and Clark. Seller and Clark each is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Section 1.3. Authority of Seller. Seller has full corporate power and authority to execute and deliver this Agreement and to sell, assign, transfer and convey the Stock to Purchaser pursuant to this Agreement, to perform its obligations hereunder and to consummate the -1- transactions contemplated hereby. The execution, delivery and performance of this Agreement by Seller, and the consummation by it of the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of Seller, including approval by Clark Business Services Corporation, as the sole shareholder of Seller, and by Clark, as the sole shareholder of Clark Business Services Corporation. This Agreement has been duly and validly executed and delivered by Seller and, assuming due execution and delivery by Purchaser, constitutes a valid and binding agreement of Seller enforceable against Seller in accordance with its terms. Section 1.4. Authority of Clark. Clark has full corporate power and authority to approve the sale, assignment, transfer and conveyance of the Stock by Seller to Purchaser in accordance with this Agreement and to cause Seller to consummate that transaction. The transactions contemplated by this Agreement, including but not limited to, the approval by Clark of the execution, delivery and performance of this Agreement by Seller and of the consummation by Seller of the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of Clark, including, if necessary, approval by the stockholders of Clark. Section 1.5. No Violations. The execution and delivery of this Agreement by Seller and the consummation of the transactions contemplated hereby (a) will not violate any provision of the Certificate of Incorporation or By-Laws of Seller or of Clark, (b) will not violate any statute, rule, regulation, order or decree of any public body or authority by which Seller, Clark, any other subsidiary of Clark, or any of their respective properties or assets, is bound and (c) will not result in a violation or breach of, or constitute a default under, any license, franchise, permit, indenture, agreement or other instrument to which Seller, Clark or any other subsidiary of Clark is a party, or by which Seller, Clark or any other subsidiary of Clark, or any of their respective assets or properties is bound. Section 1.6. Governmental Authorization. Except for such, if any, filings and approvals as are required under the Competition Act (Canada) or the European Community Merger Control Regulation, no licenses or permits from, approvals of or filings with any governmental agencies are required to enable Seller to sell the Stock to Purchaser in accordance with this Agreement. ARTICLE II REPRESENTATIONS OF PURCHASER Section 2. Representations of Purchaser. Purchaser represents and warrants to Clark and Seller as follows: Section 2.1. Existence and Good Standing of Purchaser. Purchaser is a corporation duly organized and validly existing under the laws of the Kingdom of Sweden. -2- Section 2.2. Authority of Purchaser. Purchaser has full corporate power and authority to execute and deliver this Agreement and to purchase the Stock pursuant to this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Purchaser, and the consummation by it of the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly and validly executed and delivered by Purchaser and, assuming due execution and delivery by Seller, constitutes a valid and binding agreement of Purchaser enforceable against Purchaser in accordance with its terms. Section 2.3. No Violations. The execution and delivery of this Agreement by Purchaser and the consummation of the transactions contemplated hereby (a) will not violate any provision of the Articles of Incorporation of Purchaser, (b) will not violate any statute, rule, regulation, order or decree of any public body or authority by which Purchaser, any of its subsidiaries, or any of their respective properties or assets is bound and (c) will not result in a violation or breach of, or constitute a default under, any license, franchise, permit, indenture, agreement or other instrument to which Purchaser or any of its subsidiaries is a party, or by which Purchaser or any of its subsidiaries, or any of their respective assets or properties is bound. Section 2.4. Governmental Authorization. Except for such, if any, filings and approvals as are required under the Competition Act (Canada) or the European Community Merger Control Regulation, no licenses or permits from, approvals by, or filings with any governmental agencies are required to enable Purchaser to purchase the Stock from Seller in accordance with this Agreement. Section 2.5. Purchase for Investment. Purchaser will acquire the Stock for its own account for investment and not with a view toward any resale or distribution thereof. Section 2.6. Financing. Purchaser has sufficient funds available to it to purchase all of the Stock pursuant to this Agreement. ARTICLE III SALE OF STOCK Section 3.1. Sale of Stock. Subject to the terms and conditions herein stated, Seller agrees to sell, assign, transfer and deliver to Purchaser on the Closing Date (as defined in Section 3.3 below), and Purchaser agrees to purchase from Seller on the Closing Date, the Stock. Section 3.2. Price. Purchaser shall pay as the purchase price for the Stock (the "Purchase Price") an aggregate of (i) U.S.$560 million, plus (ii) if the Closing (as defined in Section 3.3 below) does not occur by March 31, 1995, an amount equal to interest on U.S.$573 million from April 1, 1995 to the Closing Date at the rate of 8.5% per annum. The Purchase Price will be paid in full to Seller at the Closing by wire transfer in immediately available funds to an account designated by Seller prior to Closing. -3- Section 3.3. Closing. The closing of the sale referred to in Section 3.1 (the "Closing") shall take place at 10:00 A.M. at the offices of White & Case, 1155 Avenue of the Americas, New York, New York, on the later of (i) March 17, 1995, or (ii) the second business day following the earlier of either (A) the day on which the required waiting periods, if any, under the Competition Act (Canada) have expired or been terminated without action having been taken by the Canadian authorities to prevent completion of the transactions contemplated by this Agreement or (B) the day Purchaser receives an Advance Ruling Certificate with regard to the transactions contemplated by this Agreement from the Director of Investigation under the Competition Act (Canada) or (iii) the second business day after the earliest of (A) the day on which the European Commission issues a decision under Article 6(1)(a) or (b) of Council Regulation No. 4064/89 with regard to the transactions contemplated by this Agreement, (B) the day when the time period under Article 10(1) of that Council Regulation expires with regard to the transactions contemplated by this Agreement or (C) the day which is one month after the effective date of the notification with regard to the transactions contemplated by this Agreement (computed as provided in Articles 6(1) and 7(1) of Council Regulation 2367/90) if the Commission does not initiate proceedings with respect to those transactions, or at such other time, date and place as Clark and Purchaser shall by written instrument designate. Such time and date are herein referred to as the "Closing Date." Section 3.4. Occurrences at Closing. At the Closing, (a) Seller will deliver or cause to be delivered to Purchaser a notarial deed executed by a civil law notary in the Netherlands transferring the Stock, and shall take such action as is necessary to cause a notation to be made in the Company's Shareholder register crediting the Stock to Purchaser's account, (b) Clark will deliver a cancelled Promissory Note, dated December 23, 1992, from the Company to Clark in the principal amount of $35,000,000 (the "Promissory Note"), (c) Purchaser will deliver to Seller evidence of wire transfers, in payment of the Purchase Price described in Section 3.2 and (d) Purchaser will deliver or cause to be delivered by the Company evidence of wire transfers, in the aggregate amount of $35,000,000 (plus any accrued and unpaid interest due on the Promissory Note), in satisfaction of the Company's obligation to pay all principal (plus accrued and unpaid interest) on the Promissory Note, or as a purchase price for the Promissory Note. ARTICLE IV BEST EFFORTS Section 4.1. Best Efforts. Clark and Seller each will use its best efforts to cause all the conditions described in Article V to be fulfilled on or before the Closing Date and Purchaser will use its best efforts to cause all the conditions described in Article VI to be fulfilled on or before the Closing Date. Each of the parties agrees to use its best efforts to take, or cause to be taken, all action to do, or cause to be done, and to assist and cooperate with the other party hereto in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner possible, the transaction contemplated by this Agreement, including, but not limited to (a) the obtaining of any necessary -4- waivers, consents or approvals from governmental or regulatory agencies or authorities and the making of any necessary registrations or filings (including, but not limited to, filings with governmental or regulatory agencies or authorities, if any) and the taking of all reasonable steps as may be necessary or advisable to obtain any approval or waiver from, or to avoid any action or proceeding by, any governmental agency or authority, (b) the obtaining of all necessary consents, approvals or waivers from third parties and (c) the defending of any lawsuits or any other legal proceedings whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby including, without limitation, seeking to have any temporary restraining order entered by any court or administrative authority vacated or reversed. ARTICLE V CONDITIONS TO PURCHASER'S OBLIGATIONS Section 5. Conditions to Purchaser's Obligations. The obligation of the Purchaser to purchase the Stock from Seller on the Closing Date is conditioned on the satisfaction at or prior to the Closing, or waiver by Purchaser, of the following conditions: Section 5.1. Truth of Representation and Warranties. The representations and warranties of Clark and Seller contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date with the same effect as though such representations and warranties had been made on such date, and Purchaser will have received a certificate signed by the President or a Vice President of Clark to that effect. Section 5.2. Fulfillment of Obligations. Seller will have fulfilled all its obligations under this Agreement required to have been fulfilled at or before the Closing. Section 5.3. No Injunction. No court or other governmental (including European Union) body or public authority shall have issued an order which shall then be in effect and unstayed restraining or prohibiting Purchaser from completing the transactions contemplated hereby. Section 5.4. Governmental Approvals. All governmental (including European Union) consents and approvals, if any, necessary to permit the consummation of the transactions contemplated by this Agreement shall have been received. Section 5.5. Closing Date. The Closing Date will be not later than July 31, 1995. -5- ARTICLE VI CONDITIONS TO SELLER'S OBLIGATIONS Section 6. Conditions to Seller's Obligations. The obligation of Seller to sell the Stock to Purchaser on the Closing Date is conditioned on satisfaction at or prior to the Closing, or waiver by Clark, of the following conditions: Section 6.1. Truth of Representations and Warranties. The representations and warranties of Purchaser contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date with the same effect as though such representations and warranties had been made on such date, and Seller will have received a certificate signed by the President or a Vice President of Purchaser (or an attorney-in-fact for one of them), to that effect. Section 6.2. Fulfillment of Obligations. Purchaser will have fulfilled all its obligations under this Agreement required to have been fulfilled at or before the Closing. Section 6.3. No Injunction. No court or other governmental (including European Union) body or public authority shall have issued an order which shall then be in effect and unstayed restraining or prohibiting Seller or Clark from completing the transactions contemplated hereby. Section 6.4. Governmental Approvals. All governmental (including European Union) consents and approvals, if any, necessary to permit the consummation of the transactions contemplated by this Agreement shall have been received. Section 6.5. Payment of Dividend. The dividend referred to in Article VII shall have been declared and paid. Section 6.6. Repayment of Shareholder Loan. Clark's loan to the Company in the aggregate principal amount of $35,000,000, plus accrued and unpaid interest thereon, evidenced by the Promissory Note shall have been repaid by or on behalf of the Company. Section 6.7. Closing Date. The Closing Date will be not later than July 31, 1995. ARTICLE VII ACTIONS PRIOR TO THE CLOSING Section 7.1. Special Dividend. Clark and Volvo shall cause the Company to declare and pay on or prior to the Closing Date, a special dividend in the amount of $26,000,000; $13,000,000 to each of Seller and Purchaser. -6- Section 7.2. Repayment of Shareholder Loan. On or prior to the Closing Date, Clark and Purchaser shall cause the Company to repay to Clark, the full amount outstanding, plus any accrued and unpaid interest, on the Promissory Note, or the Purchaser shall purchase the Promissory Note for that amount (including an amount equal to the accrued but unpaid interest). ARTICLE VIII TERMINATION AND CONTINUATION OF AGREEMENTS Section 8.1. Continuation of Certain Agreements. From and after the Closing Date, the provisions of Section 8.2 of an Amendment Agreement dated June 23, 1992, between Purchaser and Clark will remain in effect, and each of the agreements between the Company or any of its subsidiaries, on the one hand, and Clark or its subsidiaries, on the other hand, referred to in Section 8.2 of the Amendment Agreement, will remain in effect on the terms and conditions, and for the periods, provided in Section 8.2 of the Amendment Agreement. Section 8.2. Termination of Agreement Between Shareholders. Except as provided in Section 8.1, Clark and Purchaser hereby agree that the Agreement Between Shareholders shall terminate on the Closing Date, and none of Purchaser, Clark, Seller, the Company or any other person will have any rights or obligations under the Agreement Between Shareholders after the Closing Date. ARTICLE IX MISCELLANEOUS Section 9.1. Expenses. Each of the parties hereto shall pay all of its own expenses relating to the transactions contemplated by this Agreement, including, but not limited to, the fees and expenses of their respective counsel and financial advisers. All stamp, transfer, notarial, documentary, sales, use, capital, registration and other similar taxes and fees incurred in connection with the execution or delivery of this Agreement or the consummation of the transactions contemplated hereby (collectively, "Transfer Taxes") due to any governmental authority in the United States shall be paid by Seller. All Transfer Taxes due to any governmental authority in Sweden shall be paid by Purchaser. Seller and Purchaser will each pay 50% of any Transfer Taxes due to any governmental authority in the Netherlands. Notwithstanding anything in the foregoing to the contrary, Seller and Purchaser will share equally the expense incurred by either of them of any civil law notary in the Netherlands required to effectuate the transfer of the Stock as contemplated by this Agreement. Section 9.2. Brokers. Each of Clark and Purchaser represents as to itself, and Clark represents as to Seller, that no person has acted as a broker, a finder or in any similar capacity in connection with the transactions which are the subject of this Agreement, except that (i) Clark represents and agrees that CS First Boston acted as a financial adviser to Clark and Seller, and all compensation of CS First Boston for acting in -7- that capacity will be paid by Clark or Seller, and (ii) Purchaser represents and agrees that Merrill Lynch International acted as financial adviser to Purchaser, and all compensation of Merrill Lynch International for acting in that capacity will be paid by Purchaser. Each of Clark, the Seller and the Purchaser acknowledges that Goldman, Sachs & Co. was jointly retained by Clark and Purchaser to render its opinion as to the standing and record of the Company and was paid a fee by Clark and Purchaser in consideration of rendering such opinion. Clark indemnifies Purchaser against and agrees to hold Purchaser harmless from, and Purchaser indemnifies Clark and Seller against and agrees to hold Clark and Seller harmless from, any liabilities, costs or expenses arising from any claim against the indemnified party relating to services as a broker, a finder or in a similar capacity allegedly rendered to the indemnifying party. Section 9.3. Governing Law. The interpretation and construction of this Agreement, and all matters relating hereto, shall be governed by the laws of the State of New York in the United States of America applicable to contracts made and to be performed entirely within the State of New York. Section 9.4. "Person" Defined. "Person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or other department or agency thereof. Section 9.5. Captions. The Article and Section captions used herein are for reference purposes only, and shall not in any way affect the meaning or interpretation of this Agreement. Section 9.6. Publicity. Except as otherwise required in order to comply with any law or regulation, or with any rule of a stock exchange on which shares of Clark or Purchaser are listed, none of the parties hereto shall issue any press release or make any other public statement regarding this Agreement or the transactions which are the subject of this Agreement, without submitting the text of the release or public statement to the other party for its advance review. Section 9.7. Notices. Any notice or other communication required or permitted hereunder shall be deemed given on the day when delivered in person or sent by facsimile transmission (with confirmation of receipt at the number to which sent), or on the second business day after the day on which sent by means of any overnight courier service or on the fifth business day after the day on which sent by air mail, postage prepaid, addressed as follows: If to Purchaser: AB Volvo S-405 08 Goteborg, Sweden Attention: General Counsel Facsimile No.: 46-31-537984 -8- with a copy to: David W. Bernstein, Esq. Rogers & Wells 200 Park Avenue New York, New York 10166 U.S.A. Facsimile No.: 1-212-878-8375 If to Clark Equipment Company or Seller: General Counsel Clark Equipment Company 100 North Michigan Street South Bend, Indiana 46634 Facsimile No.: 219-239-0237 with a copy to: White & Case 1155 Avenue of the Americas New York, New York 10036 Attention: William F. Wynne, Jr., Esq. Facsimile No.: 212-354-8113 or to such other address or number as shall be furnished in writing by any such party to the other party or parties in the manner provided in this Section. Section 9.8. Parties in Interest. This Agreement may not be transferred, assigned, pledged or hypothecated by either party hereto, other than by operation of law. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Section 9.9. Counterparts. This Agreement may be executed in two or more counterparts, each of which will be an original, but all of which taken together shall constitute one instrument. Section 9.10. Entire Agreement. This Agreement contains the entire agreement of the parties hereto with respect to the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. Section 9.11. Amendments. This Agreement may not be changed orally, but only by an agreement in writing signed by Clark and by Purchaser. Any provision of this Agreement can be waived, amended, supplemented or modified by written agreement of the parties hereto. Section 9.12. No Survival of Representations. The representations and warranties of Clark, Seller and Purchaser contained in this Agreement shall not survive the purchase and sale of the Stock contemplated hereby, except that the representations and warranties in Sections 1.1, 1.3, 1.4 and 2.2 will survive for eighteen months after the Closing Date. -9- ARTICLE X GUARANTY Section 10.1. Guaranty of Seller's Obligations. Clark unconditionally guarantees the performance of the obligations of Seller under this Agreement. IN WITNESS WHEREOF, Purchaser, Clark and Seller have each caused its corporate name to be hereunto subscribed by an officer thereunto duly authorized, all as of the day and year first above written. AKTIEBOLAGET VOLVO By: /s/ Sten Langenius Name: Sten Langenius Title: Executive Vice President By: /s/ Fred Bodin Name: Fred Bodin Title: Senior Vice President CLARK EQUIPMENT COMPANY By: /s/ William Harper Name: William N. Harper Title: Vice President CLARK-HURTH COMPONENTS MARKETING COMPANY By: /S/ Bernard Henely Name: Bernard D. Henely Title: Vice President -10- EX-3 3 EXHIBIT 3(b) BY-LAWS OF CLARK EQUIPMENT COMPANY A Delaware Corporation ARTICLE I Offices Section 1. Location of Offices. The location of the principal office of the Corporation shall be in the City of South Bend, Indiana. The Corporation may have such other offices as the business of the Corporation may require. ARTICLE II Meetings of Stockholders Section 1. Place of Meeting. Meetings of the stockholders may be held at the principal office of the Corporation or at such other place either within or without the State of Delaware, as may be designated by the Board of Directors or the officer calling said meetings. Section 2. Annual Meeting. In the absence of the designation by the Board of Directors of another date and time, the annual meeting of stockholders shall be held in each year on the Friday immediately following the second Monday in May (unless such Friday shall be a legal holiday at the place of meeting, in which event such meeting shall be held on the first business day preceding) at the hour of 10:00 in the morning, local time, for the purpose of electing directors and transacting such other business as may come before the meeting. If the annual meeting for election of directors is not held on the date designated therefor, the Board of Directors shall cause the meeting to be held as soon thereafter as convenient. Section 3. Special Meetings. Special meetings of the stockholders may be called by the holders of a majority of the outstanding shares of the Corporation, by a majority of the members of the Board of Directors, or by the Chief Executive Officer, at any time. Section 4. Notice of Meetings. The Secretary shall mail written or printed notice of the time and place of every meeting of stockholders to each stockholder entitled to vote thereat, at his last address of record as it appears on the records of the Corporation not less than ten nor more than sixty days before the date of every such meeting. In the case of special meetings, the notice shall state the purpose or purposes thereof. Any meeting may be held without notice if all stockholders entitled to vote are present in person or by proxy, or if notice is waived in writing, either before or after the meeting, by those not present. Section 5. Chairman of Meetings. The Chairman of the Board shall act as chairman of every meeting of stockholders unless otherwise legally determined at such meeting. Subject to the foregoing, the Chairman may designate the President to conduct all or any part of such meeting. In the absence of the Chairman the President shall preside. -1- Section 6. Voting of Shares. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the Certificate of Incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question. Each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. At all elections of directors, the voting shall be by ballot or in such other manner as may be determined by the stockholders present in person or by proxy entitled to vote at such election. With respect to any other matter presented to the stockholders for their consideration at a meeting, any stockholder entitled to vote may, on any question, demand a vote by ballot. Section 7. Voting Lists. A complete list of the stockholders entitled to vote at each such meeting, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be prepared by the Secretary and shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 8. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 9. Quorum. Unless otherwise provided by law or in the Certificate of Incorporation, a majority of the outstanding shares, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of stockholders, but the stockholders present at any meeting, in person or by proxy, though less than a quorum, may adjourn the meeting to some other day. -2- Section 10. Business at Meetings of Stockholders. (a) At any annual or special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who is entitled to vote with respect thereto and who complies with the notice procedures set forth in this Section 10(a). For business to be properly brought before an annual or special meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered or mailed to and received by the Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which notice of the date of the annual or special meeting was mailed. A stockholder's notice to the Secretary shall set forth as to each matter such stockholder proposes to bring before the annual or special meeting (x) a brief description of the business desired to be brought before the meeting, (y) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business and (z) the class and number of shares of the Corporation's capital stock that are owned of record and, if different, beneficially by such stockholder. Notwithstanding anything in these by-laws to the contrary, no business shall be brought before or conducted at an annual or special meeting except in accordance with the provisions of this Section 10(a). The officer of the Corporation or other person presiding over the annual or special meeting shall, if the facts so warrant, determine that business was not properly brought before the meeting in accordance with the provisions of this Section 10(a) and, if he should so determine, shall so declare to the meeting, and any such business so determined to be not properly brought before the meeting shall not be transacted. (b) Only persons who are nominated in accordance with the procedures set forth in these By-Laws shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders at which directors are to be elected only (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 10(b). Such nominations, other than those made by or at the direction of the Board of Directors, shall be made by timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered or mailed to and received at the principal executive offices of the Corporation by the Secretary of the Corporation not later than the close of business on the 10th day following the day on which notice of the date of the meeting was mailed. Such stockholder's notice shall set forth (x) as to each person whom such stockholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or as otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in a proxy statement as a nominee and to serving as a director if elected); and (y) as to the stockholder giving notice (a) the name and address, as they appear on the Corporation's books, of such stockholder and (b) the class and number of shares of the Corporation's capital stock that are owned of record and, if different, beneficially by -3- such stockholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the provisions of this Section 10(b). The officer of the Corporation or other person presiding at the meeting shall, if the facts so warrant, determine that a nomination was not made in accordance with such provisions and, if he should so determine, shall so declare to the meeting, and the defective nomination shall be disregarded. ARTICLE III Directors Section 1. Number, Tenure and Qualifications. The business and affairs of the Corporation shall be managed by the Board of Directors. The number of directors shall be not less than seven nor more than twelve, as determined by resolution adopted by a majority of the whole Board. No more than one-third of the directors may be employees of the Corporation. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 5 of this Article. Each director elected shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Section 2. Regular Meetings. A regular annual meeting of the Board of Directors shall be held immediately after the adjournment of each annual meeting of stockholders, and other regular meetings of the Board of Directors may be held at such times as the Board shall by resolution appoint, and a written or printed notice specifying the time and place of each such regular meeting shall be given to each director at his last address of record as it appears on the records in the office of the Corporation, at least five days before the date of such regular meeting. Section 3. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, or the President or Secretary or by five or more members of the Board by written or printed notice thereof to each director at his last address of record as it appears on the records in the office of the Corporation, at least three days before the date of such proposed meeting. Such notice shall state the time, place and purpose or purposes of every such meeting. When, in the opinion of the Chief Executive Officer, circumstances exist which justify accelerated action, a special meeting of the Board of Directors may be called by the Chief Executive Officer or Secretary by sending notice thereof by telegram, radiogram or cablegram to each director at his last address of record as it appears on the records in the office of the Corporation, at least 24 hours before the date of such proposed meeting. Such notice shall state the time, place and purpose or purposes of every such meeting. Section 4. Quorum. Except as provided in Sections 1 and 6 of this Article, a majority of the Board of Directors shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors. The directors present at any -4- meeting, though less than a quorum, may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 5. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, and the directors so chosen shall hold office until the next annual election of directors and until their successors shall be elected and qualified. Section 6. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate such committees as the Board may desire, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolutions designating it, may have and may exercise the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, but no committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the by-laws of the Corporation; and, unless the resolution designating such committee shall expressly so provide, no committee shall have the power or authority to declare a dividend or to authorize the issuance of stock (other than stock issued pursuant to a stock option plan adopted by the Corporation). To the extent provided in the resolutions designating it, any such committee may authorize the seal of the Corporation to be affixed to all papers which may require it. In the absence or disqualification of any member of any committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Each committee shall keep regular minutes of its meetings and make a report of its proceedings and actions to the Board of Directors when required. A majority of a quorum of any such committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board shall have power at any time, by resolution passed by a majority of the whole Board, to change the membership of any such committee, to fill vacancies in it, or to dissolve it. Section 7. Action by Consent. Unless otherwise restricted by the Certificate of Incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof designated pursuant to Section 6 of this Article, may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing and such writing or writings are filed with the minutes of proceedings of the Board or committee. -5- Section 8. Telephonic Meetings. Members of the Board of Directors or any committee thereof designated pursuant to Section 6 of this Article may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section shall constitute presence in person at such meeting. Section 9. Meetings, Place. Meetings of the Board of Directors shall be held at such place either within or without the State of Delaware, as shall be stated in the notice thereof. Section 10. Compensation of Directors and Committees. No director shall receive any salary or compensation for his services as a director or member of any committee of the Board designated pursuant to Section 6 of this Article except that directors' fees in such amounts as shall be determined by the Board of Directors from time to time may be paid to each director for (a) attendance at any regular or special meeting of the Board of Directors or of any such committee, and (b) services as a director performed between meetings. In addition, the Board may adopt and implement a retirement plan for those members of the Board who are not employees of the Corporation that will provide for the payment of monthly benefits to such directors upon their retirement from service on the Board. Section 11. Resignation. A director may resign at any time by giving written notice to the Chairman of the Board of Directors, to the President, or to the Secretary. Unless otherwise stated in such notice of resignation the acceptance thereof shall not be necessary to make it effective; and such resignation shall take effect at the time specified therein, or in the absence of such specification, it shall take effect upon the receipt thereof. ARTICLE IV Officers Section 1. Regular Officers. The Board of Directors shall elect a President and may elect a Chairman of the Board, one of whom shall be elected Chief Executive Officer. The Board of Directors shall also elect one or more Vice Presidents, a Secretary, a Treasurer, and a Controller. In addition, the Board of Directors may elect one or more Assistant Secretaries, one or more Assistant Treasurers and may elect such other officers and appoint such agents as the Board may determine. None of said officers, except the Chief Executive Officer, Chairman of the Board, and the President, need be a director. Any combination of offices may be held by the same person, except that the office of Vice President may not be held in combination with the office of Chairman or the office of President. One or more Vice Presidents may be given additional designations, such as Executive Vice President, Senior Vice President, Group Vice President, and the like. The Chief Executive Officer may add to the title of any officer additional words indicating the officer's duties. Subject to the above restrictions, for any reason that the Board of Directors may deem sufficient, whether occasioned by absence or otherwise, the Board may delegate all or any of the powers or duties of any officer to any other officer or director. -6- Section 2. Compensation. The compensation of all officers of the Corporation shall be fixed by the Board of Directors or such committee of the Board as the Board of Directors may designate by resolution passed by a majority of the whole Board. No officer shall be disqualified from receiving such compensation by reason of the fact that he is also a director of the Corporation. Section 3. Term of Office and Removal. Each officer shall hold office for the term for which he was elected, or until his successor is elected and qualified, or until his death, resignation, or removal in the manner herein provided. Any officer or agent selected by the Board of Directors may be removed with or without cause by the Board of Directors or, with the approval of the Governance Committee, by the Chief Executive Officer, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Section 4. Vacancies. A vacancy in any office by reason of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. Section 5. Resignation. Any officer may resign at any time upon written notice to the Corporation. Unless otherwise stated in such notice of resignation, the acceptance thereof shall not be necessary to make it effective; and such resignation shall take effect at the time specified therein, or in the absence of such specification, it shall take effect upon the receipt thereof. ARTICLE V Duties of Officers Section 1. Chief Executive Officer. Either the Chairman of the Board, or the President, as the Board of Directors shall determine, shall be the Chief Executive Officer of the Corporation. The Chief Executive Officer shall be the chief executive and administrative officer of the Corporation and, subject to the control of the Board of Directors, shall have general management and control of the affairs and business of the Corporation. The officers of the Corporation shall be responsible to him for the proper and faithful discharge of their duties and shall make such reports to him with respect to the business of the Corporation under their charge as he may from time to time require. He shall have such other powers and perform such other duties as from time to time may be assigned to him by the Board of Directors or an appropriate committee thereof authorized pursuant to Section 6 of Article III. It shall be the duty of the Chief Executive Officer to present to the stockholders at least fifteen days before the annual stockholders' meeting, a report showing the condition of the Corporation at the close of the preceding year and a summary of its operations during that year. It also shall be the duty of the Chief Executive Officer to present at each annual meeting of the Board of Directors a complete report covering the Corporation's operations for the preceding year and its condition at the end of the year. -7- Section 2. The Chairman of the Board. The Chairman of the Board shall, unless he designates the President, preside over all meetings of the stockholders and the Board of Directors. He shall have such other powers and perform such other duties as from time to time may be assigned to him by the Board of Directors or an appropriate committee authorized pursuant to Section 6 of Article III. Section 3. The President. In the absence of the Chairman, the President shall exercise the powers and assume the duties of that office. He shall have such other powers and perform such duties as from time to time may be assigned to him by the Board of Directors or an appropriate committee thereof authorized pursuant to Section 6 of Article III. Section 4. The Vice President. There may be as many Vice Presidents as the Board of Directors from time to time shall elect, and they shall have such powers and duties as the Chief Executive Officer may from time to time authorize. Section 5. The Secretary. The Secretary shall record all the proceedings of the meetings of stockholders and the Board of Directors in books to be kept for that purpose, and perform such other duties as shall be assigned to him by the Board of Directors, the Chairman or the President. He shall, when required hereunder, give or cause to be given, notice of all meetings of the stockholders and of the Board of Directors and shall perform such other duties as may be prescribed by the Board of Directors, Chairman or the President, under whose supervision he shall be. He shall keep in safe custody the seal of the Corporation and may affix the seal to any instrument requiring the same. Section 6. The Assistant Secretary. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as shall be assigned by the Board of Directors, the Chairman or the President. Section 7. The Treasurer. The Treasurer shall attend to the finances of the Corporation and shall have the custody of its funds. He shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, and shall deposit or cause to be deposited all moneys, and other valuable effects, in the name of and to the credit of the Corpo- ration, in such depositaries as may be authorized or authorized to be designated by the Board of Directors. If requested, the Treasurer shall render to the Chairman, President and directors, at the annual meeting of the Board of Directors, and at such other times as they may require it, an account of all his transactions as Treasurer, and of the financial condition of the Corporation. He shall be bonded in favor of the Corporation in such amount and with such sureties as shall be determined by the Board of Directors. -8- Section 8. The Assistant Treasurer. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as shall be assigned by the Board of Directors, the Chairman or the President. Section 9. The Controller. The Controller shall be in charge of the accounts of the Corporation; shall have supervision over the corporate, general and cost accounting activities; shall see that there is kept an adequate set of books and records with respect to the earnings, expenses, expenditures and business transactions relating to the Corporation's accounts; shall verify the assets reported by the Treasurer and cause to be examined the books and accounts kept by and under the supervision of the Treasurer; shall, when requested, furnish the Board of Directors, the Chairman, and the President with complete and accurate statements of account showing the financial position of the Corporation, and shall perform such other duties as the Board of Directors may from time to time confer upon and prescribe to him. Section 10. Bond May Be Required. In addition to the bonding required by Section 6, the Board of Directors may, by resolution, require any or all of the officers, employees or agents of the Corporation to be bonded in favor of the Corporation in such amount and with such sureties as shall be determined by the Board of Directors. ARTICLE VI Division Executives Section 1. Appointment. The Chief Executive Officer may from time to time appoint employees of the Corporation, who need not be officers of the Corporation, as Division Executives of the administrative divisions of the Corporation. Division Executives shall have any one of the titles of "President," "Executive Vice President," or "Vice President" of the administrative division concerned. The Chief Executive Officer may add to the title additional words identifying the Division Executive's duties. The Chief Executive Officer may terminate any such appointment at any time. Section 2. Duties, Authority and Compensation. Division Executives shall have such duties and authority and receive such compensation, not inconsistent with these by-laws or any limitation or restrictions imposed by the Board of Directors, as the Chief Executive Officer may from time to time determine. Division Executives shall not be officers of the Corporation for any purpose whatever by virtue of their appointment as such. -9- ARTICLE VII Execution of Instruments Section 1. Checks, Etc. All checks, drafts and orders for payment of money shall be signed in the name of the Corporation by such officers or agents as the Board of Directors shall from time to time designate or authorize to be designated for that purpose. Section 2. Contracts, Conveyances, Etc. The Board of Directors may authorize any officer, or officers, agent or agents, to enter into any contract, conveyance or other instrument, or execute and deliver any such contract, conveyance, or other instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. When the execution of any contract, conveyance, or other instrument has been authorized by the Board of Directors without specification of the executing officers or agents, the Chairman, if he is an employee of the Corporation, the President or any Vice President may execute and deliver the same in the name of and on behalf of the Corporation and may affix the corporate seal thereto, and, if the transaction represented thereby is in the ordinary course of business and does not exceed $250,000, the Chairman, if he is an employee of the Corporation, the President or any Vice President may designate any person to act as agent for the Corporation to execute and deliver, in the name of and on behalf of the Corporation, any and all contracts, conveyances, or other instruments in such transactions. Any contract, conveyance or other instrument may be executed and delivered in the name of and on behalf of the Corporation by the Chairman, if he is an employee of the Corporation, the President or any Vice President provided that the transaction represented thereby is in the ordinary course of business of the Corporation. Section 3. Attestation. The signature of any officer to any contract, conveyance or other instrument may be attested by any other officer of the Corporation and any officer may affix the corporate seal to any contract, conveyance or other instrument. ARTICLE VIII Notices Section 1. Method of Notice. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these by-laws, notice is required to be given to any director or stockholder, such notice may be given in person or in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and, when given by mail such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram, radiogram or cablegram. -10- Section 2. Waiver of Notice. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. ARTICLE IX Fiscal Year and Corporate Seal Section 1. Fiscal Year. The fiscal year of the Corporation shall be the calendar year. Section 2. Corporate Seal. The seal of the Corporation shall be circular in form and contain the name of the Corporation and state of its incorporation. Such seal may be altered from time to time at the discretion of the Board of Directors. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE X Certificates for Shares Section 1. Certificates. The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock in such form as the Board of Directors may from time to time prescribe. The certificates of stock shall be signed by the Chairman of the Board, if he is an employee of the Corporation, or the President or a Vice President and by the Secretary, or the Treasurer, or an Assistant Secretary, or an Assistant Treasurer, sealed with the seal of the Corporation or a facsimile thereof, and countersigned and registered in such manner, if any, as the Board of Directors may by resolution prescribe. Where any such certificate is countersigned by a transfer agent other than the Corporation or its employee, or registered by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed, or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 2. Transfer. The shares of stock of the Corporation shall be transferred only upon the books of the Corporation by the holder thereof in person or by his attorney, upon surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. -11- Section 3. Registered Stockholders. The Corporation shall be entitled to treat the registered holder of any share as the absolute owner thereof for all purposes, and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have express or other notice thereof, save as may be otherwise provided by the statutes of the State of Delaware. Section 4. Lost Certificates. In the event that any certificate of stock is lost, stolen, destroyed or mutilated, the Board of Directors may authorize the issuance of a new certificate of the same tenor and for the same number of shares in lieu thereof. The Board may in its discretion, before the issuance of such new certificate, require the owner of the lost, stolen, destroyed or mutilated certificate, or the legal representative of the owner to make an affidavit or affirmation setting forth such facts as to the loss, destruction or mutilation as it deems necessary, and to give the Corporation a bond in such reasonable sum as it directs to indemnify the Corporation. ARTICLE XI Indemnification of Directors, Officers and Others Section 1. The Corporation shall, to the fullest extent permitted by applicable law, indemnify any person (and the heirs, executors and administrators thereof) who was or is made, or threatened to be made, a party to an action, suit or proceeding, whether civil, criminal, administrative or investigative, whether involving any actual or alleged breach of duty, neglect or error, any accountability, or any actual or alleged misstatement, misleading statement or other act or omission and whether brought or threatened in any court or administrative or legislative body or agency, including an action by or in the right of the Corporation to procure a judgment in its favor and an action by or in the right of any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director or officer of the Corporation is serving or served in any capacity at the request of the Corporation, by reason of the fact that he, his testator or intestate is or was a director or officer of the Corporation, or is serving or served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid in settlement, and costs, charges and expenses, including attorneys' fees, incurred therein or in any appeal thereof. Section 2. The Corporation shall indemnify other persons and reimburse the expenses thereof, to the extent required by applicable law, and may indemnify any other person to whom the Corporation is permitted to provide indemnification or the advancement of expenses, whether pursuant to rights granted pursuant to, or provided by, the Delaware General Corporation Law or otherwise. Section 3. The Corporation shall, from time to time, reimburse or advance to any person referred to in Section 1 of this Article the funds necessary for payment of expenses, including attorneys' fees, incurred in connection with any action, suit or proceeding referred to in Section 1 of -12- this Article, upon receipt of a written undertaking by or on behalf of such person to repay such amount(s) if a judgment or other final adjudication adverse to the director or officer establishes that (1) his acts were committed in bad faith or were the result of active and deliberate dishonesty and, in either case, were material to the cause of action so adjudicated, (2) he personally gained in fact a financial profit or other advantage to which he was not legally entitled or (3) his conduct was otherwise of a character such that Delaware law would require that such amount(s) be repaid. Section 4. Any director or officer of the Corporation serving (1) another corporation, of which a majority of the shares entitled to vote in the election of its directors is held by the Corporation, or (2) any employee benefit plan of the Corporation or any corporation referred to in clause (1), in any capacity shall be deemed to be doing so at the request of the Corporation. Section 5. Any person entitled to be indemnified or to the reimbursement or advancement of expenses as a matter of right pursuant to this Article may elect to have the right to indemnification (or advancement of expenses) interpreted on the basis of the applicable law in effect at the time of the occurrence of the event or events giving rise to the action, suit or proceeding, to the extent permitted by applicable law, or on the basis of the applicable law in effect at the time indemnification is sought. Section 6. The right to be indemnified or to the reimbursement or advancement of expenses pursuant to this Article (1) is a contract right pursuant to which the person entitled thereto may bring suit as if the provisions hereof were set forth in a separate written contract between the Corporation and the director or officer, (2) is intended to be retroactive and shall be available with respect to events occurring prior to the adoption hereof, and (3) shall continue to exist after the rescission or restrictive modification hereof with respect to events occurring prior thereto. Section 7. If a request to be indemnified or for the reimbursement or advancement of expenses pursuant hereto is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled also to be paid the expenses of prosecuting such claim. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of or reimbursement or advancement of expenses to the claimant is proper in the circumstances, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant is not entitled to indemnification or to the reimbursement or advancement of expenses, shall be a defense to the action or create a presumption that the claimant is not so entitled. Section 8. The invalidity or unenforceability of any provision of this Article shall not affect the validity or enforceability of the remaining provisions of this Article. -13- ARTICLE XII Making, Altering or Repealing By-Laws Any provision of these by-laws may be altered or repealed, and new by-laws may be made: (1) by the stockholders or Board of Directors at any meeting thereof if notice of such proposed alteration, repeal or new by-law is contained in the notice of such meeting; provided, however, that such notice may be waived as provided in Article VIII, Section 2, if the waiver contains notice of such proposed alteration, repeal or new by-law, or (2) by unanimous written consent of the directors which consent shall contain such alteration, repeal or new by-law. -14- EX-4 4 Exhibit 4(c) EXECUTION COPY $100,000,000 MASTER CREDIT AGREEMENT dated as of April 6, 1994 among CLARK EQUIPMENT COMPANY, as Borrower and THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO, as Lenders and CHEMICAL BANK, as Agent 1 MASTER CREDIT AGREEMENT This MASTER CREDIT AGREEMENT, dated as of April 6, 1994, (this "Agreement") is entered into among CLARK EQUIPMENT COMPANY, a Delaware corporation, (the "Borrower"), the LENDERS listed on the signature pages hereof or which may hereafter become a party hereto pursuant to Section 8.01 hereof (individually, a "Lender" and collectively, the "Lenders") and CHEMICAL BANK, a New York banking corporation, as agent for the Lenders (in such capacity, the "Agent"). The Borrower has requested the Lenders to extend credit to the Borrower to enable the Borrower, on the terms and subject to the conditions set forth in this Agreement, to borrow on a revolving basis, at any time and from time to time from and including the Closing Date, an aggregate principal amount at any time outstanding not in excess of the Aggregate Commitments hereunder. Accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "ABR Borrowing" means a Borrowing comprised of ABR Loans. "ABR Loan" means a Loan as to which the Alternate Base Rate applies. "Adjusted CD Rate" means, with respect to any CD Loan, a rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the sum of (a) the product of (i) the Fixed Certificate of Deposit Rate in effect for the Interest Period applicable to such Loan and (ii) Statutory Reserves and (b) the Assessment Rate. "Fixed Certificate of Deposit Rate" means the arithmetic average (rounded upwards to the next 1/100 of 1% if such average is not such a multiple) of the prevailing rates per annum bid on or about 10:00 a.m., New York City time, to the Agent on the first Business Day of the Interest Period applicable to such CD Loan by three New York City negotiable certificate of deposit dealers of recognized standing selected by the Agent for the purchase at face value of negotiable certificates of deposit of major United States money center banks in an amount approximately equal to the principal amount of the Agent's portion of the Borrowing of which such CD Loan is a part, and with a maturity comparable to such Interest Period. "Administrative Questionnaire" means an Administrative Questionnaire in the form of Exhibit D hereto. 2 "Aggregate Commitments" means the aggregate amount of the Commitments of all Lenders, which on the Closing Date is $100,000,000 and which may be reduced from time to time pursuant to Section 2.09. "Alternate Base Rate" means, for any day, a rate per annum (rounded upwards if necessary, to the next 1/100 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. "Prime Rate" means the rate of interest per annum publicly announced from time to time by the Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced. "Base CD Rate" means, for any day, the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the Assessment Rate. "Three-Month Secondary CD Rate" means, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Federal Reserve Board through the public information telephone line of the Federal Reserve Bank of New York, to be published in Federal Reserve Statistical Release H.15 (519) during the week following such day or, if such rate shall not be so reported on such day or on such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it. "Federal Funds Effective Rate" means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. If for any reason the Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate or both for any reason, including the inability or failure of the Agent to obtain sufficient bids in accordance with the terms hereof, the Alternate Base Rate shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively. The Agent shall promptly notify the Borrower and the Lenders if at any time the Alternate Base Rate is being determined pursuant to clause (b) or (c) of the first sentence of this definition. "Applicable CD Margin" means: (a) at any time that the Credit Rating by Moody's is lower than Baa3 and the Credit Rating by S&P is lower than BBB-, a rate per annum equal to 0.6875%; (b) at any time that the Credit Rating by Moody's is Baa3 and the Credit Rating by S&P is BBB-, a rate per annum equal to 0.50%; (c) at any time that the Credit Rating by 3 Moody's is Baa2 and the Credit Rating by S&P is BBB, a rate per annum equal to 0.425%; and (d) at any time that the Credit Rating by Moody's is Baa1 or higher and the Credit Rating by S&P is BBB+ or higher, a rate per annum equal to 0.375%. If at any time the Borrower has a Credit Rating split between those set forth in clauses (a) - (d) above, then the Applicable CD Margin shall be the rate per annum that would be applicable if the highest of the applicable Credit Ratings is used. If at any time the Borrower has a Credit Rating from only one of S&P and Moody's, then the Applicable CD Margin shall be the rate per annum that would be applicable for such Credit Rating. If at any time the Borrower does not have a Credit Rating from either Moody's or S&P, then the Applicable CD Margin shall be the rate per annum that would be applicable if the lowest of the Credit Ratings is used. In this event, the Borrower shall diligently attempt to obtain from either of the Rating Agencies a private letter rating of the Notes, which rating shall then determine the meaning of "Applicable CD Margin" as if it were a Credit Rating. Any change in the Applicable CD Margin shall be effective as of the date on which any of the Rating Agencies announces a change in the Borrower's Credit Rating (if applicable), the date on which the Borrower has no Credit Rating or the date on which the Borrower obtains a private letter rating of the Notes from any of the Rating Agencies. "Applicable LIBOR Margin" means: (a) at any time that the Credit Rating by Moody's is lower than Baa3 and the Credit Rating by S&P is lower than BBB-, a rate per annum equal to 0.5625%; (b) at any time that the Credit Rating by Moody's is Baa3 and the Credit Rating by S&P is BBB-, a rate per annum equal to 0.375%; (c) at any time that the Credit Rating by Moody's is Baa2 and the Credit Rating by S&P is BBB, a rate per annum equal to 0.30%; and (d) at any time that the Credit Rating by Moody's is Baa1 or higher and the Credit Rating by S&P is BBB+ or higher, a rate per annum equal to 0.25%. If at any time the Borrower has a Credit Rating split between those set forth in clauses (a) - (d) above, then the Applicable LIBOR Margin shall be the rate per annum that would be applicable if the highest of the applicable Credit Ratings is used. If at any time the Borrower has a Credit Rating from only one of S&P and Moody's, then the Applicable LIBOR Margin shall be the rate per annum that would be applicable for such Credit Rating. If at any time the Borrower does not have a Credit Rating from either Moody's or S&P, then the Applicable LIBOR Margin shall be the rate per annum that would be applicable if the lowest of the Credit Ratings is used. In this event, the Borrower shall diligently attempt to obtain from either of the Rating Agencies a private letter rating of the Notes, which rating shall then determine the meaning of "Applicable LIBOR Margin" as if it were a Credit Rating. Any change in the Applicable LIBOR Margin shall be effective as of the date on which any of the Rating Agencies announces a change in the Borrower's Credit Rating (if applicable), the date on which the Borrower has no Credit Rating or the date on which the Borrower obtains a private letter rating of the Notes from any of the Rating Agencies. "Assessment Rate" means the net annual assessment rate (rounded upwards, if necessary, to the next higher 1/100 of 1%) determined by the Agent to be payable to the Federal Deposit Insurance Corporation or any successor ("FDIC") for the insuring by the FDIC of time deposits made in the United States as of the day two Business Days prior to the date of determination. 4 "Borrower's 1993 Form 10-K" means the Borrower's annual report on Form 10-K for 1993, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Borrowing" means one or more Loans of the same Type made by the Lenders on a single date and as to which a single Interest Period is in effect (or with respect to Competitive Loans, by each of the Lenders whose offer to make Competitive Loans as part of such borrowing has been accepted by the Borrower pursuant to Section 2.05). "Borrowing Date" means any Business Day specified in a Notice of Borrowing as a date on which the Borrower requests that either a Borrowing of Syndicated Loans or a Borrowing of Competitive Loans be made hereunder. "Business Day" means any day (other than a day which is a Saturday, Sunday or legal holiday in the State of New York) on which banks are open for business in Chicago and New York City; provided, however, that, when used in connection with a LIBOR Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "CD Borrowing" means a Borrowing comprised of CD Loans. "CD Loan" means a Loan as to which the Adjusted CD Rate applies. "Closing Date" means April 6, 1994. "Code" means the Internal Revenue Code of 1986, as amended. "Commitment" means, with respect to each Lender, the amount set forth opposite the name of such Lender on the signature pages hereof as the same may be reduced from time to time pursuant to Section 2.09. "Commitment Period" means the period from and including the Closing Date to but not including the Termination Date or such earlier date on which the Lenders' obligations to make Loans under this Agreement shall terminate as provided herein. "Competitive Bid" means an offer by a Lender to make a Competitive Loan pursuant to Section 2.05. "Competitive Bid Rate" means, as to any Competitive Bid made by a Lender pursuant to Section 2.05(b), (i) in the case of a LIBOR Competitive Loan, the Margin, and (ii) in the case of a Fixed Rate Loan, the fixed rate of interest offered by the Lender making such Competitive Bid. "Competitive Bid Request" means a request by the Borrower made pursuant to Section 2.05 in the form of Exhibit A-1 hereto. "Competitive Loan" means a Loan from a Lender pursuant to the bidding procedure described in Section 2.05. "Competitive Notes" means promissory notes of the Borrower in the form of Exhibit B hereto, evidencing the obligations of the Borrower to repay the Competitive Loans. 5 "Consolidated Net Worth" means at any date the consolidated stockholders' equity of the Borrower and its Consolidated Subsidiaries plus the FASB 106 Adjustment minus the FASB 109 Adjustment plus the Terex Adjustment plus the Non-Cash Benefit Plan Adjustment. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements as of such date. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code. "Credit Rating" means the publicly announced rating on public senior unsecured long-term debt of the Borrower given by a Rating Agency. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under capital leases, (v) all debt described in items (i)-(iv) above of others secured by a Lien on any asset of such Person, whether or not such debt described in items (i)-(iv) above is assumed by such Person, and (vi) all debt described in items (i)-(iv) above of others Guaranteed by such Person; provided, however, that "Debt" shall not include (a) any obligation of such Person to reimburse commercial banks for payments under letters of credit opened by such banks in connection with transactions arising in the ordinary course of such Person's business, if such obligation shall have been paid when due by such Person, (b) debt described in items (i)-(iv) above fully collateralized by cash, (c) Guarantees consisting of obligations of the Borrower or its Subsidiaries, incurred in the ordinary course of business, to repurchase inventory from its dealers and distributors pursuant to the terms of its dealer and distributor agreements, or (d) Guarantees consisting of obligations of the Borrower and its Subsidiaries, incurred in the ordinary course of business, to repurchase inventory from banks or other financial institutions in the event of the repossession of such inventory by the bank or financial institution from the dealer for whom the inventory was financed by the bank or financial institution. "Default" means any condition or event the occurrence of which would, with the lapse of time or the giving of notice, or both, constitute an Event of Default. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, including all regulations from time to time promulgated thereunder. "Event of Default" has the meaning set forth in Section 7.01. 6 "Facility Fee Percentage" means: (a) at any time that the Credit Rating by Moody's is lower than Baa3 and the Credit Rating by S&P is lower than BBB-, a rate per annum equal to 0.3125%; (b) at any time that the Credit Rating by Moody's is Baa3 and the Credit Rating by S&P is BBB-, a rate per annum equal to 0.225%; (c) at any time that the Credit Rating by Moody's is Baa2 and the Credit Rating by S&P is BBB, a rate per annum equal to 0.20%; and (d) at any time that the Credit Rating by Moody's is Baa1 or higher and the Credit Rating by S&P is BBB+ or higher, a rate per annum equal to 0.1875%. If at any time the Borrower has a Credit Rating split between those set forth in clauses (a) - (d) above, then the Facility Fee Percentage shall be the rate per annum that would be applicable if the highest of the applicable Credit Ratings is used. If at any time the Borrower has a Credit Rating from only one of S&P and Moody's, then the Facility Fee Percentage shall be the rate per annum that would be applicable for such Credit Rating. If at any time the Borrower does not have a Credit Rating from either Moody's or S&P, then the Facility Fee Percentage shall be the rate per annum that would be applicable if the lowest of the Credit Ratings is used. In this event, the Borrower shall diligently attempt to obtain from either of the Rating Agencies a private letter rating of the Notes, which rating shall then determine the meaning of "Facility Fee Percentage" as if it were a Credit Rating. Any change in the Facility Fee Percentage shall be effective as of the date on which any of the Rating Agencies announces a change in the Borrower's Credit Rating (if applicable), the date on which the Borrower has no Credit Rating or the date on which the Borrower obtains a private letter rating of the Notes from any of the Rating Agencies. "FASB 106 Adjustment" means the sum of the current and long-term portions of the Borrower's liability resulting from the Borrower's adoption, and subsequent application, of Financial Accounting Standards Board Statement 106, as shown from time to time in the Borrower's balance sheet under the captions "Accrued Postretirement Benefits" and "Current Liabilities: Accrued Postretirement Benefits". "FASB 109 Adjustment" means the amount of tax benefit resulting from time to time from the application of Financial Accounting Standards Board Statement 109 to the FASB 106 Adjustment, as calculated by the Borrower in accordance with generally accepted accounting principles. "Fixed Rate Loan" means any Competitive Loan offered by a Lender pursuant to Section 2.05 accruing interest at an absolute percentage rate per annum, not necessarily related to the Alternate Base Rate, the Adjusted CD Rate or the LIBOR Rate, selected by such Lender and expressed as a decimal (to no more than four decimal places), which the Borrower shall have elected to accept. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, 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 7 (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Interest Period" means: (a) with respect to any Syndicated Loan: (i) initially, the period commencing on the Borrowing Date with respect to such Syndicated Loan and ending, with respect to LIBOR Syndicated Loans, one, two, three or six months thereafter as selected by the Borrower in its Notice of Borrowing as provided in Section 2.03; or, with respect to CD Loans, 30, 60, 90 or 180 days thereafter as selected by the Borrower in its Notice of Borrowing as provided in Section 2.03; or, with respect to ABR Loans, within ninety days thereafter as selected by the Borrower in its Notice of Borrowing as provided in Section 2.03; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Syndicated Loan and ending, with respect to LIBOR Syndicated Loans, one, two, three or six months thereafter as selected by the Borrower no later than 11:00 a.m. (New York City time) three Business Days prior to the last day of the then current Interest Period with respect to such LIBOR Syndicated Loan; or, with respect to CD Loans, 30, 60, 90 or 180 days thereafter as selected by the Borrower no later than 11:00 a.m. (New York City time) two Business Days prior to the last day of the then current Interest Period with respect to such CD Loan; or, with respect to ABR Loans, within ninety days thereafter as selected by the Borrower no later than 10:30 a.m. (New York City time) on the same Business Day as the last day of the then current Interest Period with respect to such ABR Loan; and (b) with respect to any Competitive Loan: (i) as to any LIBOR Competitive Loan, the period commencing on the date of such LIBOR Competitive Loan and ending one, two, three or six months thereafter, as the Borrower may elect; and (ii) as to any Fixed Rate Loan, the period (not to be less than seven days nor to exceed 360 days) commencing on the date of such Competitive Loan and ending on the date specified in the Competitive Bid Request pursuant to which the offer to make the Fixed Rate Loan was extended; provided, that all of the foregoing provisions relating to Interest Periods are subject to the following: (A) if any Interest Period would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day unless, with respect to LIBOR Loans only, the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; 8 (B) with respect to Syndicated Loans only, if the Borrower shall fail to give notice as provided above with respect to a LIBOR Syndicated Loan or a CD Loan, the Borrower shall be deemed to have selected an ABR Loan to replace the affected LIBOR Syndicated Loan or CD Loan; (C) with respect to Syndicated Loans only, if the Borrower fails to specify the Interest Period applicable to a LIBOR Syndicated Loan, an Interest Period of a one month duration shall apply, and if the Borrower fails to specify the Interest Period applicable to a CD Loan, an Interest Period of a 30 day duration shall apply; (D) no Interest Period shall extend beyond the Termination Date; and (E) with respect to Syndicated Loans only, the Borrower shall make no more than five Interest Period selections in any calendar month and shall select Interest Periods in such a manner that all Interest Periods at any one time outstanding hereunder shall end on no more than five different dates in any calendar month. "Joint Venture Company" means VME Group N.V., a Netherlands corporation which is fifty percent-owned by the Borrower. "LIBOR Borrowing" means a Borrowing comprised of LIBOR Syndicated Loans or LIBOR Competitive Loans. "LIBOR Competitive Loan" means any Competitive Loan bearing interest at a rate determined by reference to the LIBOR Rate in accordance with the provisions of Article II. "LIBOR Loan" means collectively a LIBOR Competitive Loan and a LIBOR Syndicated Loan. "LIBOR Rate" means, with respect to any LIBOR Borrowing for any Interest Period, an interest rate per annum determined by the Agent to be the arithmetic average of the rates designated as "LIBO" on Telerate screen number 3750 USD-LIBOR-BBA (rounded upwards if necessary, to the next one-sixteenth of one percent) for deposits with a maturity comparable to such Interest Period offered in immediately available funds in the London interbank market at approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period; provided, however, that if such screen is cancelled or becomes otherwise unavailable, the "LIBOR Rate" shall be determined by some other reference to be agreed upon by the Borrower and the Agent. "LIBOR Syndicated Loan" means any Syndicated Loan bearing interest at a rate determined by reference to the LIBOR Rate in accordance with the provisions of Article II. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has 9 acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Syndicated Loan or a Competitive Loan. "Margin" means as to any Competitive Bid made by a Lender pursuant to Section 2.05(b), the margin (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) to be added to or subtracted from the LIBOR Rate in order to determine the interest rate acceptable to such Lender with respect to the Competitive Loan to which such bid relates. As used in this Agreement, the phrase "the sum of" any Margin and the LIBOR Rate, or similar phrase, shall require an addition (if this definition requires an addition of such Margin to such rate) or a subtraction (if this definition requires a subtraction of such Margin from such rate). "Material Subsidiary" means (i) any Subsidiary of the Borrower with revenues during the fiscal year of the Borrower most recently ended equal to or greater than 10% of the total revenues of the Borrower and its Consolidated Subsidiaries during such year or (ii) any Subsidiary of the Borrower with assets as of the last day of the Borrower's most recently ended fiscal year equal to or greater than 10% of the total assets of the Borrower and its Consolidated Subsidiaries at such date; provided, however, that intercompany accounts shall be excluded from the determination of total assets for purposes of clause (ii) above. "Moody's" means Moody's Investor Services, Inc. "Non-Cash Benefit Plan Adjustment" means the non-cash impact on consolidated stockholders' equity resulting from time to time from the application of Financial Accounting Standards Board Statement 87 to the Borrower's Retirement Program for Salaried Employees - Plan 23, including, but not limited to, any such impact that results from the termination of the Borrower's leveraged employee stock ownership plan. "Notes" means the Competitive Notes and the Syndicated Notes, and "Note" means any Competitive Note or Syndicated Note. "Notice of Borrowing" has the meaning ascribed to it in Section 2.03 hereof. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, a trust or unincorporated organization, and a government or political subdivision or an agency thereof. "Plan" means at any time an employee pension benefit plan as defined in Section 3(2) of ERISA and which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by a member of the Controlled Group for employees of a member of the Controlled Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which 10 more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "Rating Agency" means S&P or Moody's and "Rating Agencies" means both S&P and Moody's. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System from time to time in effect and shall include any successor or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulations G, U and X" means Regulations G, U and X of the Board of Governors of the Federal Reserve System from time to time in effect and shall include any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. "Required Lenders" means: (a) at any time prior to the termination of the Commitments as provided hereunder, Lenders having Commitments representing at least 51% of the Aggregate Commitments or (b) for purposes of acceleration pursuant to Article VII or at any time subsequent to the termination of Commitments as provided hereunder, Lenders holding Loans representing at least 51% of the aggregate principal amount of the Loans outstanding. "Responsible Officer" means the President, Vice President and Treasurer, Vice President and Controller or Assistant Treasurer of the Borrower, or any person designated by the Vice President and Treasurer of the Borrower. "S&P" means Standard & Poor's Corporation. "Statutory Reserves" means a fraction (expressed as a percentage), the numerator of which is one and the denominator of which is one minus a percentage (expressed as a decimal) which is in effect on the date of determination as prescribed by the Board of Governors of the Federal Reserve System (or any successor), for determining the reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding one billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity of three months and in an amount of $100,000 or more. "Subsidiary" of a Person means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. "Syndicated Loan" means a loan made by a Lender to the Borrower pursuant to Section 2.01. 11 "Syndicated Notes" means promissory notes of the Borrower in the form of Exhibit C hereto, evidencing the obligations of the Borrower to repay the Syndicated Loans. "Terex Adjustment" means the impact on consolidated stockholder's equity resulting from time to time from (i) the bankruptcy or insolvency of Terex Corporation or Clark Material Handling Company or (ii) the failure of Terex Corporation or Clark Material Handling Company to perform any of the liabilities and obligations which they assumed in connection with the sale of Clark Material Handling Company and its affiliates by the Borrower to Terex Corporation; provided, however, that the amount of this adjustment shall in no event exceed $37,000,000.00. "Termination Date" means the date of termination of the Lenders' obligations to make Loans hereunder to the Borrower, as provided in Section 11.01 hereof. "Type", when used in respect of any Loan or Borrowing, shall refer to the interest rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. "Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles applied on a basis consistent with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Lenders. The Borrower shall promptly notify the Agent of any material change in or application of such generally accepted accounting principles adopted by the Borrower and reflected or to be reflected in financial statements of the Borrower, including, but not limited to, any such changes or applications resulting from the Borrower's adoption of the principles set forth in the Exposure Draft entitled "Accounting for the Impairment of Long-Lived Assets", and the Borrower and Lenders agree that, in the event of any such change, they shall discuss in good faith adjustment to the covenants contained in Sections 6.01, 6.02, 6.03 and 6.04 hereof. ARTICLE II LOANS SECTION 2.01. Syndicated Loans. Each Lender severally, and not jointly, agrees, on the terms and conditions set forth in this Agreement, to make revolving credit loans (individually, a "Syndicated Loan"; collectively, the "Syndicated Loans") to the Borrower from time to time during the Commitment Period in a principal amount outstanding at any time not exceeding the amount of such Lender's Commitment, subject to reduction as provided in Section 2.09, subject, however, to the conditions that (i) at no time shall the outstanding aggregate principal amount of all 12 Syndicated Loans and all Competitive Loans made by the Lenders exceed the Aggregate Commitments and (ii) at no time shall (A) the sum of (x) the outstanding aggregate principal amount of all Syndicated Loans made by any Lender and (y) the portion of such Lender's Commitment deemed (pursuant to Section 2.06(a)) used by such Lender with respect to Competitive Loans exceed (B) the Commitment of such Lender. The Borrower may borrow, repay the Syndicated Loans in whole or in part and reborrow, all in accordance with the terms and conditions hereof. All Syndicated Loans shall be due and payable at the end of the Interest Period applicable thereto, and all amounts outstanding shall be due and payable on the Termination Date. Each Borrowing of Syndicated Loans shall be made by the Lenders simultaneously and proportionately to the amount of each Lender's Commitment, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make a Syndicated Loan hereunder nor shall any Lender's Commitment be increased or decreased as a result of the default by any other Lender in that other Lender's obligation to make a Syndicated Loan hereunder. Section 2.02. Syndicated Notes. The Borrower shall execute and deliver to the Agent, for each Lender, on or before the Closing Date, a Syndicated Note in the form of Exhibit C attached hereto and made a part hereof to evidence that Lender's Syndicated Loans, in the principal amount of such Lender's Commitment and with other appropriate insertions (a "Syndicated Note"). Each Lender is hereby authorized to record the amount and type of each Syndicated Loan made by such Lender, the date and the amount of each payment or prepayment of principal thereof, the length of the Interest Period with respect thereto, the LIBOR Rate applicable to each LIBOR Syndicated Loan, the Alternate Base Rate applicable to each ABR Loan, and the Adjusted CD Rate applicable to each CD Loan, on its books or records or on the schedule annexed to and constituting a part of its Syndicated Note, and any such recordation shall, in the absence of manifest error, constitute prima facie evidence of the accuracy of the information so recorded, provided, however, that failure by a Lender to make any such recordation on its books or records or on its Syndicated Note shall not affect any of the obligations of the Borrower under such Syndicated Note or this Agreement. 2.03. Notice of Borrowing. Whenever the Borrower desires to borrow under Section 2.01 hereof, it shall deliver to the Agent a written Syndicated Loan Notice of Borrowing, a form of which is attached hereto as Exhibit A-5, (each a "Notice of Borrowing") no later than (a) 11:00 a.m. (New York City time) on the third Business Day prior to the proposed Borrowing Date, in the case of a requested LIBOR Syndicated Loan, (b) 11:00 a.m. (New York City time) on the second Business Day prior to the proposed Borrowing Date, in the case of a requested CD Loan, or (c) 10:30 a.m. (New York City time) on the proposed Borrowing Date, in the case of a requested ABR Loan. The Notice of Borrowing shall specify (i) the proposed Borrowing Date (which shall be a Business Day), (ii) the amount of the proposed Borrowing, (iii) whether such Borrowing is to consist of LIBOR Syndicated Loans, CD Loans or ABR Loans, provided that any Syndicated Loan made while a Default is continuing may be made only as an ABR Loan, and (iv) the Interest Period for such Borrowing. Each Notice of Borrowing which shall fail to state an Interest Period applicable to a LIBOR Borrowing shall be deemed to be a request for an Interest Period of a one month duration, and each Notice of Borrowing which shall fail to state an Interest Period 13 applicable to a CD Borrowing shall be deemed to be a request for an Interest Period of a thirty day duration. LIBOR Borrowings and CD Borrowings shall be in minimum amounts of $8,000,000 and integral multiples of $1,000,000 in excess of that amount. ABR Borrowings shall be in a minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount. In lieu of delivering a Notice of Borrowing, the Borrower may give the Agent telephonic notice by the required time and specifying the required information of any proposed Borrowing under Section 2.01; provided that such telephonic notice shall be promptly confirmed in writing by delivery by telecopier or telex of a Notice of Borrowing to the Agent on the same Business Day Agent receives telephonic notice. If the Borrower fails to specify whether a Borrowing is to be a LIBOR Borrowing, a CD Borrowing or an ABR Borrowing, such Borrowing shall be an ABR Borrowing. In the case of LIBOR Borrowings, the Agent shall notify the Borrower two Business Days prior to the Borrowing Date of the LIBOR Rate applicable to the proposed LIBOR Borrowing for the Interest Period specified for such LIBOR Borrowing. In the case of CD Borrowings, the Agent shall notify the Borrower on the Borrowing Date of the Adjusted CD Rate applicable to the proposed CD Borrowing for the Interest Period specified for such CD Borrowing. Neither the Agent nor any Lender shall incur any liability to the Borrower in acting upon any telephonic notice referred to above that the Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of the Borrower or for otherwise acting in good faith under this Section and upon funding of the Syndicated Loans by the Lenders in accordance with this Agreement. Section 2.04. Disbursement of Funds. (a) The Agent shall give each Lender notice of each Notice of Borrowing, or telephonic notice thereof, and the contents thereof, promptly on the day of the Agent's receipt thereof. Except as provided to the contrary in subsection (c) below, each Lender shall make the amount of its Syndicated Loan available to the Agent, in same day funds, at the office of the Agent located in New York, New York, not later than 1:00 p.m. (New York time) on the Borrowing Date, and the Agent shall make the proceeds of such Syndicated Loans available to the Borrower by 3:00 p.m. (New York time) on such Borrowing Date by causing an amount of same day funds equal to the proceeds of all such Syndicated Loans received by the Agent to be credited to the account of the Borrower at such office of the Agent. Each Lender may at its option make any Syndicated Loan which is a LIBOR Syndicated Loan by causing a foreign branch or affiliate of such Lender to make such Loan, but only if any exercise of such option shall not subject the Borrower to any additional or increased payment obligations pursuant to this Agreement. (b) Unless the Agent shall have been notified by any Lender prior to any Borrowing Date in respect of any Syndicated Loan that such Lender does not intend to make available to the Agent such Lender's Syndicated Loan on such Borrowing Date, the Agent may assume that such Lender has made such amount available to the Agent on such Borrowing Date, and the Agent in its sole discretion may, but shall not be obligated to, make available to the Borrower a corresponding amount on such Borrowing Date. If the Agent does determine to make available to the Borrower such corresponding amount, the Agent shall promptly notify the Borrower of such determination. If such corresponding amount is not in fact made available 14 to the Agent by such Lender, the Agent shall promptly notify such Lender of such fact, and shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from the date on which the Agent notified such Lender that such corresponding amount was not received by the Agent until the date such amount is paid to the Agent, at the customary rate set by the Agent for the correction of errors among banks for two Business Days and thereafter at the ABR Rate. If such Lender does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent shall promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Agent. Nothing in this Section shall be deemed to relieve any Lender from its obligation to fulfill its Commitment hereunder or to prejudice any rights that the Borrower may have against any Lender as a result of any default by such Lender hereunder. (c) Each Borrowing of Syndicated Loans which does not increase the aggregate outstanding principal amount of Syndicated Loans owing to Lenders over the aggregate principal amount of Syndicated Loans outstanding immediately prior to the making of such Syndicated Loans shall be effected by the Lenders by applying the proceeds of the new Borrowing of Syndicated Loans (or portion thereof) to the Syndicated Loans (or portion thereof) due and payable on such date, and accrued interest on the Syndicated Loan (or portion thereof) due and payable on such date shall be paid by the Borrower at the time of such new Borrowing of Syndicated Loans. Section 2.05. Competitive Bid Procedure. (a) In order to request Competitive Bids, the Borrower shall hand deliver or telex or telecopy to the Agent a duly completed Competitive Bid Request in the form of Exhibit A-1 hereto (each a "Competitive Bid Request"), signed by a Responsible Officer of the Borrower, to be received by the Agent (i) in the case of Borrowings of LIBOR Competitive Loans, not later than 10:00 a.m. New York City time four Business Days before a proposed Borrowing of LIBOR Competitive Loans, and (ii) in the case of Borrowings of Fixed Rate Loans, not later than 10:00 a.m. New York City time one Business Day before a proposed Borrowing of Fixed Rate Loans. No CD Loan or ABR Loan shall be requested in or made pursuant to a Competitive Bid Request. Competitive Bid Requests that do not conform substantially to the format of Exhibit A-1 may be rejected in the Agent's sole discretion, and the Agent shall notify the Borrower of such rejection by telex or telecopier not later than noon, New York City time on the date of receipt. Such Competitive Bid Request shall in each case refer to this Agreement and specify (w) whether the Loans then being requested are to be LIBOR Competitive Loans or Fixed Rate Loans, (x) the date of such Loans (which shall be a Business Day), (y) the aggregate principal amount thereof (which shall not be greater than the aggregate amount of the then unused Commitments of all the Lenders, shall not be less than $5,000,000 and shall be an integral multiple of $1,000,000), and (z) the Interest Period with respect thereto. The maturity date for repayment for each Competitive Loan to be made as a part of each Borrowing shall be the last day of the Interest Period relating thereto. Promptly on the date of receipt by the Agent of such Competitive Bid Request, the Agent shall invite by telex or telecopier (in the form set forth in Exhibit A-2 hereto) the Lenders to make Competitive Bids pursuant to such Competitive Bid Request in accordance with the terms and conditions of this Agreement. 15 (b) Each Lender may, in its sole discretion, make one or more Competitive Bids to the Borrower responsive to such Competitive Bid Request. Each Competitive Bid by a Lender must be received by the Agent via telex or telecopier, in the form of Exhibit A-3 hereto, (i) in the case of LIBOR Competitive Loans, not later than 9:30 a.m. New York City time, three Business Days before a proposed Borrowing of LIBOR Competitive Loans, and (ii) in the case of Fixed Rate Loans, not later than 9:30 a.m. New York City time, on the Business Day of a proposed Borrowing of Fixed Rate Loans. Multiple bids will be accepted by the Agent. Any Competitive Bid of any Lender that does not conform precisely to the format of Exhibit A-3 may be rejected by the Agent upon consultation with the Borrower and the Agent shall notify such Lender of such rejection by telex or telecopier as soon as practicable after consultation with the Borrower. Each Competitive Bid of any Lender shall refer to this Agreement and specify (x) the maximum principal amount (which may be up to the full amount of the requested Borrowing regardless of the Commitment of such Lender and which shall be in a minimum amount of $5,000,000 and in an integral multiple of $1,000,000) of the Competitive Loan that such Lender is willing to make to the Borrower, (y) the Competitive Bid Rate at which such Lender is prepared to make the Competitive Loan and (z) the Interest Period and last date thereof. If any Lender shall elect not to make a Competitive Bid, such Lender shall so notify the Agent via telex or telecopier (i) in the case of LIBOR Competitive Loans, not later than 9:30 a.m. New York City time, three Business Days before a proposed Borrowing of LIBOR Competitive Loans, and (ii) in the case of Fixed Rate Loans, not later than 9:30 a.m. New York City time, the same Business Day of a proposed Borrowing of Fixed Rate Loans; provided, however, that failure by any Lender to give such notice shall not cause such Lender to be obligated to make any Competitive Loan. A Competitive Bid submitted by a Lender pursuant to this paragraph (b) shall be irrevocable. (c) The Agent shall promptly notify the Borrower by telex or telecopier (i) in the case of LIBOR Competitive Loans, not later than 10:00 a.m. New York City time, three Business Days before a proposed Borrowing of LIBOR Competitive Loans, and (ii) in the case of Fixed Rate Loans, not later than 10:00 a.m. New York City time the same Business Day of a proposed Borrowing of Fixed Rate Loans, of the number of Competitive Bids made, the Competitive Bid Rate and the maximum principal amount of each Competitive Loan in respect of which a Competitive Bid was made and the identity of the Lender making such Competitive Bid. The Agent shall send a copy of all Competitive Bids to the Borrower as soon as practicable after receipt thereof. (d) The Borrower may in its sole and absolute discretion, subject only to the provisions of this paragraph (d), accept or reject any Competitive Bid referred to in paragraph (c) above. The Borrower shall notify the Agent by telephone, confirmed by telex or telecopier in the form of a Competitive Bid Accept/Reject Letter, a copy of which is attached as Exhibit A-4 hereto, whether and to what extent it has decided to accept or reject any of or all the bids referred to in paragraph (c) above, (x) in the case of a LIBOR Competitive Loan, not later than 10:30 a.m., New York City time, three Business Days before a proposed Borrowing of LIBOR Competitive Loans, and (y) in the case of a Fixed Rate Loan, not later than 10:30 a.m., New York City time, on the day of a proposed Borrowing of Fixed Rate Loans; provided, however, that (i) the failure by the Borrower to give 16 such notice shall be deemed to be a rejection of all the bids referred to in paragraph (c) above, (ii) the Borrower shall not accept a bid made at a particular Competitive Bid Rate if the Borrower has decided to reject a bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by the Borrower shall not exceed the principal amount specified in the Competitive Bid Request, (iv) if the Borrower shall accept a bid or bids made at a particular Competitive Bid Rate but the amount of such bid or bids shall cause the total amount of bids to be accepted by the Borrower to exceed the amount specified in the Competitive Bid Request, then the Borrower shall accept a portion of such bid or bids in an amount equal to the amount specified in the Competitive Bid Request less the amount of all other Competitive Bids accepted with respect to such Competitive Bid Request, which acceptance, in the case of multiple bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such bid at such Competitive Bid Rate, and (v) except pursuant to clause (iv) above, no bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000; provided further, however, that if a Competitive Loan must be in an amount less than $5,000,000 because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of $1,000,000 in a manner which shall be in the discretion of the Borrower. A notice given by the Borrower pursuant to this paragraph (d) shall be irrevocable. (e) The Agent shall promptly notify the Lenders whether or not their Competitive Bids have been accepted (and if so, in what amount) by telex or telecopier sent by the Agent. Each successful bidder will thereupon become bound, subject to the other applicable conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted. (f) No Competitive Bid Request shall be issued by the Borrower within five Business Days of the date of any other Competitive Bid Request. (g) If the Agent in its capacity as a Lender shall elect to submit a Competitive Bid, it shall submit such bid to the Borrower one-quarter hour earlier than the latest time at which the other Lenders are required to submit their bids to the Agent pursuant to Section 2.05(b). (h) All notices required by this Section 2.05 shall be made in accordance with Section 11.04. Section 2.06. Competitive Loans. (a) Competitive Loans made by the Borrower on any date shall be in an integral multiple of $1,000,000 and in a minimum aggregate principal amount of $5,000,000. Competitive Loans shall be made to the extent Competitive Bids are accepted by the Borrower in accordance with Section 2.05(d). At no time shall the aggregate outstanding principal amount of all Competitive Loans exceed an amount equal to the Aggregate Commitments minus the aggregate then outstanding principal amount of all Syndicated Loans. The Aggregate Commitments shall be deemed used from time to time to the extent of the aggregate amount of the Competitive Loans then outstanding, pro rata in accordance with the Lenders' respective Commitments. 17 (b) Each Competitive Loan shall be a LIBOR Competitive Loan or a Fixed Rate Loan, as the Borrower may request subject to and in accordance with Section 2.05. Each Lender may at its option make any LIBOR Competitive Loan by causing a foreign branch or affiliate of such Lender to make such Loan but only if any exercise of such option shall not subject the Borrower to any additional or increased payment obligations pursuant to this Agreement. Any exercise of such option in accordance with the terms hereof shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of the applicable Competitive Note. Competitive Loans of more than one interest rate option may be outstanding at the same time. (c) Each Lender shall make its Competitive Loan on the proposed date thereof by paying the amount required to the Agent, in immediately available funds not later than 1:00 p.m., New York City time, and the Agent shall by 3:00 p.m., New York City time, credit the amounts so received to the general deposit account of the Borrower with the Agent or, if Competitive Loans are not made on such date because any condition precedent to a Borrowing herein specified shall not have been met, return the amounts so received to the respective Lenders as soon as practicable. Section 2.07. Competitive Notes. The Borrower shall execute and deliver to each Lender (or to the Agent on behalf of each Lender) a Competitive Note substantially in the form of Exhibit B attached hereto. The Competitive Note issued to each Lender shall (i) be payable to the order of such Lender and be dated the Closing Date, (ii) be in a stated principal amount equal to the Aggregate Commitments and be payable in the outstanding principal amount of Competitive Loans evidenced thereby from time to time, (iii) mature with respect to each Competitive Loan evidenced thereby on the last day of the Interest Period applicable thereto, (iv) bear interest as provided in Section 3.01 in respect of LIBOR Competitive Loans or Fixed Rate Loans, as the case may be, evidenced thereby, and (v) be entitled to the benefits of this Agreement and the other loan documents. Each Competitive Note shall bear interest from the date of the first Borrowing evidenced by such Note on the outstanding principal balance thereof as set forth in Section 3.01. Each Lender shall, and is hereby authorized by the Borrower to, endorse on the schedule attached to each Competitive Note of such Lender (or on a continuation of such schedule attached to each such Note and made a part thereof) an appropriate notation evidencing the date, amount and interest rate of each Competitive Loan of such Lender, each payment or prepayment of principal of any Competitive Loan and the other information provided for on such schedule; provided, however, that the failure of any Lender to make such a notation or any error therein shall not in any manner affect the obligation of the Borrower to repay the Competitive Loans made by such Lender in accordance with the terms of such Competitive Note. Section 2.08. Use of Proceeds. The proceeds of the Loans shall be used solely for general corporate purposes of the Borrower, including, but not limited to, acquisitions and commercial paper support. Section 2.09. Optional Reduction of Commitments. The Borrower shall have the right, from time to time, upon not less than three Business Days' prior notice to the Agent, to terminate the Commitments or reduce the amount of the Aggregate Commitments, provided that (a) any such reduction 18 shall be in an amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof and shall permanently reduce the Aggregate Commitments then in effect, (b) no such reduction may reduce the amount of the Aggregate Commitments to an amount less than the aggregate outstanding principal amount of Competitive Loans, (c) to the extent, if any, that the amount of the Loans then outstanding exceeds the amount of the Aggregate Commitments as then reduced, the Borrower shall, on the date of such reduction, prepay the Syndicated Loans in an amount not less than such excess, together with accrued interest on the amount so prepaid to the date of such prepayment and any amounts owing by the Borrower pursuant to Section 11.02(b) hereof as a result of such prepayment, and (d) the Borrower shall, on the date of such reduction, pay accrued facility fees pursuant to Section 3.06 hereof on the amount of such reduction to the date of such reduction. Upon any such reduction of the Aggregate Commitments, the Commitment of each Lender shall be reduced pro rata. Each notice of reduction of the Aggregate Commitments shall be irrevocable once given. Section 2.10. Optional Prepayment of Loans. (a) The Borrower may at any time and from time to time prepay Syndicated Loans, in whole or in part, without premium or penalty, upon at least one Business Day's notice to the Agent, in the case of prepayment of ABR Loans, and upon at least three Business Days' notice to the Agent, in the case of prepayment of LIBOR Syndicated Loans or CD Loans, specifying the date and amount of prepayment and the Loans and the type of Syndicated Loans being prepaid. Upon receipt of such notice the Agent shall promptly notify each Lender thereof. If such notice is given by the Borrower, the Borrower shall make such prepayment, and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid and any amounts owing by the Borrower pursuant to Section 11.02(b) hereof as a result of such prepayment. Partial payments pursuant to this Section shall be in an aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. (b) Competitive Loans may not be prepaid by the Borrower, except upon acceleration pursuant to Article VII hereof. ARTICLE III INTEREST RATE PROVISIONS, FEES AND PAYMENTS Section 3.01. Interest Rate and Payments. (a) Each LIBOR Loan shall bear interest on the unpaid principal amount at a rate per annum equal to the LIBOR Rate plus (i) if such Loan is a LIBOR Competitive Loan, the Margin specified by the Lender making such Loan in its Competitive Bid with respect to such Loan and (ii) if such Loan is a LIBOR Syndicated Loan, the Applicable LIBOR Margin. Each CD Loan shall bear interest on the unpaid principal amount at a rate per annum equal to the Adjusted CD Rate plus the Applicable CD Margin. The ABR Loans shall bear interest on the unpaid principal amount at a rate per annum equal to the Alternate Base Rate. Each Fixed Rate Loan shall bear interest at a rate per annum equal to the fixed rate of interest offered by the Lender making such Loan and accepted by the Borrower pursuant to Section 2.05. 19 (b) Interest on each LIBOR Loan, each CD Loan and each Fixed Rate Loan shall be due and payable in arrears at the end of the Interest Period applicable thereto and also, in the case of a LIBOR Loan with an Interest Period in excess of three months, upon the expiration of three months following the commencement of the Interest Period, in the case of a CD Loan with an Interest Period in excess of 90 days, upon the expiration of 90 days following the commencement of the Interest Period, and in the case of a Fixed Rate Loan with an Interest Period in excess of 90 days, at the end of each calendar quarter, unless, as of the end of such calendar quarter, no more than 90 days remain in the Interest Period. Interest on each ABR Loan shall be due and payable in arrears at the end of the Interest Period applicable thereto and on the last Business Day of each calendar quarter. Interest on principal prepaid on Loans shall also be due and payable in arrears upon such prepayment and accrued and unpaid interest on all Loans shall also be due and payable in arrears upon any acceleration of principal pursuant to Article VII and on the Termination Date. (c) The Agent shall notify the Lenders, in accordance with the Agent's customary procedures, of the LIBOR Rate applicable to each LIBOR Loan and the Adjusted CD Rate applicable to each CD Loan, and shall notify the Lenders from time to time, in accordance with the Agent's customary procedures, of the ABR Rate. Section 3.02. Late Principal Payment. Any principal payments on the Loans not paid when due, whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall, to the extent permitted by applicable law, thereafter bear interest (compounded monthly and payable upon demand) at a rate which is 2% per annum in excess of the rate of interest otherwise payable under this Agreement in respect of such principal amount until such unpaid amount has been paid in full (whether before or after judgment). Section 3.03. General Provisions as to Payments. The Borrower shall make each payment of interest on the Loans and each payment of fees pursuant to Section 3.06 and Section 3.07 hereof not later than 1:00 p.m. (New York City time) on the date when due, in funds immediately available in New York City, to the Agent, for the account of the Lenders, at its address referred to in Section 11.04 of this Agreement. Payments of principal, whether at the stated repayment date, on the Termination Date, by acceleration or by prepayment, shall be made in the same manner as prescribed for payments of interest. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. Section 3.04. Pro Rata Treatment and Payments. Each Borrowing of Syndicated Loans by the Borrower hereunder, each payment (including each prepayment) by the Borrower on account of principal or interest with respect to Syndicated Loans or on account of fees hereunder, and any reduction of the Aggregate Commitments hereunder shall be made pro rata among the Lenders, in accordance with their respective Commitments. Each payment (including each prepayment) by the Borrower on account of principal or interest with respect to Competitive Loans shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Competitive Loans extended by each Lender comprising a part of the Borrowing as to which such payment is made. All payments (including 20 prepayments) to be made by the Borrower on account of principal, interest and fees shall be made without set-off or counterclaim to the Agent, for the account of the Lenders, at the Agent's office located in New York, New York, in dollars and in immediately available funds. The Agent shall distribute such payments to each Lender promptly on the day of the Agent's receipt thereof by causing such Lender's portion of such payment to be deposited in such account as may be designated by such Lender. If the Agent does not distribute any Lender's portion of such payment by such time, such Lender shall promptly notify the Agent of such fact, and shall be entitled to recover such portion on demand from the Agent together with interest thereon, for each day from the date on which such Lender notified the Agent that such portion was not received by the Lender until the date such portion is paid to such Lender, at the customary rate set by the Agent for the correction of errors among banks. Section 3.05. Computation of Interest. Interest on LIBOR Loans, CD Loans and Fixed Rate Loans, and interest on ABR Loans based on the Base CD Rate or the Federal Funds Effective Rate, shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed, calculated as to each Loan from and including the first day thereof to the date of payment thereof. Interest on ABR Loans based on the Prime Rate shall be computed on the basis of a 365/366 day year and paid for the actual number of days elapsed, calculated as to each Loan from and including the first day thereof to the date of payment thereof. Section 3.06. Facility Fee. The Borrower agrees to pay to the Agent, for the account of each Lender, above and beyond and in addition to interest as provided elsewhere in this Agreement, a facility fee in an amount equal to the Facility Fee Percentage on such Lender's Commitment, from the date of this Agreement to but not including the Termination Date, payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing June 30, 1994, and computed on the basis of a 365/366 day year on the actual number of days elapsed. Section 3.07. Agent's Fees. The Borrower agrees to pay to the Agent the fees according to the terms of the letter agreement dated March 10, 1994. ARTICLE IV CONDITIONS TO LOANS Section 4.01. Conditions to Initial Loans. The obligation of each Lender to make Loans on the date of the initial Borrowing(s) is subject to the satisfaction of the following conditions: (a) prior to and immediately after such Loans have been made, no Default or Event of Default shall have occurred and be continuing; (b) the representations and warranties of the Borrower contained in this Agreement shall be true in all material respects on and as of such date such Loans are made; 21 (c) receipt by the Agent, on behalf of each Lender, of a duly executed Syndicated Note, in the principal amount of such Lender's Commitment, each dated the Closing Date; (d) receipt by the Agent, on behalf of each Lender, of a duly executed Competitive Note, in a principal amount equal to the Aggregate Commitments, each dated the Closing Date; (e) receipt by the Agent, with sufficient copies for each Lender, of a written opinion letter of John J. Moran, Assistant Secretary and Senior Counsel of the Borrower, substantially in the form of Exhibit E hereto, dated the Closing Date and covering such additional matters relating to the transactions contemplated hereby as the Required Lenders may reasonably request; (f) receipt by the Agent, with sufficient copies for each Lender, of a certificate signed by the chief accounting officer or Treasurer of the Borrower and dated the Closing Date, to the effect set forth in clauses (a) and (b) of this Article IV; and (g) receipt by the Agent, with sufficient copies for each Lender, of all documents as the Required Lenders may reasonably request relating to the existence of the Borrower, the authority for and the validity and enforceability of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Required Lenders. Section 4.02. Conditions to All Loans. The obligation of each Lender to make Loans hereunder shall be subject to the following conditions precedent. On the date of each Borrowing hereunder: (a) The Agent shall have received a notice of such Borrowing as required by Section 2.05(d) or Section 2.03, as applicable; (b) in the case of a Borrowing of Competitive Loans, or a Borrowing of Syndicated Loans which would increase the aggregate principal amount of Syndicated Loans owing to the Lenders over the aggregate principal amount of Syndicated Loans outstanding immediately prior to the making of such Syndicated Loans, the representations and warranties of Borrower contained herein shall be true and correct in all material respects with the same effect as though made on and as of such date; and in the case of a Borrowing of Syndicated Loans which would not increase the aggregate principal amount of Syndicated Loans owing to the Lenders over the aggregate principal amount of Syndicated Loans outstanding immediately prior to the making of such Syndicated Loans, the representations and warranties of Borrower contained herein, other than those set forth in Section 5.04(b) and Section 5.05, shall be true and correct in all material respects with the same effect as though made on and as of such date; and (c) in the case of a Borrowing of Competitive Loans, or a Borrowing of Syndicated Loans which would increase the aggregate principal amount of Syndicated Loans owing to the Lenders over the aggregate principal amount of Syndicated Loans outstanding immediately prior to the making of such Syndicated Loans, the Borrower shall be in 22 compliance with all the terms and provisions contained herein on its part to be observed or performed, and both at the time of and immediately after such Borrowing no Default or Event of Default shall have occurred and be continuing; and in the case of a Borrowing of Syndicated Loans which would not increase the aggregate principal amount of Syndicated Loans owing to the Lenders over the aggregate principal amount of Syndicated Loans outstanding immediately prior to the making of such Syndicated Loans, the Borrower shall be in compliance with all the terms and provisions contained herein on its part to be observed or performed, and both at the time of and immediately after such Borrowing no Event of Default shall have occurred and be continuing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the applicable matters specified in paragraphs (b) and (c) of this Section 4.02. The Agent and Lenders agree that for purposes of determining satisfaction of the conditions precedent specified in paragraphs (b) and (c) above with respect to Section 5.04(b) hereof, the Agent shall make such reasonable determination in good faith. ARTICLE V REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: Section 5.01. Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, is duly licensed and duly qualified as a foreign corporation in good standing in all the jurisdictions in which the character of the property owned or leased or the nature of the business conducted by it requires such licensing or qualification and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. Section 5.02. Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its property or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. Section 5.03. Binding Effect. This Agreement constitutes, and each of the Notes, when executed and delivered in accordance with this Agreement, will constitute, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and except as enforceability thereof may be limited by equitable principles. 23 Section 5.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 1993 and the related consolidated statement of income and statement of changes in financial position for the fiscal year then ended, reported on by Price Waterhouse and set forth in the Borrower's 1993 Annual Report, which is incorporated by reference in the Borrower's 1993 Form 10-K, copies of which have been delivered to the Lenders, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and changes in financial position for such period. (b) Since December 31, 1993 there has been no material adverse change in the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. Section 5.05. Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision where the damages would exceed an amount in excess of fifteen percent (15%) of the consolidated current assets of the Borrower and its Consolidated Subsidiaries or which in any manner draws into question the validity or enforceability of this Agreement or the Notes. Section 5.06. Compliance with ERISA. Each member of the Controlled Group has substantially fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code, and has not incurred any liability to the PBGC or a Plan under Title IV of ERISA which could reasonably be expected to materially adversely affect the business, consolidated financial position or consolidated results of operations of the Borrower and its Consolidated Subsidiaries. Section 5.07. Taxes. The United States Federal income tax returns of the Borrower and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1991. The Borrower and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Subsidiary, except for taxes and assessments being contested in good faith by Borrower or any Subsidiary. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. Section 5.08. Subsidiaries. Each of the Borrower's corporate Material Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, is duly licensed and duly qualified as a foreign corporation in good standing in all of the jurisdictions in which the character of the property owned or leased or the nature of the business conducted by it requires such licensing or qualification except in such jurisdictions where failure to be 24 so licensed or qualified could not materially adversely affect the business, consolidated financial position or consolidated results of operations of the Borrower and its Consolidated Subsidiaries, taken as a whole, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. As of the date hereof, the Borrower has no Material Subsidiaries other than as set forth in Exhibit F attached hereto and made a part hereof. Section 5.09. Not an Investment Company. The Borrower is not (a) an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. Section 5.10. Contractual Obligations. To the best knowledge of the Borrower, neither the Borrower nor any of its Subsidiaries is subject to or bound by any contractual obligations which could have a material adverse effect on the financial condition or operations of the Borrower and its Subsidiaries, taken as a whole. Section 5.11. No Default. To the best knowledge of the Borrower, no event has occurred and is continuing which constitutes (a) a Default or an Event of Default under this Agreement, or (b) a default under any other instrument for borrowed money in an aggregate principal amount in excess of $10,000,000 binding upon the Borrower or any of its Subsidiaries or under any material contract, agreement, instrument, judgment, decree, order, statute, rule or regulation binding upon or affecting the Borrower or any of its Subsidiaries or the assets of the Borrower or any of its Subsidiaries. Section 5.12. Compliance with Laws. To the best knowledge of the Borrower, except to the extent that failure to comply could not reasonably be expected to materially interfere with the conduct of the business of the Borrower and its Subsidiaries, taken as a whole, the Borrower and each of its Subsidiaries has complied with all applicable laws with respect to: (i) any restrictions, specifications or other requirements pertaining to its business and operations; (ii) the conduct of its business; and (iii) the use, maintenance, and operation of the real and personal properties owned or leased by it in the conduct of its business. To the best knowledge of the Borrower, the Borrower and each of its Subsidiaries is in compliance with all federal, state, local and foreign environmental laws and regulations, including without limitation the Federal Resource Conservation and Recovery Act, as amended, and the Comprehensive Environmental Response, Compensation and Liability Act, as amended ("CERCLA"), their implementing regulations and all applicable state and foreign hazardous waste laws and regulations, and has no liability, whether fixed, unliquidated, absolute, contingent or otherwise, under any such laws or regulations, including without limitation any liabilities for any fines or penalties, or for investigation, removal or remedial expense to effect compliance with or discharge any duty, obligation or claim under any such laws or regulations, except where the failure to so comply or the liability would not exceed an amount in excess of fifteen percent (15%) of the consolidated current assets of the Borrower and its Consolidated Subsidiaries; provided, however, in determining the amount of the 25 Borrower's liability under CERCLA, the Borrower's liability shall be reduced by the amount which the Borrower reasonably determines will be paid by other responsible parties who are jointly and severally liable with the Borrower for such liability (such determination to take into consideration the inability of such other responsible parties to pay the amount of such reduction to the Borrower's liability as a result of such other responsible parties' bankruptcy or insolvency). Section 5.13. Title to Assets. To the best knowledge of the Borrower, the Borrower and each of its Subsidiaries has good and marketable title to all of its assets owned by it which are material to the operation of its business, subject to no Lien or the claim of any third person except for Liens permitted pursuant to Section 6.03 herein and excepting all machinery, equipment and all other leasehold improvements by the Borrower on the premises at the Borrower's Gwinner, North Dakota plant which are located on real property leased from the Burlington Northern Railroad on a lease terminable on thirty days prior notice by either party. Section 5.14. Disclosure. No representation or warranty of the Borrower contained in this Agreement or any other document, certificate or written statement furnished to the Lenders pursuant hereto or in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading. There is no fact known to the Borrower which materially adversely affects the business, operations, property, assets or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole, which has not been disclosed herein or in such other documents, certificates and statements furnished to the Lenders. ARTICLE VI COVENANTS The Borrower agrees that, so long as any amount payable under any Note remains unpaid, any Commitment exists hereunder, or any other amount arising pursuant hereto remains unpaid: Section 6.01. Minimum Consolidated Net Worth. The Borrower will not permit its Consolidated Net Worth to at any time fall below an amount equal to the sum of (a) $352,500,000, plus (b) twenty-five percent (25%) of the consolidated net income of the Borrower and its Consolidated Subsidiaries accrued subsequent to December 31, 1993, such Consolidated Net Worth to be computed as of the end of each fiscal quarter of the Borrower. In no event shall the amount of the Consolidated Net Worth required to be maintained by the Borrower hereunder be reduced by the amount of any losses incurred by the Borrower and its Consolidated Subsidiaries after December 31, 1993. Section 6.02. Limitation on Consolidated Debt. The Borrower will not, and will not permit any of its Consolidated Subsidiaries to, incur any Debt if, after giving effect thereto, the ratio of the consolidated Debt of the Borrower and its Consolidated Subsidiaries to the sum of (i) the consolidated Debt of the Borrower and its Consolidated Subsidiaries, plus (ii) the Consolidated Net Worth of the Borrower and its Consolidated Subsidiaries, would exceed fifty-five percent (55%). 26 Section 6.03. Limitation on Liens. The Borrower shall not at any time create or assume, and will not cause, suffer or permit a Subsidiary to create or assume, any Debt secured by any Lien on the property of the Borrower or any of its Subsidiaries; provided, however, that the foregoing covenants shall not be applicable to the following: (a) Liens in existence as of the Closing Date, as described in Exhibit G attached hereto and made a part hereof; (b) (i) any Lien on any property hereafter acquired or constructed by the Borrower or a Subsidiary and created contemporaneously with, or within 180 days after, such acquisition or completion of construction and commencement of full operation of such property, whichever is later, to secure or provide for the payment of all or any part of the purchase price or construction cost of such property; or (ii) the acquisition of property subject to any Lien upon such property existing at the time of acquisition thereof, whether or not assumed by the Borrower or such Subsidiary; or (iii) any Lien existing on the property or on the outstanding shares or indebtedness of a corporation at the time such corporation shall become a Subsidiary; or (iv) Liens on the property of a corporation existing at the time such corporation is merged into or consolidated with the Borrower or a Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation or firm as an entirety or substantially as an entirety to the Borrower or a Subsidiary; provided, however, that any such Lien does not apply to property owned by the Borrower or such Subsidiary prior to such event or to property thereafter acquired other than (x) additions to the property acquired pursuant to such event or (y) other property which, together with the property acquired pursuant to such event, is part of a single construction or development program; (c) Liens incurred to purchase equipment or make capital expenditures in the ordinary course of business of the Borrower or a Subsidiary; (d) other Liens on property of the Borrower, provided that, at the time of or prior to imposition of each Lien, the Borrower makes effective provision whereby all obligations of the Borrower to the Lenders pursuant to this Agreement and the Notes will be secured by such Lien equally and ratably with any and all other Debt secured by the same property or assets; (e) any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any Lien permitted by this Section; provided, however, that the principal amount of Debt secured thereby shall not exceed the principal amount outstanding immediately prior to the time of such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to the property (or property which, in the ordinary course of business of the Borrower or such Subsidiary, replaces the original property) which secured the Lien so extended, renewed or replaced and additions to such property; 27 (f) Liens of the United States or a State to secure partial, progress or other advance payments pursuant to a contract or statute; provided, however, that the book value of all assets secured by all such Liens does not at any time exceed $10,000,000; and (g) other Liens that do not, in the aggregate outstanding at any time, exceed 15% of the Borrower's Consolidated Net Worth. Section 6.04. Restrictions on Sales, Mergers and Consolidations. The Borrower will not, and will cause each of its Material Subsidiaries not to, (a) in one transaction or in a series of transactions, consolidate or merge with any other Person, or sell or otherwise dispose of all or substantially all of its properties or business or any of its divisions or businesses that, if incorporated separately, would constitute a Material Subsidiary; (b) liquidate, wind up or dissolve (or suffer any liquidation or dissolution); or (c) convey, sell or otherwise dispose of the capital stock of any Material Subsidiary, except that: (i) the Borrower may transfer assets to any of its Subsidiaries unless, after giving effect to such transfer, the aggregate book value all of the Borrower's assets transfered during the term of this Agreement to any of its Subsidiaries would exceed 15% of the Borrower's assets; (ii) Material Subsidiaries of the Borrower may merge with and into, or sell or transfer assets to, other Subsidiaries of the Borrower, and Material Subsidiaries of the Borrower may merge with and into the Borrower; and (iii) the Borrower may merge with any other Person, or any Material Subsidiary of the Borrower may consolidate or merge with any other Person; provided that, in the case of any merger of the Borrower, the Borrower is the surviving corporation in such merger, and, in the case of any merger or consolidation of a Material Subsidiary of the Borrower, the surviving corporation in such merger or consolidation is or becomes as a result thereof a Material Subsidiary of the Borrower, and immediately following any such consolidation or merger, and after giving effect thereto, the Borrower could incur an additional $1 of Debt and remain in compliance with the provisions of the other Sections of this Article VI; provided further that the foregoing restrictions contained in this Section 6.04 shall not apply to the initial public offering of shares of common stock of Clark Automotive Products Corporation, a Michigan corporation. Section 6.05. Information. The Borrower will deliver to the Agent, with sufficient copies for each Lender: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a copy of the Annual Report on Form 10-K, other than the exhibits thereto (unless such exhibits are specifically requested by the Agent), required to be filed by the Borrower with the Securities and Exchange Commission pursuant to, and meeting the requirements of, the Securities Exchange Act of 1934, as amended, for the previous fiscal year, with the financial statements of the Borrower and its Consolidated Subsidiaries contained therein reported on in a manner acceptable to the Securities and Exchange Commission by Price Waterhouse or other independent public accountants of nationally recognized standing and with the financial statements of the Joint Venture Company contained therein reported on by independent public accountants of recognized standing in accordance with generally accepted accounting principles applicable in the jurisdiction in which the Joint Venture Company is organized or 28 in the jurisdiction in which the books and records of the Joint Venture Company are maintained; (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a copy of the Quarterly Report on Form 10-Q, other than the exhibits thereto (unless such exhibits are specifically requested by the Agent), required to be filed by the Borrower with the Securities and Exchange Commission pursuant to, and meeting the requirements of, the Securities Exchange Act of 1934, as amended, for such quarter, with the financial statements contained therein certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principals and consistency by the chief accounting officer of the Borrower; (c) forthwith upon the occurrence of any Default or Event of Default, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) promptly upon the mailing thereof to the stockholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (e) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or other reports which the Borrower shall have filed with the Securities and Exchange Commission; (f) if and when any member of the Controlled Group (1) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan (other than a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA) has given or is required to give notice of any such reportable event, or (2) receives from the plan administrator of any Plan which is a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, notice of any such reportable event which the plan administrator has given or is required to give of such reportable event to the PBGC, a copy of the notice of such reportable event given or required to be given to the PBGC; (g) if at any time the value of all "margin stock" (as defined in Regulation U of the Board of Governors of the Federal Reserve System) owned by the Borrower or any Consolidated Subsidiary exceeds 25% of the value of the assets of the Borrower or such Consolidated Subsidiary, as reasonably determined by the Borrower, prompt notice of such fact and, promptly upon the request of any Lender, a duly completed statement of purpose on Form U-1 for each Lender together with such other information or documents as any Lender may be required to obtain under said Regulation U in connection with this Agreement; 29 (h) within five days following the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth in reasonable detail the calculations required to establish whether the Borrower and its Consolidated Subsidiaries were in compliance with the requirements of Section 6.01 and Section 6.02 on the date of such financial statements; and (i) from time to time such additional information regarding the financial position or business of the Borrower, any Subsidiary or the Joint Venture Company as any Lender may reasonably request. Section 6.06. Payment of Taxes and Claims. The Borrower will pay, and will cause each of its Subsidiaries to pay, all material taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its franchises, business, income or property before any penalty or interest accrues thereon, and all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or may become a Lien, upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto, provided no such tax, assessment, charge or claim need be paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, and if the Borrower or such Subsidiary shall provide a reserve or other appropriate provision, if any, as shall be required in conformity with generally accepted accounting principles. Section 6.07. Maintenance of Corporate Existence; Properties; Insurance. Except as permitted by Section 6.04 herein, the Borrower will, and will cause each of the Material Subsidiaries to, keep in full force and effect its legal existence. The Borrower will maintain, and will cause each of its Subsidiaries to maintain, in good repair, working order and condition all material properties used or useful in its business and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof. The Borrower will maintain, and will cause each of its Subsidiaries to maintain, insurance (including self-insurance) of such types, in such amounts and covering such risks as is consistent with prudent business practice, and the Borrower shall have and maintain, and shall cause each of its Subsidiaries to have and maintain, at all times fidelity bonds and all workers' compensation or similar insurance as may be required by law. All expenses of insurance shall be prepaid by the Borrower or its Subsidiaries, as the case may be, or paid under installment plans provided by the broker or carriers. The Borrower will promptly notify the Agent if any policy of insurance is cancelled and is not immediately replaced with similar coverage, or if self-insurance is substituted for any policy of insurance other than that which may be placed with Celfor Bermuda. Section 6.08. Inspection; Books and Records. The Borrower will permit, and will cause each of its Subsidiaries to permit, any authorized representatives designated by any Lender to visit and inspect any of the properties of the Borrower or any of its Subsidiaries, including its financial books and records, and to discuss its affairs, finances and 30 accounts with its officers and independent public accountants, all upon reasonable notice and at such times during normal business hours and as often as may be reasonably requested. Each Lender hereby agrees that it will keep confidential any financial reports and other information previously or from time to time supplied to it by the Borrower hereunder, to the extent that such information is not and does not become publicly available, and will use such financial reports and other information only in connection with the transactions contemplated by this Agreement and for no other purpose, provided that nothing herein shall affect the disclosure of any such information (i) by any Lender to any other Lender, (ii) to the extent required by law (including statute, rule, regulation or judicial process), (iii) to counsel for any Lender or to their respective accountants, each of whom shall also be bound by the confidentiality obligations set forth herein, (iv) to bank examiners and auditors and appropriate government examining authorities, (v) to the extent necessary or appropriate in connection with any litigation to which any Lender is a party, or (vi) subject to the provisions of Sections 8.01, 8.04 and 8.05 hereof, by any Lender to any actual or prospective participant or assignee of any part of such Lender's Commitment or any Loan owing to or Note held by such Lender, a determination by a Lender as to the application of the circumstances described in the foregoing clauses (i)-(v) being conclusive if made in good faith. Each Lender hereby agrees that it shall give the Borrower notice prior to disclosure of any such information pursuant to clause (ii) and clause (v) hereof, to the extent permitted under applicable law. The Borrower will, and will cause each of its Subsidiaries to, at all times maintain adequate financial books and records in accordance with generally accepted accounting principles, as in effect from time to time, consistently applied. Section 6.09. Compliance with Laws. The Borrower will comply, and will cause each of its Subsidiaries to comply, with the requirements of all applicable laws, rules, regulations and orders of any governmental authority, including without limitation all federal, state, local and foreign environmental laws and regulations, noncompliance with which could materially adversely affect the business, properties, assets, operations or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole, except for those which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and for which such reserve or other appropriate provision, if any, as shall be required in conformity with generally accepted accounting principles shall have been made. Section 6.10. Margin Stock. Except to the extent the Loans are exempted pursuant to Section 221.6 of Regulation U, none of the proceeds of the Loans will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any "margin stock" within the meaning of Regulation U. ARTICLE VII DEFAULTS Section 7.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: 31 (a) the Borrower shall fail to pay principal on any Note within 5 days of when due or interest on any Note or any other amount payable hereunder within 10 days of when due; (b) the Borrower shall fail to observe or perform any covenant contained in Section 6.01, Section 6.03, or Section 6.04; (c) the Borrower shall fail to observe or perform its covenant contained in Section 6.02 hereof for 10 days after the later of the commencement of such failure or notice to the Borrower thereof; (d) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clauses (a), (b) or (c) above) for 30 days after the later of the commencement of such failure or notice to the Borrower thereof; (e) any representation, warranty, certification or statement made or deemed to be made pursuant to Section 4.02 hereof by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect when made in any material respect; (f) the Borrower or any Material Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it for such purpose, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (g) an involuntary case or other proceeding shall be commenced against the Borrower or any Material Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property for such purpose, and such involuntary case or other proceeding shall have been neither dismissed nor stayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Material Subsidiary under the Federal bankruptcy laws as now or hereafter in effect; (h) any event or condition shall occur which could result in the acceleration of the maturity of any Debt of the Borrower or any Material Subsidiary (other than the Notes) in an aggregate outstanding principal amount in excess of $10,000,000; 32 (i)(1) A "reportable event" (as defined in Section 4043 of ERISA, other than a "reportable event" with respect to which the PBGC has waived the 30-day notice requirement) shall have occurred with respect to any Plan and, on the basis of such reportable event, there are reasonable grounds under Section 4042(a)(1), (2) or (3) of ERISA for the termination of such Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Plan; (2) a trustee shall be appointed by a United States district court to administer any Plan; or (3) the PBGC shall institute proceedings to terminate any Plan; and the occurrence of any of the events described in clauses (1), (2) or (3) could reasonably be expected to result in a liability to the Borrower or any member of the Controlled Group which could reasonably be expected to materially adversely affect the business, consolidated financial position or consolidated results of operations of the Borrower and its Consolidated Subsidiaries; (j) a Change in Control Default, as defined in Section 7.02 below, shall have occurred; or (k) judgments or orders for the payment of money in an aggregate amount in excess of $10,000,000 shall be rendered against the Borrower and continue unsatisfied for a period of 30 days, excluding judgments or decrees which have been vacated, discharged, stayed or bonded pending appeal within 30 days from the date of entry thereof and judgments to the extent covered by insurance; then, and in every such event, the Agent may, and at the direction of the Required Lenders will, by notice to the Borrower, terminate the Commitments and the Commitments shall thereupon automatically terminate, and the Agent may, and at the direction of the Required Lenders will, by notice to the Borrower, declare the Notes (together with accrued interest thereon and all other amounts owing pursuant hereto) to be, and the Notes and all such other amounts shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided, that in the case of any of the Events of Default specified in clauses (f) or (g) above with respect to the Borrower or a Material Subsidiary, without any notice to the Borrower or any other act by the Agent or any Lender, the Commitments shall automatically terminate and the Notes (together with accrued interest thereon and all other amounts owing pursuant hereto) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. If at any time after acceleration of the maturity of the Notes and all other amounts owing pursuant hereto as provided above, the Borrower shall pay all arrears of interest and all payments on account of principal of the Loans which shall have become due otherwise than by acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement) and all Events of Default and Defaults (other than nonpayment of principal of and accrued interest on the Notes, and other obligations due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 11.08, then by written notice to the Borrower, the Required Lenders may elect, in the sole discretion of such Required Lenders, to rescind and 33 annul the acceleration and its consequences; but such action shall not affect any subsequent Default or Event of Default or impair any right or remedy consequent thereon. The provisions of the preceding sentence are intended merely to bind the Lenders to a decision which may be made at the election of the Required Lenders; they are not intended to benefit the Borrower and do not give the Borrower the right to require the Lenders to rescind or annul any acceleration hereunder, even if the conditions set forth herein are met. Section 7.02. Change in Control Default. (a) For purposes of Section 7.01(j) hereof, a "Change in Control Default" shall occur on any date following a Change of Control of the Borrower on which any of the following shall occur: (i) Moody's rates public senior unsecured long-term debt of the Borrower at Ba2 or lower or S&P rates public senior unsecured long-term debt of the Borrower at BB or lower; (ii) in response to a request by the Borrower in accordance with the provisions of subsection (b) of this Section 7.02, Moody's has issued a private letter rating of the Notes at Ba2 or lower or S&P has issued a private letter rating of the Notes at BB or lower; or (iii) 60 days after the date on which Required Lenders requested that the Borrower obtain a private letter rating of the Notes in accordance with the provisions of subsection (b) of this Section 7.02, any such private letter rating shall not have been issued by the rating agency or agencies from whom such private letter rating was sought, unless public senior unsecured long-term debt of the Borrower shall then be rated better than Ba2 by Moody's or BB by S&P. (b) If at any time on or after a Change of Control of the Borrower, the Borrower does not have public senior unsecured long-term debt outstanding that is publicly rated by either Moody's or S&P, the Borrower will notify the Agent. Upon the request of Required Lenders, the Borrower will promptly, and in any event within one Business Day after receiving such request, seek and thereafter diligently attempt to obtain from either of Moody's or S&P a private letter rating of the Notes, and, promptly, and in any event within one Business Day, after receiving such private letter rating, deliver a copy thereof to the Agent. If the Borrower does not obtain a private letter rating of the Notes from either Moody's or S&P within 60 days after the Required Lenders shall have requested the Borrower to obtain a private letter rating of the Notes in accordance with this subsection (b), the Borrower will promptly, and in any event within one Business Day, after the end of such 60-day period notify the Agent of such failure. If the Borrower shall obtain a private letter rating of the Notes in accordance with this subsection (b), the Required Lenders may at any time thereafter (but not more often than once in each period of three consecutive months) request the Borrower to obtain a new private letter rating of the Notes in accordance with this subsection (b). (c) For purposes of this Section 7.02, "Change of Control" of the Borrower means either: (i) that any Person or group, as such term is defined pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, other than the employee stock ownership plan and trust established pursuant to the Clark Equipment Company Employee Stock Ownership Plan and the Clark Equipment Company Leveraged Employee Stock Ownership Trust, each adopted effective July 1, 1985, as amended from time to time, acquires ownership, direct, indirect or beneficial, of more than fifty percent (50%) of the outstanding voting capital stock of the Borrower; or (ii) at any 34 time after the date of this Agreement, less than fifty percent (50%) of the members of the Board of Directors of the Borrower are persons who either are members of the Board of Directors of the Borrower as of the date hereof or who were recommended for election to succeed such members of the Board of Directors of the Borrower by a majority of such members of the Board of Directors of the Borrower. ARTICLE VIII ASSIGNMENTS AND PARTICIPATIONS Section 8.01. Assignment. (a) Each Lender may assign to one or more institutions all or a portion of its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of such Lender's Commitment or the Loans and the Notes held by it); provided, however, that (i) any such assignment, other than an assignment to another Lender which does not result in any one Lender's Commitment exceeding thirty percent (30%) of the Aggregate Commitments hereunder, may be made only with prior written consent of the Borrower, which shall not be unreasonably withheld, (ii) any such assignment shall be pursuant to an assignment and acceptance in the form attached hereto as Exhibit H and made a part hereof (an "Assignment and Acceptance"); (iii) each such assignment shall be of a constant, and not a varying, percentage of the assigning Lender's rights and obligations under this Agreement and shall be in a minimum amount of $2,500,000, or, if less, the aggregate amount of the assigning Lender's rights and obligations, (iv) the parties to each such assignment shall execute and deliver to the Agent, for recording in the Register, as defined in Section 8.02 hereof, an Assignment and Acceptance, together with the Note(s) subject to such assignment and a processing and recordation fee of $2,000, (v) each such assignee, if it is not already a Lender, must execute and deliver to the Borrower, prior to the effective date of the assignment or receipt of any non-public information supplied by the Borrower or the Lenders to the assignee, a confidentiality agreement in the form of Exhibit I attached hereto and made a part hereof, (vi) each such assignee, if it is not already a Lender, must complete and deliver to the Agent an Administrative Questionnaire, and (vii) the parties to each such assignment shall comply with all of the provisions of Section 8.06 hereof. Upon acceptance and recording pursuant to Section 8.03, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof (except as otherwise agreed by the assignor, the assignee and the Agent), (x) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the assigning Lender thereunder shall, to the extent of the interest assigned by such Lender, be released from its obligations under this Agreement other than its obligation to keep certain information confidential as provided in Section 6.08 (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto, but shall continue to be entitled to the benefits of Section 9.04, Section 11.02, Section 11.06 and Section 11.15, to the extent that any event or occurrence giving rise to the need for such benefits arose or accrued prior to the effective date of such Assignment and Acceptance, as well as to any interest and fees accrued for its account but not yet paid). 35 Notwithstanding the foregoing, any Lender assigning rights and obligations under this Agreement may retain any Competitive Loans made by it outstanding at such time and in such case shall retain its rights hereunder in respect of any Competitive Loans so retained until such Competitive Loans have been repaid in full in accordance with this Agreement. (b) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that its Commitment and the outstanding balances of its Loans, in each case without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance, (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representa- tions made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other loan document or any other instrument or document furnished pursuant hereto, or the financial condition of the Borrower or any Subsidiary thereof or the performance or observance by the Borrower or any Subsidiary thereof of any of its obligations under this Agreement, any other loan document or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant to Section 6.05 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the Agent to take such action as Agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (c) Any Assignment and Acceptance by any Lender shall be made in compliance with the terms of this Article VIII. Notwithstanding this requirement, any Lender may, at any time, without the consent of the Borrower, pledge all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank; provided, however, that no such assignment shall release the transferor Lender from its obligations hereunder. Section 8.02. Register. The Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the name and address of, and the Commitment of and the principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register as to the name and address of 36 each Lender shall be conclusive in the absence of manifest error and the Borrower, the Lenders and the Agent may treat each person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement; provided, however, that failure to make any such entry or recordation shall not affect any of the obligations of the Borrower under this Agreement or the Notes. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. Section 8.03. Recordation; Replacement Notes. Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed for the assignee (unless the assignee shall already be a Lender hereunder), the processing and recording fee referred to in Section 8.01(a) above, the Note or Notes subject to such Assignment and, if required, the prior written consent of the Borrower to such assignment, the Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Lenders and the Borrower. Within five Business Days after receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Agent a new Note or Notes to the order of such assignee in an amount equal to the aggregate amount of the Commitment or the aggregate principal amount of the Loans assumed by it pursuant to such Assignment and Acceptance, as the case may be, and, if the assigning Lender has retained any portion of such Lender's Commitment or any Loans hereunder, a new Note or Notes to the order of the assigning Lender in an amount equal to the aggregate amount of the Commitment or the aggregate principal amount of the Loans, as the case may be, retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in the form of Exhibit B or Exhibit C hereto, as the case may be. The Agent shall promptly return cancelled Notes to the Borrower upon its receipt of new Notes. Section 8.04. Participations. Any Lender may at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, the Note or Notes held by such Lender or any other interest of such Lender hereunder, provided, however, that (i) each such sale of a participating interest shall be in an amount equal to or greater than $100,000, (ii) each Lender must retain all rights of approval hereunder, without the consent of any participant, except rights of approval with respect to amendments, modifications or waivers relating to the interest rates borne by the Loans, the amount of fees payable hereunder as applicable to such participant, the amount of the Commitments, the maturity dates of the Loans, and the dates when interest and fees are required to be paid hereunder, and (iii) each such participant must execute and deliver to the Borrower, prior to the earlier of effectiveness of such sale of a participating interest or receipt of any non-public information supplied by the Borrower or the Lenders to the participant, a confidentiality agreement in the form of Exhibit I attached hereto and made a part hereof. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of such Note or Notes for all purposes under this Agreement, and 37 the Borrower shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. The Borrower agrees that each participant will be entitled to the benefits of Section 9.01, Section 9.04, Section 11.02 and Section 11.15 hereof with respect to its participation in the Loans or the Notes or under this Agreement. Section 8.05. Disclosure of Information. Any Lender may, in connection with any assignment or proposed assignment, or any sale or proposed sale of a participating interest, pursuant to this Article VIII, disclose to the assignee or prospective assignee or to the participant or prospective participant any information, including without limitation any non-public information, relating to the Borrower furnished to the Lender by or on behalf of the Borrower; provided, however, that prior to any disclosure of any non-public information relating to the Borrower the recipient thereof shall execute and deliver to the Borrower a confidentiality agreement in the form of Exhibit I attached hereto and made a part hereof or in such other form as may be approved by the Borrower and the Agent, which approval shall not be unreasonably withheld. Section 8.06. Tax Withholding. Each Lender agrees that if, pursuant to this Article VIII, any interest of such Lender in this Agreement or in its Note or Notes is assigned to any assignee which is organized under the laws of any jurisdiction other than the United States or any State thereof (including the District of Columbia), such Lender shall cause such assignee, concurrently with the effectiveness of such assignment, (a) to represent to the Borrower that under applicable law and treaties no taxes will be required to be withheld by the Borrower with respect to any payments to be made to such assignee in respect of the Note or Notes, (b) to furnish to the Borrower either United States Internal Revenue Service Form 4224 or United States Internal Revenue Service Form 1001 (wherein such assignee claims entitlement to complete exemption from United States federal withholding tax on all interest payments under the Note or Notes) and (c) to agree to provide (to the extent permissible under current law) to the Borrower a new Form 4224 or Form 1001 upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable United States laws and regulations and amendments duly executed and completed by such assignee, and to comply from time to time with all applicable United States laws and regulations with regard to such withholding tax exemption. In the event any Lender fails to fulfill any of its obligations under this Section, Borrower may replace such Lender pursuant to the terms and conditions set forth in Section 9.05. ARTICLE IX CHANGE IN CIRCUMSTANCES AFFECTING LOANS Section 9.01. Capital Adequacy. (a) If any Lender shall have determined that the applicability of any law, rule, regulation or guideline adopted pursuant to or arising out of the July 1988 report of the Basle Committee on Banking Regulations and Supervisory Practices entitled "International Convergence of Capital Measurement and Capital Standards," or the adoption after the date hereof 38 of any other law, rule, regulation or guideline regarding capital adequacy, or any change in any of the foregoing, or in the interpretation or administration of any of the foregoing by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any lending office of such Lender) or any Lender's holding company with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of its obligations hereunder, and under similar agreements with its other customers, to a level below that which such Lender or such Lender's holding company could have achieved but for such adoption, change or compliance (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, such Lender shall notify the Borrower as soon as practicable of any such determination and thereupon the Borrower shall pay to such Lender, on demand, such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. In determining such additional amounts, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable. (b) In the event that any amounts are owing by the Borrower to any Lender pursuant to subsection (a) above, such Lender shall deliver to the Borrower a statement explaining the basis upon which such amounts have been determined to be owing, which statement shall be conclusive and binding absent manifest error. (c) Failure on the part of any Lender to demand compensation for any reduction in return on capital with respect to any Interest Period shall not constitute a waiver of such Lender's rights to demand compensation for any reduction in return on capital in such Interest Period or in any other Interest Period. The protection of this Section shall be available to each Lender regardless of any possible contention of invalidity or inapplicability of the law, regulation or condition which shall have been imposed. Section 9.02. Illegality of LIBOR Loans. (a) Notwithstanding any other provisions herein, if any Lender reasonably determines (which determination shall be conclusive and binding in the absence of manifest error) that it has become unlawful, as a result of any law, treaty, rule, regulation, or determination of a court or other governmental authority, or any change therein, or in the interpretation or application thereof, applicable to it, or for any other reason, for such Lender to make or maintain LIBOR Loans, (an "Illegality"), the obligation of such Lender to make or maintain such Loans shall, upon the happening of such event, forthwith be suspended for the period of the Illegality. In such event, such Lender shall give notice of such determination to the Borrower and to the Agent, the Borrower shall promptly on demand by such Lender repay such Lender's LIBOR Loans outstanding and reborrow any such LIBOR Syndicated Loans as either ABR Loans or CD Loans, at the Borrower's election, and all Syndicated Loans thereafter made by such Lender during the period of the Illegality shall be ABR Loans or CD Loans. If any Illegality results in 39 payment of a LIBOR Loan other than on the last day of the Interest Period applicable thereto, the Borrower shall pay to such Lender, on demand, one-half of any amounts owing pursuant to Section 11.02(b) hereof. (b) For purposes of subsection (a), a notice to the Borrower by any Lender or Participant shall be effective, if lawful, on the last day of the then-current Interest Period; in all other cases, such notice shall be effective on the date of receipt by the Borrower. (c) If an Illegality occurs with respect to a Lender, prior to giving notice pursuant to (a) above, the affected Lender shall make all reasonable efforts (which shall not require the Lender to incur a loss or otherwise suffer any disadvantage) to make within 30 days an assignment of its rights and delegation and transfer of its obligations hereunder to another of its offices, branches or affiliates for the purpose of causing such Illegality to cease to exist so long as such assignment and delegation will not create another Illegality and the Lender shall be permitted under applicable law to continue to hold LIBOR Loans pending such assignment and delegation. Section 9.03. Unavailability of LIBOR Loans or CD Loans; Interest Rate Unascertainable. (a) Notwithstanding any other provisions herein, if the Agent reasonably determines (which determination shall be conclusive and binding in the absence of manifest error) that by reason of circumstances affecting the Agent, the interbank Eurodollar market or the position of the Agent in such market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate, then the Agent shall give notice of such determination to the Borrower. From and after the date of receipt by the Borrower of such notice, all Syndicated Loans shall be made as ABR Loans or CD Loans, and the Borrower shall not request, and the Lenders shall not offer to make, Competitive Loans which are LIBOR Competitive Loans. (b) Notwithstanding any other provisions herein, if the Agent reasonably determines (which determination shall be conclusive and binding in the absence of manifest error) that the Adjusted CD Rate cannot be determined for any reason, including, without limitation, the inability of the Agent to obtain sufficient bids in accordance with the terms of the definition of Fixed Certificate of Deposit Rate, then the Agent shall give notice of such determination to the Borrower. From and after the date of receipt by the Borrower of such notice, all Syndicated Loans shall be made as ABR Loans or LIBOR Syndicated Loans. (c) Notwithstanding any other provisions herein, if any Lender reasonably determines (which determination shall be conclusive and binding absent manifest error) that the LIBOR Rate shall not represent the effective pricing to that Lender for dollar deposits of comparable amounts being loaned by that Lender for the relevant period, or that the Adjusted CD Rate will not adequately and fairly reflect the cost to that Lender of making or maintaining CD Loans of comparable amounts for the relevant period, then such Lender shall give notice of such determination to the Borrower, and with respect to any such LIBOR Loans or CD Loans, as the case may be, (i) the Borrower shall promptly on demand by such Lender repay such outstanding LIBOR Loans or CD Loans, as the case may be, and (ii) all Loans thereafter made by such Lender shall, at such Lender's option, be of a Type 40 other than the Type subject to the foregoing determination, until such time that the Lender reasonably determines (which determination shall be conclusive and binding absent manifest error) that the LIBOR Rate represents effective pricing to that Lender for dollar deposits of comparable amounts being loaned by that Lender for the relevant period, or that the Adjusted CD Rate adequately and fairly reflects the cost to that Lender of making and maintaining CD Loans of comparable amounts for the relevent period, as the case may be. If any such determination results in payment of a LIBOR Loan or a CD Loan other than on the last day of the Interest Period applicable thereto, the Lender shall be responsible for any amounts owing pursuant to Section 11.02(b) hereof. Section 9.04. Reserve Requirements; Taxes. (a) The cost to the Lenders of making or maintaining the Loans may fluctuate as a result of imposition of, or changes in, the reserve requirements promulgated by the Board of Governors of the Federal Reserve System, including without limitation reserve requirements applicable to "Eurocurrency liabilities" pursuant to Regulation D or any other then applicable regulation of the Board of Governors which prescribes reserve requirements applicable to "Eurocurrency liabilities" as presently defined in Regulation D. Accordingly, the Borrower shall pay to any Lender, on demand, such additional amount or amounts as will compensate it for the effect of such reserve requirements (other than as a result of any change by way of imposition or increase of reserve requirements, in the case of CD Loans, included in Statutory Reserves) to the extent actually incurred by such Lender as determined by such Lender pursuant to the next sentence hereof, which determination shall be conclusive absent manifest error. Any amount payable by the Borrower to any Lender pursuant to this Section 9.04(a) with respect to LIBOR Loans shall be determined by multiplying (i) the aggregate amount actually incurred by such Lender as a result of such reserve requirements by (ii) a fraction, the numerator of which shall be the aggregate amount of such Lender's LIBOR Loans then outstanding, and the denominator of which shall be the then aggregate Eurocurrency liabilities of such Lender. (b) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law) shall change the basis of taxation of payments to any Lender of the principal of or interest on any of such Lender's Loans or any other amounts payable hereunder (other than taxes imposed on the overall net income of such Lender) or shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, such Lender or shall impose on such Lender or the London interbank market any other condition affecting this Agreement or such Lender's Loans, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Loan or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise) in respect thereof by an amount deemed by such Lender to be material, then such additional amount or amounts as will compensate such Lender for such additional costs or reduction will be paid to such Lender by the Borrower upon demand by such Lender. 41 (c) In the event that any amounts are owing by the Borrower to any Lender pursuant to subsection (a) or subsection (b) above, such Lender shall deliver to the Borrower a statement explaining the basis upon which such amounts have been determined to be owing, which statement shall be conclusive and binding absent manifest error. Section 9.05. Replacement of Lenders in Certain Circumstances. Notwithstanding anything to the contrary contained in Section 9.01, Section 9.04 or Section 11.02(b) hereof, if any Lender shall make a demand to the Borrower for payment pursuant to Section 9.01, Section 9.03(c), Section 9.04 or Section 11.02(b) hereof, then the Borrower may, at any time within thirty days after such demand (but only at a time when no Default or Event of Default has occurred and is continuing), upon notice to such Lender and all other parties hereto that the Borrower is exercising its rights pursuant to this Section 9.05, and subject to the payment of all amounts due to such Lender (including, without limitation, facility fees under Section 3.06 hereof accrued through the date of the assignment referred to below, and any amounts payable pursuant to Section 9.01, Section 9.03(c), Section 9.04, Section 11.02(b) and Section 11.06 hereof, including amounts payable pursuant to Section 11.02(b) as a result of such assignment and the compensation demanded by the Lender which gave rise to the Borrower's exercise of its rights hereunder), cause such Lender to (and such Lender shall) assign pursuant to Section 8.01 hereof all (but not less than all) such Lender's Loans and Commitment and other obligations under this Agreement to any assignee or assignees selected by the Borrower that will agree to accept such assignment for a price equal to the aggregate principal amount of all such Lender's outstanding Loans and accrued interest thereon through the date of such assignment, and which assignee or assignees shall assume all (but not less than all) of such Lender's Commitment and other obligations hereunder. ARTICLE X THE AGENT Section 10.01. Appointment. Each Lender hereby irrevocably designates and appoints Chemical Bank as the Agent of such Lender under this Agreement and each such Lender irrevocably authorizes Chemical Bank, as the Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Agent. Section 10.02. Delegation of Duties. The Agent may exercise any of its duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties including the advancing of funds to the Borrower and distribution of funds to the Lenders. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 42 Section 10.03. Exculpatory Provisions. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement (except for its or such Person's own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer therefor contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the Notes or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Borrower. Section 10.04. Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation reasonably believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless an Assignment and Acceptance, as defined in Article VIII, shall have been filed with the Agent pursuant to Article VIII. The Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first receive such advice or concurrence of Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Notes in accordance with a request of Required Lenders, and such request and any action taken or failed to be taken pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes. Section 10.05. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has actual knowledge thereof or has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Agent receives such a notice, the Agent shall promptly give notice thereof to the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 43 Section 10.06. Non-Reliance on Agent. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Borrower which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. Section 10.07. Indemnification. Each Lender agrees to indemnify the Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to its Pro Rata Amount, as defined below, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement or any documents contemplated hereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's gross negligence or willful misconduct and, provided, further, that if the Agent is at any time reimbursed by the Borrower for any indemnity paid by the Lenders pursuant to this Section, the Agent shall pay each Lender, ratably according to its Pro Rata Amount, such reimbursement received from the Borrower. For purposes hereof, a Lender's "Pro Rata Amount" means the aggregate amount payable by all Lenders pursuant to this Section 10.07, or the aggregate amount payable to all Lenders pursuant to this Section 10.07, as the case may be, multiplied by a fraction, the numerator of which is such Lender's Commitment, and the denominator of which is the Aggregate Commitments. The agreements in this Section 10.07 shall survive the payment of the Notes and all other amounts payable hereunder. 44 Section 10.08. Agent in Its Individual Capacity. The Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Agent were not the Agent hereunder. With respect to Loans made or renewed by it and any Note issued to it, the Agent shall have the same rights and powers under this Agreement as any Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" shall include the Agent in its individual capacity. Section 10.09. Successor Agent. The Agent may resign as Agent upon 45 days' notice to the Borrower and the Lenders. If the Agent shall resign as Agent under this Agreement, then Required Lenders during such 45 day period shall appoint from among the Lenders a successor agent for the Lenders, whereupon and following such successor agent's written acceptance thereof such successor agent shall succeed to the rights, powers and duties of the Agent, and the term "Agent" means such successor agent effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement or any holders of the Notes. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. ARTICLE XI MISCELLANEOUS Section 11.01. Termination Date. Unless earlier terminated pursuant to the terms of this Agreement, the Lenders' obligations to make Loans hereunder to the Borrower shall terminate on April 6, 1997 (such date, as it may be extended pursuant hereto, is herein referred to as the "Termination Date"); provided, however, that the Lenders may, at their option concurred in by all Lenders in writing, renew this Agreement for no more than two successive one-year terms thereafter upon the written request of the Borrower delivered to the Agent no later than two years and 90 days, and no earlier than two years and 120 days, prior to the Termination Date as in effect at the time of such request. The Lenders shall respond to any such request within thirty days of receipt thereof by the Agent and failure to respond within the requisite time period shall be deemed to be a rejection of such extension offer. In the event that less than all of the Lenders agree to renew this Agreement, then, at the option of the Borrower, this Agreement shall be renewed in an amount equal to the total amount of the Commitments of remaining Lenders; provided, however, that in no event shall this Agreement be renewed if the total amount of the Commitments of the remaining Lenders is less than 66 2/3% of the Aggregate Commitments as of the Closing Date. In the event that this Agreement is renewed, any Lender that, pursuant to this Section 11.01, elects or is deemed to elect not to renew this Agreement shall, as of the Termination Date determined without giving effect to such renewal, cease to be a party hereto. Section 11.02. Indemnification. (a) The Borrower hereby indemnifies the Agent and each Lender for and holds them harmless from all losses, costs, expenses (including attorneys' fees and expenses and costs of settlement), damages, penalties, actions, judgments, suits or other 45 liabilities, or disbursements of any kind (including without limitation, those arising under Section 10.07 hereof), except any such items arising out of the gross negligence or willful misconduct of the Agent or such Lender, which the Agent or such Lender may incur or which may be imposed upon or asserted against the Agent or such Lender in any way relating to or arising out of the Borrower's use of the proceeds of the Loans, this Agreement, the Notes or proceedings commenced as a result of any tender offer, proxy contest or other similar transaction involving the Borrower. This agreement shall survive termination of this Agreement and payment in full of the Notes. (b) The Borrower hereby indemnifies each Lender and holds such Lender harmless from any loss, cost or expense which such Lender shall actually sustain or incur as a consequence of (i) a failure by the Borrower to pay principal of or interest on any LIBOR Loan, CD Loan or Fixed Rate Loan of such Lender when due, including, but not limited to, any such loss, cost or expense arising from interest or fees payable by such Lender to lenders of funds obtained by it in order to make or maintain its LIBOR Loans or CD Loans or any Fixed Rate Loan hereunder, (ii) failure by the Borrower to make a Borrowing after the Borrower has given a notice in accordance with Section 2.03 or after Competitive Bids have been accepted, (iii) failure by the Borrower to make any prepayment after the Borrower has given a notice in accordance with Section 2.09 or Section 2.10, and (iv) a payment of a LIBOR Loan, a CD Loan or a Fixed Rate Loan (whether by prepayment, on acceleration, or otherwise), or an assignment pursuant to Section 9.05 hereof of a LIBOR Loan, a CD Loan or a Fixed Rate Loan, on a day which is not the last day of the Interest Period with respect thereto, in each case including, but not limited to, an amount equal to the excess, if any, as reasonably determined by such Lender of (A) its cost of obtaining the funds for the Loan being paid, prepaid, assigned or not borrowed for the period from the date of such payment, prepayment, assignment or failure to borrow to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow, the Interest Period for such Loan which would have commenced on the date of such failure to borrow) over (B) the amount of interest (as reasonably determined by the Lender) that would be realized by the Lender in reemploying the funds so paid, prepaid, assigned or not borrowed. Each Lender shall provide to the Borrower a statement, supported where applicable by documentary evidence, explaining the amount of any such loss, cost or expense, which statement shall, in the absence of manifest error, be conclusive with respect to the parties hereto. The Borrower shall pay to each Lender within fifteen Business Days following receipt by the Borrower of such statement, the amount shown thereon as owing by the Borrower to the Lender. This agreement shall survive termination of this Agreement and payment in full of the Notes. Section 11.03. Representation of Lenders. Each Lender hereby represents that it is a commercial lender or financial institution which makes loans in the ordinary course of its business and that it will make each Loan made by it hereunder in the ordinary course of such business; provided, however, that, subject to Article VIII, the disposition of the Notes held by that Lender shall at all times be within its exclusive control. 46 Section 11.04. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, telecopier, rapifax or similar writing) and shall be given to such party at its address, telex number, telecopier number or rapifax number set forth on the signature pages hereof or such other address, telex number, telecopier number or rapifax number as such party may hereafter specify for that purpose by notice to the Lenders and the Borrower. Each such notice, request or other communication shall be effective (a) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (b) if given by telecopier or rapifax, upon receipt (receipt confirmed), (c) if by messenger or by nationally recognized overnight carrier addressed as aforesaid (with charges prepaid), upon written confirmation of delivery, or (d) if given by any other means, when delivered at the address specified in this Section. Section 11.05. No Waivers. No failure or delay by any party in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 11.06. Expenses; Documentary Taxes. The Borrower shall pay (a) all reasonable out-of-pocket expenses of the Agent (including reasonable fees and disbursements of special counsel to the Agent) in connection with the preparation of this Agreement, and all reasonable out-of-pocket expenses of the Agent and the Lenders in connection with any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder, and (b) if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by the Agent and any Lender, including fees and disbursements of counsel, in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. The Borrower shall indemnify each Lender against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution, delivery or performance of this Agreement or the Notes. This Agreement shall survive termination of this Agreement and payment in full of the Notes. Section 11.07. Sharing of Set-Offs. Each Lender agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the principal and interest due with respect to the Syndicated Note or the Competitive Note held by it, as a result of which the unpaid principal portion of the Syndicated Note or Competitive Note held by it shall be proportionately less than the unpaid principal portion of the Syndicated Note or Competitive Note, respectively, held by any other Lender, the Lender receiving such proportionately greater payment shall purchase a participation in the Syndicated Note or Competitive Note, as the case may be, held by such other Lender, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Syndicated Notes or Competitive Notes, as appropriate, held by the Lenders shall be shared by the Lenders pro rata, provided, that nothing in this Section shall impair the right of any Lender to exercise any right of set-off or counterclaim it 47 may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Notes. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. Section 11.08. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Lenders, provided that no such amendment or waiver shall, unless signed by all the Lenders, (a) increase or subject any Lender to any additional obligation, (b) increase the Aggregate Commitments, (c) reduce the principal of or rate of interest on any Loan or any fees hereunder, (d) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder, (e) change the percentage of the Commitments, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Section or any other provision of this Agreement, (f) change the definition of Interest Period herein, or (g) amend or waive any provision of Section 11.09 or Section 11.16 hereof; and provided further that no such amendment or waiver of any provision of Article X hereof shall be effective without the written concurrence of the Agent. Section 11.09. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Lenders. Section 11.10. Collateral. Each of the Lenders represents to each of the other Lenders that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. Section 11.11. Obligations Several; Independent Nature of Lenders' Rights. The obligation of each Lender hereunder is several, and no Lender shall be responsible for the obligations or Commitment of any other Lender hereunder. Nothing contained in this Agreement and no action taken by the Lenders pursuant thereto shall be deemed to constitute the Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. Section 11.12. Survival of Warranties. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement, the making of the Loans hereunder and the execution and delivery of the Notes. 48 Section 11.13. Severability. In case any provision in or obligation under this Agreement or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. Section 11.14. Consent to Jurisdiction and Service of Process; Waiver of Jury Trial. All judicial proceedings brought against the Borrower or any of the Lenders arising out of or relating to this Agreement, any Note or any obligation of the Borrower or any obligation of the Lenders in connection herewith or therewith may be brought in any state or federal court of competent jurisdiction in the State and County of New York and by execution and delivery of this Agreement each of the Borrower and the Lenders accepts for itself and in connection with its properties, generally and unconditionally, the jurisdiction of the aforesaid courts and waives any defense of forum non conveniens, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement, such Note or such obligation. All parties to this Agreement irrevocably waive all right to trial by jury in any judicial proceeding arising out of or relating to this Agreement, any Note or any such obligation. Each of the Borrower and the Lenders agrees that it either has designated and appointed such Persons as it selects to receive on its behalf service of all process in any such proceeding in any such court, such service being hereby acknowledged by each of the Borrower and the Lenders to be effective and binding in every respect, or, in the alternative, hereby agrees and consents that service of all process in any such proceeding in any such court by certified mail at its notice address provided in the applicable signature pages hereto constitutes effective notice and shall be effective and binding in every respect. If any agent appointed by the Borrower or any Lender refuses to accept service, the Borrower and each of the Lenders hereby agrees that service upon it by mail shall constitute sufficient notice. Nothing herein shall affect the right to service of process in any other manner permitted by law or shall limit the right of any Lender or the Borrower to bring proceedings in the courts of any other jurisdiction. Section 11.15. Taxes. All payments made by the Borrower to the Agent and to the Lenders hereunder shall be made free and clear of, and without reduction for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any governmental authority excluding net income and franchise taxes (imposed with respect to net income) of the United States of America or any political subdivision or taxing authority thereof or therein (including Puerto Rico) (such non-excluded taxes being called "Foreign Taxes"). If any Foreign Taxes are required to be withheld from any amounts payable hereunder or under the Notes, the amounts so payable shall be increased to the extent necessary to yield (after payment of all Foreign Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the Notes. Whenever any Foreign Tax is payable by the Borrower, as promptly as possible thereafter, the Borrower shall send to the Lenders a certified copy of an original official receipt showing payment thereof. If the Borrower fails to pay any Foreign Taxes when due to the appropriate taxing authority or fails to remit to the Lenders the required receipts or other required documentary 49 evidence, the Borrower shall indemnify the Lenders for any incremental taxes, interest or penalties that may become payable as a result of any such failure. Notwithstanding anything to the contrary contained herein, however, in the event that a Lender (or any assignee of such Lender's obligations hereunder) is a foreign corporation or partnership for United States income tax purposes, the Borrower's obligation under the first two sentences of this Section 11.15 shall apply only to payments which are effectively connected with the conduct of a trade or business by the Lender (or its assignee) within the United States within the meaning of Section 882 of the Internal Revenue Code of 1986, as amended. Section 11.16. Reinstatement. To the extent any Lender receives any payment by or on behalf of the Borrower, which payment or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to the Borrower or its estate, trustee, receiver, custodian or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the obligation or part hereof which has been paid, reduced or satisfied by the amount so repaid shall be reinstated by the amount so repaid and shall be included within the liabilities of the Borrower to such Lender as of the date such initial payment, reduction or satisfaction occurred. Section 11.17. New York Law. This Agreement and each Note shall be construed in accordance with and governed by the law of the State of New York. Section 11.18. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Section 11.19. Entire Agreement. This Agreement, the other loan documents related hereto and the side letter agreement referred to in Section 3.07 constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement, the other loan documents and the side letter agreements referred to herein. Nothing in this Agreement, the other loan documents or the side letter agreements referred to herein, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement, the other loan documents or the side letter agreements referred to herein. 50 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. CLARK EQUIPMENT COMPANY By: /s/ William N. Harper Title: Vice President and Controller By: /s/ Thomas B. Jones, Jr. Title: Assistant Treasurer 100 N. Michigan Street South Bend, Indiana 46634 Telex number: 6718074 Rapifax numbers: (219) 239-0238 or 0237 Commitments $20,000,000.00 CHEMICAL BANK By: /s/ C. C. Wardell Christopher Wardell Managing Director Notice Address pursuant to Section 11.05: Jennifer H. McGowan Vice President Chemical Securities Inc. 10 South LaSalle Street Suite 2300 Chicago, Illinois 60603 Telephone: (312) 807-4035 Facsimile: (312) 443-1964 Notice Address (copy): Christopher C. Wardell Managing Director Chemical Bank 270 Park Avenue, Tenth Floor New York, New York 10017 Telephone: (212) 270-2053 Facsimile: (212) 270-3860 51 $12,500,000.00 ROYAL BANK OF CANADA By: /s/ Gordon MacArthur Name: Gordon MacArthur Title: Manager Notice Address pursuant to Section 11.05: New York Branch Royal Bank of Canada c/o New York Operations Center Pierrepont Plaza 300 Cadman Plaza West Brooklyn, New York 11201-2701 Telephone: (212) 858-7168 Facsimile: (718) 522-6292/3 Notice Address (copy): Royal Bank of Canada One North Franklin Street, Suite 700 Chicago, Illinois 60606 Attention: Gordon C. MacArthur, Manager Telephone: (312) 551-1613 Facsimile: (312) 551-0805 52 $12,500,000.00 COMERICA BANK By: /s/ Phillip A. Coosaia Name: Phillip A. Coosaia Title: Assistant Vice President Notice Address pursuant to Section 11.05: Phillip A Coosaia Comerica Bank 500 Woodward Avenue - MC 3279 Detroit, Michigan 48226 Telephone: (313) 222-7044 Facsimile: (313) 222-3330/6199 Notice Address (copy): Sandra Fields Comerica Bank 500 Woodward Avenue - MC 3279 Detroit, Michigan 48226 Telephone: (313) 222-3805 Facsimile: (313) 222-3330/6199 53 $12,500,000.00 NATIONSBANK OF NORTH CAROLINA, N.A. By: /s/ Christopher B. Torie Name: Christopher B. Torie Title: Senior Vice President Notice Address pursuant to Section 11.05: Christopher Torie NationsBank of North Carolina, N.A. 70 West Madison Avenue, Suite 5300 Chicago, Illinois 60602 Telephone: (312) 853-5794 Facsimile: (312) 853-9194 Notice Address (copy): Kathy Mumpower NationsBank of North Carolina, N.A. One NationsBank Plaza NCI-002-06-19 Charlotte, North Carolina 28255 Telephone: (704) 386-7429 Facsimile: (704) 386-8694 54 $12,500,000.00 PNC BANK, NATIONAL ASSOCIATION By: /s/ James N. DeVries Name: James N. DeVries Title: Vice President Notice Address pursuant to Section 11.05: PNC Bank, N.A. Fifth Avenue and Wood Street Pittsburgh, PA 15222 Telephone:_________________________ Facsimile:_________________________ Notice Address (copy): PNC Bank, N.A. Chicago Office 500 West Madison Street, Suite #3140 Chicago, IL 60661 Telephone: (312) 906-3400 Facsimile: (312) 906-3420 55 $7,500,000.00 UNION BANK OF SWITZERLAND, CHICAGO BRANCH By: /s/ Walter R. Wolff Name: Walter R. Wolff Title: First Vice President By: /s/ Thomas H. Meyers Name: Thomas H. Meyers Title: Lending Officer Notice Address pursuant to Section 11.05: Denis J. Campbell, IV Union Bank of Switzerland, Chicago Branch 30 South Wacker Drive, 40th Floor Chicago, Illinois 60606 Telephone: (312) 993-5604 Facsimile: (312) 993-5530 Notice Address (copy): Anna Trost Union Bank of Switzerland, Chicago Branch 30 South Wacker Drive, 40th Floor Chicago, Illinois 60606 Telephone: (312) 993-5522 Facsimile: (312) 993-5530 56 $7,500,000.00 ABN-AMRO BANK N.V. By: /s/ Robert J. Graff Name: Robert J. Graff Title: Vice President By: /s/ Bernard J. McGuigan Name: Bernard J. McGuigan Title: Group Vice President Notice Address pursuant to Section 11.05: Robert J. Graff ABN AMRO Bank N.V. 135 South LaSalle Street Chicago, Illinois 60603 Telephone: (312) 443-2675 Facsimile: (312) 606-8425 Notice Address (copy): Loan Administration ABN AMRO Bank N.V. 135 South LaSalle Street Chicago, Illinois 60603 Telephone: (312) 443-2961 Facsimile: (312) 606-8435 57 $7,500,000.00 BANK BRUSSELS LAMBERT - NEW YORK BRANCH By: /s/ Dominick H.J. Vangaever Name: Dominick H.J. Vangaever Title: Vice President -Credit Dept. By: /s/ Eric Hollanders Name: Eric Hollanders Title: Senior Vice President - Credit Dept. Notice Address pursuant to Section 11.05: Mary V. Roney Vice President Bank Brussels Lambert - New York Branch 70 West Madison Avenue Chicago, Illinois 60602 Telephone: (312) 541-0068 Facsimile: (312) 541-0072 Notice Address (copy): Jose Garces Bank Brussels Lambert - New York Branch 630 Fifth Avenue, 6th Floor New York, New York 10111 Telephone: (212) 632-5429 Facsimile: (212) 632-5308 58 $7,500,000.00 BANK OF MONTREAL By: /s/ Jeffrey C. Nicholson Name: Jeffrey C. Nicholson Title: Director Notice Address pursuant to Section 11.05: Jeffrey C. Nicholson Bank of Montreal 115 South LaSalle Street Chicago, Illinois 60603 Telephone: (312) 750-3732 Facsimile: (312) 750-6057 Notice Address (copy): Debra J. Sandt Bank of Montreal 115 South LaSalle Street Chicago, Illinois 60603 Telephone: (312) 750-3727 Facsimile: (312) 750-4344 ______________ $100,000,000 59 EX-4 5 Exhibit 4(d) EXECUTION COPY AMENDMENT NO. 1 dated as of February 21, 1995 (this "Amendment"), among Clark Equipment Company, a Delaware corporation (the "Borrower"), the financial institutions parties hereto (the "Lenders") and Chemical Bank, a New York banking corporation, as agent for the Lenders (in such capacity, the "Agent"). PRELIMINARY STATEMENTS. (1) The Borrower, the Lenders and the Agent have entered into the Master Credit Agreement dated as of April 6, 1994 (the "Credit Agreement") and have agreed to amend the Credit Agreement as hereinafter set forth. (2) Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement. In consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto hereby agree, on the terms and subject to the conditions set forth herein, as follows: SECTION 1. Amendment of the Credit Agreement. The Credit Agreement is hereby amended as follows: (a) The defined terms "Aggregate Commitments" and "Commitment" contained in Section 1.01 of the Credit Agreement are hereby deleted and the following defined terms substituted therefor: "Aggregate Commitments" means the aggregate amount of the Commitments of all Lenders, subject to reduction as provided in Section 2.09. "Commitment" means, with respect to each Lender, such Lender's Original Commitment and Additional Commitment, collectively. (b) The following defined terms are hereby added to Section 1.01 of the Credit Agreement (in appropriate alphabetical order): "Additional Commitment" means, with respect to each Lender, the amount set forth opposite the name of such Lender under the heading "Additional Commitment" on the signature pages hereof, subject to reduction as provided in Section 2.09. The original aggregate amount of the Additional Commitments is $100,000,000. "Additional Commitment Termination Date" means February 20, 1996. "Original Commitment" means, with respect to each Lender, the amount set forth opposite the name of such Lender under the heading "Original Commitment" on the signature pages hereof, subject to reduction as provided in Section 2.09. The original aggregate amount of the Original Commitments is $100,000,000. (c) The defined term "Interest Period" contained in Section 1.01 of the Credit Agreement is hereby amended to add the following at the end of clause (D) of the proviso clause thereto: -1- "and no Interest Period shall extend beyond the Additional Commitment Termination Date if, as a result thereof, Loans in an aggregate principal amount in excess of $100,000,000 would be subject to Interest Periods which extend beyond the Additional Commitment Termination Date." (d) Section 2.09 of the Credit Agreement is hereby deleted in its entirety and the following substituted therefor: Section 2.09. Reductions of the Commitments. The Borrower shall have the right, from time to time, upon not less than three Business Days' prior notice to the Agent, to terminate the Original Commitments and/or the Additional Commitments or reduce the amount of the Original Commitments and/or the Additional Commitments. In addition, the Additional Commitment of each Lender shall automatically terminate on the Additional Commitment Termination Date and the Aggregate Commitments shall be reduced accordingly. Any reduction or termination of the Commitments shall be subject to the following: (a) any such reduction shall be in an amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof and shall permanently reduce the Original Commitments or the Additional Commitments, as applicable, then in effect, (b) no such reduction or termination may reduce the amount of the Aggregate Commitments to an amount less than the aggregate outstanding principal amount of Competitive Loans (after giving effect to any repayments of Competitive Loans on the date of such reduction), (c) to the extent, if any, that the amount of the Loans then outstanding exceeds the amount of the Aggregate Commitments as then reduced, the Borrower shall, on the date of such reduction or termination, prepay the Syndicated Loans in an amount not less than such excess, together with accrued interest on the amount so prepaid to the date of such prepayment and any amounts owing by the borrower pursuant to Section 11.02(b) hereof as a result of such prepayment, and (d) the Borrower shall, on the date of such reduction or termination, pay accrued facility fees pursuant to Section 3.06 hereof on the amount of such reduction or termination to the date of such reduction or termination. Upon any such reduction of the Original Commitments or the Additional Commitments, the Original Commitment or Additional Commitment, as the case may be, of each Lender shall be reduced pro rata. Each notice of reduction of the Original Commitments or the Additional Commitments shall be irrevocable once given. (e) Section 8.01(a) of the Credit Agreement is hereby amended to add the following clause (viii) to the proviso clause thereto: "(viii) any assignment of such Lender's Original Commitment shall include an assignment of an equal portion of such Lender's Additional Commitment, and any assignment of such Lender's Additional Commitment shall include an assignment of an equal portion of such Lender's Original Commitment." (f) Section 11.01 of the Credit Agreement is hereby amended to (i) change the date in the first sentence thereof from "April 6, 1997" to "April 6, 1998" and (ii) to delete the words "two successive one-year terms" contained in the proviso clause to the first sentence thereof and to substitute the words "one additional one-year term" therefor. -2- SECTION 2. Consent to Sale of Borrower's Interest in the Joint Venture Company. Notwithstanding anything to the contrary contained in the Credit Agreement, the Lenders hereby consent to the Borrower's sale of all or any portion of its interest in the Joint Venture Company. SECTION 3. Representations and Warranties. The Borrower represents and warrants to each of the Lenders and the Agent that: (a) This Amendment and each of the replacement Notes executed in connection herewith have been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable in accordance with their respective terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). (b) Before and after giving effect to this Amendment, the representations and warranties set forth in Article V of the Credit Agreement are true and correct in all material respects with the same effect as if made on the date hereof, except to the extent such representations and warranties expressly relate to an earlier date. (c) Before or after giving effect to this Amendment, no Event of Default or Default has occurred and is continuing. SECTION 4. Condition to Effectiveness. The amendments to the Credit Agreement set forth in this Amendment shall become effective as of the date first above written when the Agent shall have received (i) counterparts of this Amendment that, when taken together, bear the signatures of the Borrower and all of the Lenders and (ii) a replacement Competitive Note and a replacement Syndicated Note executed by the Borrower for each of the Lenders. SECTION 5. Credit Agreement. Except as specifically amended hereby, the Credit Agreement shall continue in full force and effect in accordance with the provisions thereof as in existence on the date hereof. After the date hereof, any reference to the Credit Agreement shall mean the Credit Agreement as amended hereby. For purposes of determining each Lender's Original Commitment and Additional Commitment, the signature pages to this Amendment shall be deemed to also constitute signature pages to the Credit Agreement. SECTION 6. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 7. Counterparts. This Amendment may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. SECTION 8. Expenses. The Borrower agrees to reimburse the Agent for its out-of-pocket expenses in connection with this Amendment, including the reasonable fees, charges and disbursements of Sidley & Austin, counsel for the Agent. -3- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date and year first above written. CLARK EQUIPMENT COMPANY By: /s/ Thomas L. Doepker Title: Vice President and Treasurer By: /s/ Thomas B. Jones, Jr. Title: Assistant Treasurer Commitments: Original Commitment CHEMICAL BANK $20,000,000.00 Additional Commitment $20,000,000.00 By: /s/ C. C. Wardell Name: C. C. Wardell Title: Managing Director Original Commitment THE ROYAL BANK OF CANADA $12,500,000.00 Additional Commitment $12,500,000.00 By: /s/ Gordon MacArthur Name: Gordon MacArthur Title: Manager Original Commitment COMERICA BANK $12,500,000.00 Additional Commitment $12,500,000.00 By: /s/ Phillip A. Coosaia Name: Phillip A. Coosaia Title: Assistant Vice President -4- Original Commitment NATIONSBANK OF NORTH CAROLINA, N.A. $12,500,000.00 Additional Commitment $12,500,000.00 By: /s/ Christopher B. Torie Name: Christopher B. Torie Title: Senior Vice President Original Commitment PNC BANK, NATIONAL ASSOCIATION $12,500,000.00 Additional Commitment $12,500,000.00 By: /s/ James N. DeVries Name: James N. DeVries Title: Vice President Original Commitment UNION BANK OF SWITZERLAND, $7,500,000.00 CHICAGO BRANCH Additional Commitment $7,500,000.00 By: /s/ Walter R. Wolff Name: Walter R. Wolff Title: Managing Director By: /s/ Denis J. Campbell IV Name: Denis J. Campbell IV Title: Vice President Original Commitment ABN-AMRO BANK N.V. $7,500,000.00 Additional Commitment $7,500,000.00 By: /s/ Bernard J. McGuigan Name: Bernard J. McGuigan Title: Group Vice President By: /s/ John Wm. Stanger Name: John Wm. Stanger Title: Group Vice President -5- Original Commitment BANK BRUSSELS LAMBERT - NEW YORK $7,500,000.00 BRANCH Additional Commitment $7,500,000.00 By: /s/ Gerrit Verlodt Name: Gerrit Verlodt Title: Senior Vice President By: /s/ Eric Hollanders Name: Eric Hollanders Title: Senior Vice President Credit Department Original Commitment BANK OF MONTREAL $7,500,000.00 Additional Commitment $7,500,000.00 By: /s/ Jonathan D. Hook Name: Jonathan D. Hook Title: Director -6- EX-10 6 Exhibit 10(b) 15 February 1995 Mr. Frank M. Sims Clark Equipment Company 100 North Michigan Street P. O. Box 7008 South Bend, Indiana 46634 Dear Mr. Sims: The terms and conditions of your employment with Clark Equipment Company (CLARK) are contained in a letter dated 12 November 1992 (the 1992 Agreement). The purpose of this letter (herein "this Agreement") is to amend and restate our agreement. Specifically, CLARK proposes the following: 1. STATEMENT OF PURPOSE. You have deferred $113,500 of your base salary. Those deferred amounts have been used by CLARK to purchase insurance policies on your life with the proceeds of those policies payable to CLARK on your death. CLARK expects that those proceeds are sufficient to fund the benefits set forth in this Agreement. The purpose of this Agreement is to describe the benefits to which you or your surviving spouse or estate will become entitled if you die, retire or otherwise cease to be an employee of CLARK. 2. EMPLOYMENT. 2.1 Duties. CLARK will continue to employ you and you will continue to serve CLARK either as a Senior Vice President at CLARK's Principal Offices, with duties and responsibilities appropriate to such a position, or, in such other capacity and location with duties and responsibilities as the Chief Executive Officer may from time to time determine. 2.2 Compensation. For your services as a full-time employee of CLARK, your salary shall be fixed from time to time by the Chief Executive Officer, but shall not be less than a rate which is 88.75% of the average of the Hay Management Consultants Industrial Salary Survey, as determined from year to year, for the number of Hay Client Points of your position as of the date of this Agreement. In no event will your salary be reduced to a rate below its then current rate unless reductions of the same percentage are being made at the same time to the salaries of all other CLARK officers in the Corporate Offices at or above the vice president level, and your salary would then be restored to its prior level when, and to the same extent, that occurs for the other officers. As a full-time employee you will be afforded the opportunity to earn a bonus or other non-salary compensation and to participate in all employee benefits or perquisites as may be made applicable to employees of like rank and position. -1- 3. BENEFITS UPON YOUR DEATH, RETIREMENT OR TERMINATION OF EMPLOYMENT. 3.1 Retirement. If you elect to retire from the employ of CLARK for any reason, CLARK agrees to make monthly payments to you for the rest of your life in an amount determined from Exhibit A to this Agreement reduced by the amount of any payments received by you pursuant to the Deferred Compensation Agreements awarded to you on 1 May 1974 and 14 January 1980. 3.2 Death After Retirement. If, after being retired from the employ of CLARK pursuant to Section 3.1, you die, CLARK agrees to make monthly payments to your widow, Jo Anne Sims, for the rest of her life, in an amount equal to 60% of the monthly sum guaranteed to you in Section 3.1 reduced by the amount of any payments received by her or any other beneficiary pursuant to the Deferred Compensation Agreements awarded to you on 1 May 1974 and 14 January 1980. 3.3 Death Before Retirement. If you die while still an employee of CLARK, CLARK will pay to your widow, Jo Anne Sims, for the rest of her life, the amounts which would have been payable to her pursuant to Section 3.2 if you had retired from the employ of CLARK on the first day of the month in which you died. 3.4 Supplemental Payments. CLARK will also make monthly payments to you (or to your widow) in an amount equal to the additional amounts of pension benefits that would have been payable to you (or to her) from the CLARK Retirement Program for Salaried Employees if the amount of such pension benefits were not limited either by Section 415 of the Internal Revenue Code or by any other law or regulation that limits either the amount of pension benefits or the amount of salary that can be used to determine pension benefits. 3.5 Termination Of Your Employment Other Than For Cause. If your employment is terminated by CLARK other than for cause (as defined in Section 3.6), you will be entitled to a one time payment equal to 1.5 times your then annual salary, excluding bonus. In addition, you would be entitled to elect to retire at the time of such termination and thereby qualify for the payments provided for in Section 3.1. 3.6 Termination Of Your Employment For Cause. CLARK may terminate this Agreement and your employment for cause immediately upon notice to you if it is established that there has been either continued neglect or a material breach of your duties and obligations hereunder. If your employment is terminated by CLARK for cause, you will have the option to retire pursuant to Section 3.1 at that time in lieu of such termination. 4. CHANGE IN CONTROL OF CLARK. If at a time when you are no longer an active employee at CLARK and you or your widow, Jo Anne Sims, are entitled to monthly payments pursuant to Sections 3.1, 3.2, 3.3 or 3.4 of this Agreement, a change in control of CLARK occurs as defined in Section 9 hereof, then CLARK shall pay or cause to be paid to you (or to her), within 30 days thereafter, a one-time lump sum payment in lieu of the monthly payments that would otherwise be payable to you or to her pursuant to such sections. The amount of such lump sum payment shall be an amount sufficient that, after your payment of all -2- income taxes thereon, the amount remaining will be the present value of all future payments to which you or your surviving spouse would otherwise be entitled under this Agreement, calculated as described in Section 9.5. 5. YOUR DEFERRAL OBLIGATION. You agree to forego the receipt of salary and salary increases awarded to you after 1 June 1984 in amounts sufficient to satisfy the salary deferral schedule incorporated herein as Exhibit B. Since the cumulative total of such salary amounts so foregone now equals the amounts shown in Exhibit B, you have no further obligation to forego salary or salary increases. 6. NON-COMPETITION. While employed by CLARK, your duties have related to all of the business operations of CLARK, both in the United States and elsewhere in the world. For such time as you are employed by CLARK, and thereafter for a period of (i) five years if your employment terminates at a time and for a reason that entitles you to lifetime monthly payments pursuant to this Agreement or (ii) two years if the termination of your employment does not entitle you to such lifetime monthly payments, but in any event only for so long as CLARK satisfies its obligations under this Agreement, you agree to refrain from competing with CLARK or any of its subsidiaries or affiliates in the United States or elsewhere in the world with respect to any aspect of the business conducted by CLARK or its subsidiaries or affiliates (collectively "the Business"), including without limitation, the design, manufacture, sale or distribution of products which are competitive with those of CLARK, or becoming an employee or representative of any person, firm or company which competes with CLARK or any of its subsidiaries or affiliates in the United States or elsewhere in the world with respect to the Business. If a court shall finally hold that the time or territory or any other provisions stated in this Section 6 constitutes an unreasonable restriction upon you, the provisions of this Agreement shall not be rendered void, but shall instead apply as to time for a period of two years and as to territory in the continental United States or to such lesser extent as such court may judicially determine constitutes a reasonable restriction under the circumstances involved. If you request and obtain from the Human Effectiveness Committee of the Board of Directors of CLARK (or a successor committee) a written approval that an employment opportunity or other activity that you are considering would not be in violation of this Section 6, then CLARK will abide by such determination and will not seek to enforce this Section with respect to such employment or activity. 7. CONFIDENTIAL INFORMATION. During the course of your employment with CLARK, you have received, developed or otherwise become aware of confidential information of CLARK, VME Group N.V., and their subsidiaries and affiliates. For a period of five years following the cessation of your employment with CLARK for any reason (but only for so long as CLARK satisfies its obligations under this Agreement), you will not use, disclose, give, sell or otherwise divulge to any person, firm or corporation any confidential information regarding CLARK or VME Group N.V. or any of their subsidiaries or affiliates. The term "confidential information" shall include but not be limited to any aspect of CLARK's or VME Group N.V.'s (or their subsidiaries' or -3- affiliates') business, trade secrets, strategies, potential acquisitions or divestitures, discussions relating to acquisitions or divestitures, financial statements or other financial information, forecasts, operations, business plans, prices, discounts, products, product specifications, designs, plans, processes, data and know-how, ideas, technical information and intellectual property, except such information as is otherwise made publicly available by CLARK or VME Group N.V., or their subsidiaries or affiliates. You will not remove from CLARK's possession any confidential information, and shall return to CLARK on or before the termination of your employment any confidential information which may have previously been in your possession. The provisions of this Section 7 shall survive any termination of this Agreement. Any other agreements between CLARK and you relating to confidentiality shall, to the extent not inconsistent herewith, remain in effect. 8. EMPLOYEES. For a period of three years from the date of the cessation of your employment with CLARK (but only for so long as CLARK satisfies its obligations under this Agreement), you agree to refrain from suggesting, persuading, or inducing any key employees of CLARK or its subsidiaries or affiliates to leave their employ at CLARK to be employed elsewhere. 9. CHANGE IN CONTROL OF CLARK. 9.1 This Section Governs. If following a change in control of CLARK as hereinafter defined your employment terminates, the provisions of this Section 9 shall govern your rights and shall, to the extent inconsistent with the other provisions of this Agreement or other agreements between you and CLARK, supersede such other provisions and agreements. 9.2 Resignation Within One Year. If within one year after a change in control of CLARK you terminate your employment with CLARK, such termination will be treated as a termination by CLARK other than for cause. 9.3 Resignation After Change In Location, Duties, Compensation. If any time subsequent to a change in control of CLARK, you terminate your employment with CLARK within six months after the occurrence of one or more of the following events: (i) a change in the location of your employment; (ii) a significant change in the nature and scope of your employment responsibilities or duties including but not limited to a change in title or reporting responsibility; or (iii) any reduction in your compensation, benefits or perquisites, either separately or in the aggregate, such termination will be treated as a termination by CLARK other than for cause. 9.4 Termination By Clark. If after a change in control of CLARK you are terminated by CLARK other than for cause (as defined in Section 9.6), CLARK shall pay or cause to be paid to you within 30 days thereafter: (a) An amount sufficient that, after your payment of all income taxes thereon, the amount remaining will be the present value of all future payments to which you or your surviving spouse would otherwise be entitled under all of the other provisions of this Agreement except for those included in this Section 9; -4- (b) An amount sufficient that, after your payment of all income taxes thereon, the amount remaining will be the present value of any lump sum payments payable to you at a future date or dates under the provisions of this Agreement that are not included in this Section 9, regardless of whether such future payments are conditioned on your still being an active employee at such future date or dates (any such condition being hereby waived); and (c) A severance payment equal to two times "base income" as hereinafter defined. Notwithstanding the foregoing, if the aggregate payments to which you are entitled as a result of a termination by CLARK other than for cause would constitute an "excess parachute payment" under Internal Revenue Code Section 280 G(b), then the severance payment set forth in this paragraph (c) shall be reduced to the extent necessary so that when it is added to all other payments constituting "parachute payments", the total "parachute payments" are not more than 2.99 times "base income". No amount will be payable under this paragraph (c) if the total of the other "parachute payments" exceeds 2.99 times "base income". For the purpose of this paragraph (c), the term "base income" shall mean your average annual total taxable compensation received from CLARK over the last five years ending before the change in control of CLARK occurs. 9.5 Present Value Calculation. For the purposes of paragraphs (a) and (b) of Section 9.4, "present value" will be calculated using the interest rate specified in Section 411(a)11(B)(ii) of the Internal Revenue Code of 1986, or any successor section thereto, as of the date of such termination and the 1983 Group Annuitants Mortality Table, or the mortality table (if it is different) then being used by CLARK's actuaries for valuation purposes with respect to CLARK's qualified pension plans. All calculations for the purposes of Sections 9.4 and 9.7 shall be made, at the expense of CLARK, by the independent auditors of CLARK. As soon as practicable after the need for such calculation arises, CLARK shall provide to its auditors all information needed to perform such calculations. 9.6 Other Than For Cause - Defined. For the purposes of this Section 9, a termination of your employment by CLARK shall be "other than for cause" if it is either (i) treated as such pursuant to Sections 9.2 or 9.3 hereof or (ii) if such termination by CLARK occurs after a change in control of CLARK, for any reason other than either continued neglect or a material breach of your duties and obligations under this agreement. 9.7 Tax Protection. In the event that you become entitled to payments under Section 9.4 and the aggregate payments to which you are entitled (disregarding paragraph (c) of Section 9.4) constitutes an "excess parachute payment" under Internal Revenue Code Section 280 G(b), then CLARK will pay to you at the time of the payments under Section 9.4 an amount sufficient that, after your payment of income taxes and any excise taxes thereon, the amount remaining will be sufficient to pay any excise tax imposed on you by the Internal Revenue Code because of such "excess parachute payment". 9.8 Expenses. In the event of a change in control of CLARK, all subsequent legal and accounting fees and expenses incurred by you in connection with, or in prosecuting or defending, any dispute arising out of or relating to this Agreement shall be paid by CLARK provided you prevail in whole or in part in any such dispute. -5- 9.9 Change In Control - Defined. For the purpose of this Agreement, a change in control of CLARK shall mean any of the following events: (1) the acquisition of beneficial ownership of 25% or more of the shares of the Common Stock of CLARK by or for any person (as such term is defined in Section 14(d)(2) of the Securities Exchange Act of 1934), including for purposes of calculating such person's ownership, all shares beneficially owned by the affiliates and associates (as such terms are defined in Rule 12b-2 of the Securities Exchange Act of 1934) of such person, provided, however, that the term "person" shall not include any of the following: CLARK, any subsidiary of CLARK, any employee benefit plan or employee stock plan of CLARK or of any subsidiary of CLARK, any dividend reinvestment plan of CLARK, any person or entity organized, appointed or established by CLARK for or pursuant to the terms of any such plan, or any person which becomes the beneficial owner of 25% or more of such shares then outstanding solely as a result of the acquisition by CLARK or any employee benefit plan of CLARK of shares of the Common Stock of CLARK, provided that such person does not thereafter acquire any shares of the Common Stock of CLARK, or (2) during any period of 24 consecutive months, individuals who at the beginning of such period constitute the Board of Directors of CLARK cease for any reason to constitute a majority thereof, unless the election, or nomination for election by CLARK's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period, or (3) CLARK's stockholders shall approve (a) the merger or consolidation of CLARK with or into another corporation and CLARK shall not be the surviving corporation, or (b) an agreement to sell or otherwise dispose of all or substantially all of CLARK's assets (including a plan of liquidation). 10. TERMINATION OF SURVIVOR BENEFITS. In the event that, (i) while you are employed pursuant to this Agreement, your spouse predeceases you, or (ii) while you are either so employed or retired and eligible for payments pursuant to Section 3.1, either your marriage ends by divorce or you wish to delete from this Agreement the provisions providing for benefits to your surviving spouse for a reason other than her death, you may notify CLARK of such fact and request that this Agreement be amended to delete the surviving spouse provisions. If in the opinion of legal counsel to CLARK such amendment can be legally made and will be effective to extinguish any legal rights that your spouse or former spouse might have under this Agreement, and subject to the satisfaction of any conditions (such as obtaining a written waiver or consent from such spouse or former spouse) expressed in such legal opinion, CLARK will agree to so amend this Agreement. CLARK will also agree to include in such amendment an actuarial adjustment, on an equal value basis, of the benefits payable to you under this Agreement to reflect the fact that benefits will no longer be payable to a surviving spouse. -6- 11. SPOUSE OPTION AND GUARANTEE. 11.1 In calculating the monthly amounts of Sections 3.1 and 3.2, the 60% Spouse Option under the Clark Equipment Company Retirement Program for Salaried Employees was assumed. Accordingly, if and so long as this Agreement provides for any benefits to be payable to your surviving spouse, CLARK's agreement to make or to continue the monthly payments under Sections 3.1 or 3.2 is expressly conditioned upon your selecting and maintaining the 60% Spouse Option at the time you elect retirement. 11.2 If your widow, Jo Anne Sims, either becomes entitled to benefits pursuant to Section 3.2 or 3.3, or would have been entitled to benefits pursuant to one of such Sections but for the fact that she predeceased you, and if the aggregate amount of the monthly payments made to you and to her under this Agreement is less than the applicable guarantee as shown in the table below, a lump sum payment will be made either to your estate or to such other beneficiary as you may have otherwise designated, in an amount equal to the difference between the applicable guaranteed amount and the aggregate amounts paid to you and to her. Section Under Which Your Guaranteed Total Widow Was (or Would Have Payments Equal Been) Eligible for 60 Times This Monthly Benefits Monthly Amount: 3.2 The amount which was payable to you under Section 3.1. 3.3 The amount which would have been payable to you under Section 3.1 if you had retired from CLARK on the first day of the month in which you died 12. COMPENSATION ADMINISTRATION BY CLARK. Notwithstanding your obligation under Section 5 to forego the receipt of salary, CLARK will, except as otherwise required either by law or to maintain the tax qualified status of its benefit programs, continue to administer your salary, benefits and non-salary compensation as if that obligation to forego did not exist. 13. CLARK RETIREMENT PROGRAM. As used in this Agreement, the term "Clark Retirement Program" means the Clark Equipment Company Retirement Program for Salaried Employees or any successor pension plan funded entirely by CLARK. Such term does not include the Clark Savings and Investment Plan or the Clark Leveraged Employee Stock Ownership Plan. Notwithstanding the foregoing, for the purpose of this Agreement, the amount of any monthly payment received by either you, or your widow, from the CLARK Retirement Program shall be deemed to include the entire amounts which would be payable to either of you from the Clark Equipment Company Retirement Program for Salaried Employees without regard to any reduction in such benefits to reflect the amounts payable from the Clark Leveraged Employee Stock Ownership Plan. -7- 14. GOVERNING LAW. This Agreement shall be governed by the law of the State of Indiana. 15. SEVERABILITY. If any provision of this Agreement is held invalid, such invalidity shall not affect the remaining provisions of this Agreement to the extent those provisions are not dependent upon the invalid provision. 16. REMEDIES. In the event of a violation of any of the provisions of this Agreement by either you or CLARK, the other party will be entitled, if it so elects, in addition to all other remedies under applicable law, to institute proceedings at law or in equity to seek damages with respect to such violation or to enforce specific performance of this Agreement or to enjoin the violating party from engaging in any activity in violation thereof. Prior to taking any legal action to seek damages or enforce such provisions, either party will give to the other party written notice of the claimed violations and allow the other party a period of sixty days to cure such violations. 17. AMENDMENT AND RESTATEMENT OF THE 1992 AGREEMENT. Upon execution by you of this Agreement, the 1992 Agreement shall be amend- ed and restated by this Agreement. If the foregoing is entirely satisfactory to you, please sign and return the attached copy of this letter whereupon it shall constitute an agreement between us as of the date first set forth above. Very truly yours, CLARK EQUIPMENT COMPANY Accepted and Agreed to: By /s/ Leo J. McKernan Leo J. McKernan /s/ Frank M. Sims Chairman, President and Chief Executive Officer -8- Mr. Frank M. Sims 15 February 1995 EXHIBIT A Benefit Schedule Section 3.1 Payable for Retirement Amounts Between $ 9,766.67 1 August 1994 and 31 July 1995 $10,550.00 1 August 1995 and 31 July 1996 $11,391.67 1 August 1996 and 31 July 1997 $12,300.00 1 August 1997 and Thereafter -9- EXHIBIT B Mr. Frank M. Sims 15 February 1995 Salary Deferral Schedule Section 5 Period Amount 1 June 1984 through 31 July 1985 $28,000 1 August 1985 through 31 July 1986 28,000 1 August 1986 through 31 July 1987 13,900 1 August 1987 through 31 July 1988 200 1 August 1988 through 31 July 1989 800 1 August 1989 through 31 July 1990 1,400 1 August 1990 through 31 July 1991 2,400 1 August 1991 through 31 July 1992 7,400 1 August 1992 through 31 July 1993 12,400 1 August 1993 through 31 July 1994 19,000 -10- EX-10 7 Exhibit 10 (l) CLARK EQUIPMENT COMPANY INCENTIVE COMPENSATION PLAN FOR CORPORATE OFFICE MANAGEMENT (AMENDED AND RESTATED EFFECTIVE 1 JANUARY 1994) This Plan was adopted the 18th day of February 1992, and on 14 February 1994 was amended and restated by the Human Effectiveness Committee of the Board of Directors of Clark Equipment Company ("Clark"), effective as of 1 January 1994, as set forth below. 1. Statement of Purpose 1.1 For many years Clark has maintained a program providing an incentive for executives and managers through a means for them to participate in the success of the Company. This Plan provides an incentive for such employees by rewarding performance on the basis of the achievement of planned income and return on equity, and other goals. 2. Definitions Unless the context provides a different meaning, whenever used in this Plan the following terms shall have the following meanings: 2.1 "Actual Net Income" means the Net Income actually achieved by the Company for the Year. 2.2 "Actual Return on Equity" means the Return on Equity actually achieved by the Company for the Year. 2.3 "Average Equity" means, for any Year, the average of the stockholders' equity in the Company for the last five quarterly financial reports of the Company ending with the report as of December 31 of such Year. 2.4 "Board" means the Board of Directors of Clark Equipment Company. 2.5 "Committee" means the Human Effectiveness Committee of the Board or such other Committee to which the Board has delegated the responsibility for administering the Plan. 2.6 "Company" means Clark Equipment Company. 2.7 "Compensation Year" or "Year" means a calendar year for which incentive compensation is determined pursuant to the Plan, beginning with the Year 1994. 2.8 "Corporate Office" means the corporate office of the Company. 2.9 "Hay Average Incentive Compensation" or "HAIC" means, with respect to each Participant, the difference between average total compensation and average base salary for his salary grade. This HAIC amount shall be determined for the Year in accordance with the Hay Compensation Report for Industrial Management at the average salary level of surveyed companies. -1- 2.10 "Incentive Compensation" means the incentive amount payable to a Participant as determined pursuant to Section 3 of the Plan. 2.11 "Net Income" means the reported net earnings of the Company for the Year. 2.12 "Participant" means an employee in the Corporate Office who (a) is in salary grade 61 or higher, or (b) is in salary grade 59 or 60, and whose inclusion in the Plan has been approved by the Chief Executive Officer of the Company. 2.13 "Plan" means the Clark Equipment Company Incentive Compensation Plan for Corporate Office Management, as set forth herein. 2.14 "Planned Net Income" means the amount of Net Income contained in the Company's plan for the Year, as submitted to the Board for the Year. The determination of Planned Net Income may be revised, for purposes of this Plan, at the discretion of the Committee, during the Year to reflect any change in capitalization, or a transaction such as any acquisition, divestiture, merger, consolidation, separation, (including a spin-off or other distribution of stock or property), any reorganization, any partial or complete liquidation, or other major changes in the business which were not reflected in the plan. 2.15 "Planned Return on Equity" means the percentage Return on Equity contained in the Company's plan for the Year, as submitted to the Board for the Year. The determination of Planned Return on Equity may be revised, for purposes of this Plan, at the discretion of the Committee, during the Year to reflect any change in capitalization, or a transaction such as any acquisition, divestiture, merger, consolidation, separation, (including a spin-off or other distribution of stock or property), any reorganization, any partial or complete liquidation, or other major changes in the business which were not reflected in the plan. 2.16 "Return on Equity" or "ROE" means the Net Income of the Company for the Year as a percentage of Average Equity for such Year. 3. Incentive Compensation 3.1 The Incentive Compensation for each Participant for each Year will be a percentage of Hay Average Incentive Compensation for such Year equal to the sum of the HAIC percentages determined under Sections 3.2, 3.3 and 3.4, subject to the limitations of Sections 3.5 and 3.6. 3.2 (a) The HAIC percentage under this Section is based on the financial performance of the Company for the Year as determined from the following matrix of Return on Equity and Net Income: -2- Actual Return on Equity Compared to Planned Return on Equity No Less Than +5% -5% -2.5% +2.5% or More Points Points Equal Points Points Actual 120% 60% 65% 70% 75% 80% Net or more Income 110% 50% 55% 60% 65% 70% as a Per- centage 100% 40% 45% 50% 55% 60% of Planned 90% 30%* 35% 40% 45% 50% Net at least Income 80% -- 25%* 30% 35% 40% Percentages within the box are percentages of HAIC If Planned Net Income is a loss, then the 110% line shall mean a 10% improvement, etc. (b) Intermediate values within the above matrix will be determined by interpolation, except that there will be no interpolation below the two HAIC percentages marked with an asterisk(*), nor will there be any Incentive Compensation payable below these HAIC percentages. (c) If either Planned Return on Equity or Planned Net Income is less than an amount equal to six percent Return on Equity, then: (i) if either Actual Return on Equity or Actual Net Income is less than an absolute dollar amount equivalent to six percent Return on Equity, the maximum percentage of HAIC under this Section is 50%; or (ii) if both Actual Return on Equity and Actual Net Income are at least equal to an absolute dollar amount equivalent to six percent Return on Equity, the actual HAIC percentage shall be determined from the above matrix except that, for measurement purposes, Planned Return on Equity shall be deemed to be six percent and Planned Net Income shall be deemed to be the amount of Net Income equal to six percent Return on Equity. 3.3 The HAIC percentage under this Section is based on the achievement of one or more operating goals recommended by the Chief Executive Officer and approved by the Committee for the Year. -3- The percentage of HAIC payable for performance of these goals will be established each Year by the Committee but, in general, will be stated as follows: Percentage of Performance Percentage of Goal(s) of HAIC 120% or more 40% 110% 35% 100% 25% 90% 20% at least 80% 15% Intermediate values will be determined by interpolation. 3.4 The HAIC percentage under this Section will be determined for each Participant other than the Chief Executive Officer for the Year by the Committee on the recommendations of the Chief Executive Officer. Such percentage for the Chief Executive Officer will be determined by the Committee. Normally, the incentive compensation awarded under this Section for good performance will be 25% of HAIC, but may vary from 0 to 50% of HAIC. 3.5 Except to the extent provided in Section 3.6, no Incentive Compensation will be earned in any Year for which Actual Net Income is negative. 3.6 At the discretion of the Committee, after a second consecutive Year in which Actual Net Income is positive following a Year in which Actual Net Income is negative, an evaluation may be made by the Committee of performance during the Year of negative Actual Net Income immediately preceding the first of such Years of positive Actual Net Income. Performance for such Year shall be measured in the same manner as is done for a profitable Year as provided in Sections 3.2, 3.3 and 3.4, except that the HAIC percentage for such Year shall not, in the aggregate, exceed 50%, and at the discretion of the Committee such HAIC percentage may be reduced to zero. The resulting percentage of HAIC, if any, will, at the discretion of the Committee, be paid, in addition to the amounts earned for performance in such second consecutive Year in which Actual Net Income is positive, to the Participants who were Participants in the Plan during the relevant Year of negative Actual Net Income. Notwithstanding the preceding paragraph of this Section 3.6, in the event that the Year 1994 is the second consecutive Year in which Actual Net Income is positive following one or more Years in which Actual Net Income is negative, Incentive Compensation will be paid with respect to such Year(s) of negative Actual Net Income if and to the extent that it would have been payable under this Plan as in effect on December 31, 1993. -4- 4. Adjustments 4.1 At the discretion of the Committee, the Incentive Compensation payable to any Participant for any Year may be adjusted either upward or downward to reflect extraordinary events or circumstances. 5. Payment of Incentive Compensation 5.1 The Incentive Compensation payable pursuant to this Plan shall be paid as soon as practicable following the end of the Year and the determination and approval of the amounts payable, except as provided in Section 3.5. 6. Termination of Participation 6.1 If a Participant in the Plan ceases to be a Participant for any reason, he shall have no right to any incentive payments under the Plan. However, at the sole discretion of the Committee, he may be granted a pro rata payment for the Year in which he ceased to be a Participant. 7. No Creation of Employment Rights 7.1 Nothing contained herein shall provide any employee of the Company with any right to continued employment or in any way abridge the rights of the Company to determine the terms and conditions of employment, and whether to terminate the employment, of any employee. 8. Authority 8.1 Except as otherwise expressly provided herein, full power and authority to interpret and administer this Plan shall be vested in the Committee. The Committee may, in their sole discretion, adopt, amend, modify, suspend or terminate such rules and policies as they may determine in connection with the performance of their responsibilities under the Plan. 9. Effective Date 9.1 This Plan, as amended and restated herein, shall be effective beginning as of 1 January 1994. 10. Amendment and Termination 10.1 This Plan may be amended or terminated at any time at the sole discretion of the Committee. 10 February 1994 -5- EX-10 8 Exhibit 10(m) CLARK EQUIPMENT COMPANY INCENTIVE COMPENSATION PLAN FOR BUSINESS UNIT MANAGEMENT (AMENDED AND RESTATED EFFECTIVE 1 JANUARY 1994) This Plan was adopted the 18th day of February 1992, and on 14 February 1994 was amended and restated by the Human Effectiveness Committee of the Board of Directors of Clark Equipment Company ("Clark"), effective as of 1 January 1994, as set forth below. 1. Statement of Purpose 1.1 For many years Clark has maintained a program providing an incentive for executives and managers in the Business Units of the Company through a means for them to participate in the success of their Business Units. This Plan provides an incentive for such employees by rewarding performance on the basis of the achievement of planned income and return on capital, and other goals. 2. Definitions Unless the context provides a different meaning, whenever used in this Plan the following terms shall have the following meanings: 2.1 "Actual Net Income" means the Net Income actually achieved by the Unit for the Year. 2.2 "Actual Return on Capital" means the Return on Capital actually achieved by the Unit for the Year. 2.3 "Average Capital" means, with respect to each Business Unit for any Year, the average of the Capital of the Unit for the last five quarterly reports of the Unit ending with the report as of December 31 of such Year. 2.4 "Board" means the Board of Directors of Clark Equipment Company. 2.5 "Business Unit" or "Unit" means a subsidiary or other business unit of the Company that is determined by the Committee to be eligible to participate in the Plan. 2.6 "Capital" means total assets reflected on the Business Unit's financial statements, net of all valuation reserves such as accumulated depreciation, bad debt reserves, LIFO reserves and the like, less all non-interest bearing liabilities, deferred credits, pension liabilities and any management incentive compensation liability. Intercompany balances with the Corporate Office are excluded from assets or non-interest liabilities. This should result in Capital being equal to Business Unit equity plus debt and plus or minus any intercompany balances with the Corporate Office. 2.7 "Committee" means the Human Effectiveness Committee of the Board or such other Committee to which the Board has delegated the responsibility for administering the Plan. -1- 2.8 "Company" means Clark Equipment Company. 2.9 "Compensation Year" or "Year" means a calendar year for which incentive compensation is determined pursuant to the Plan, beginning with the Year 1994. 2.10 "Corporate Office" means the corporate office of the Company. 2.11 "Hay Average Incentive Compensation" or "HAIC" means, with respect to each Participant, the difference between average total compensation and average base salary for his salary grade. This HAIC amount shall be determined for the Year in accordance with the Hay Compensation Report for Industrial Management at the average salary level of surveyed companies. 2.12 "Incentive Compensation" means the incentive amount payable to a Participant as determined pursuant to Section 3 of the Plan. 2.13 "Net Income" means, with respect to each Business Unit for any Year, Unit income before tax determined under U. S. Generally Accepted Accounting Principles and the Company's policies and less provision for income taxes. Income taxes are to be provided for by tax jurisdiction in accordance with generally accepted accounting principals, Company policy and tax law of the jurisdiction. 2.14 "Participant" means an employee of the Business Unit who (a) is in salary grade 61 or higher, or (b) is in salary grade 59 or 60, and whose inclusion in the Plan has been recommended by the Business Unit Planning Board and approved by the Chief Executive Officer of the Company. 2.15 "Plan" means the Clark Equipment Company Incentive Compensation Plan for Business Unit Management, as set forth herein. 2.16 "Planned Net Income" means the amount of Net Income contained in the Business Unit's plan for the Year, as submitted to the Board for the Year. The determination of Planned Net Income may be revised, for purposes of this Plan, at the discretion of the Committee, during the Year to reflect any change in capitalization, or a transaction such as any acquisition, divestiture, merger, consolidation, separation, (including a spin-off or other distribution of stock or property), any reorganization, any partial or complete liquidation, or other major changes in the business which were not reflected in the plan. 2.17 "Planned Return on Capital" means the percentage Return on Capital contained in the Business Unit's plan for the Year, as submitted to the Board for the Year. The determination of Planned Return on Capital may be revised, for purposes of this Plan, at the discretion of the Committee, during the Year to reflect any change in capitalization, or a transaction such as any acquisition, divestiture, merger, consolidation, separation, (including a spin-off or other distribution of stock or property), any reorganization, any partial or complete liquidation, or other major changes in the business which were not reflected in the plan. -2- 2.18 "Return on Capital" or "ROC" means, with respect to each Unit for any Year, the Net Income of the Unit for the Year as a percentage of Average Capital of the Unit for such Year. 3. Incentive Compensation 3.1 The Incentive Compensation for each Participant in a Unit for each Year will be a percentage of Hay Average Incentive Compensation for such Year equal to the sum of the HAIC percentages determined under Sections 3.2, 3.3 and 3.4, subject to the limitations of Section 3.5. 3.2 (a) The HAIC percentage under this Section is based on the financial performance of the Business Unit for the Year as determined from the following matrix of Return on Capital and Net Income: Actual Return on Capital Compared to Planned Return on Capital No Less Than +5% -5% -2.5% +2.5% or More Points Points Equal Points Points Actual 120% 60% 65% 70% 75% 80% Net or more Income 110% 50% 55% 60% 65% 70% as a Per- centage 100% 40% 45% 50% 55% 60% of Planned 90% 30%* 35% 40% 45% 50% Net at least Income 80% -- 25%* 30% 35% 40% Percentages within the box are percentages of HAIC If Planned Net Income is a loss, then the 110% line shall mean a 10% improvement, etc. (b) Intermediate values within the above matrix will be determined by interpolation, except that there will be no interpolation below the two HAIC percentages marked with an asterisk (*), nor will there be any Incentive Compensation payable below these HAIC percentages. (c) If either Planned Return on Capital or Planned Net Income is less than an amount equal to six percent Return on Capital, then: (i) if either Actual Return on Capital or Actual Net Income is less than an absolute dollar amount equivalent to six percent Return on Capital, the maximum percentage of HAIC under this Section is 50%; or -3- (ii) if both Actual Return on Capital and Actual Net Income are at least equal to an absolute dollar amount equivalent to six percent Return on Capital, the actual HAIC percentage shall be determined from the above matrix except that, for measurement purposes, Planned Return on Capital shall be deemed to be six percent and Planned Net Income shall be deemed to be the amount of Net Income equal to six percent Return on Capital. 3.3 The HAIC percentage under this Section is based on the achievement of one or more operating goals established by the Chief Executive Officer of the Company for the Business Unit for the Year. The percentage of HAIC payable for performance of these goals will be stated separately for each Business Unit but, in general, will be stated as follows: Percentage of Performance Percentage of Goal(s) of HAIC 120% or more 40% 110% 35% 100% 25% 90% 20% at least 80% 15% Intermediate values will be determined by interpolation. 3.4 The HAIC percentage under this Section will be determined for each Unit, or for each Participant in the Unit, for the Year by the Chief Executive Officer of the Company upon the recommendation of the Business Unit President and of the Corporate Office Planning Board and with the approval of the Committee. Normally, the incentive compensation awarded by the Chief Executive Officer under this Section for good performance will be 25% of HAIC, but may vary from 0 to 50% of HAIC. 3.5 Except as provided in this Section, no Incentive Compensation will be earned in any Year for which Actual Net Income is negative. At the discretion of the Committee, after a second consecutive Year in which Actual Net Income is positive following a Year in which Actual Net Income is negative, an evaluation may be made by the Committee of performance during the Year of negative Actual Net Income immediately preceding the first of such Years of positive Actual Net Income. Performance for such Year shall be measured in the same manner as is done for a profitable Year as provided in Sections 3.2, 3.3 and 3.4, except that the HAIC percentage for such Year shall not, in the aggregate, exceed 50%, and at the discretion of the Committee such HAIC percentage may be reduced to zero. The resulting percentage of HAIC, if any, will, at the discretion of the Committee, be paid, in addition to the amounts earned for performance in such second consecutive Year in which Actual Net Income is positive, to the Participants who were Participants in the Plan during the relevant Year of negative Actual Net Income. -4- Notwithstanding the preceding paragraph of this Section 3.5, in the event that the Year 1995 is the second consecutive Year in which Actual Net Income is positive following one or more Years in which Actual Net Income is negative, Incentive Compensation will be paid with respect to such Year(s) of negative Actual Net Income if and to the extent that it would have been payable under this Plan as in effect on December 31, 1993. 4. Adjustments 4.1 At the discretion of the Committee, the Incentive Compensation payable to any Participant or for any Unit for any Year may be adjusted either upward or downward to reflect extraordinary events or circumstances. 5. Payment of Incentive Compensation 5.1 The Incentive Compensation payable pursuant to this Plan shall be paid as soon as practicable following the end of the Year and the determination and approval of the amounts payable, except as provided in Section 3.5. 6. Termination of Participation 6.1 If a Participant in the Plan ceases to be a Participant for any reason, he shall have no right to any incentive payments under the Plan. However, at the sole discretion of the Committee, he may be granted a pro rata payment for the Year in which he ceased to be a Participant. 7. No Creation of Employment Rights 7.1 Nothing contained herein shall provide any employee of any Business Unit with any right to continued employment or in any way abridge the rights of the Business Unit to determine the terms and conditions of employment, and whether to terminate the employment, of any employee. 8. Authority 8.1 Except as otherwise expressly provided herein, full power and authority to interpret and administer this Plan shall be vested in the Committee. The Committee may, in their sole discretion, adopt, amend, modify, suspend or terminate such rules and policies as they may determine in connection with the performance of their responsibilities under the Plan. The Committee may also, with respect to any Business Unit, make such adjustments in the Incentive Compensation formulae of Sections 3.2 and 3.3 as they determine to be appropriate for such Unit and may, from time to time, establish different performance measurements and goals for any Unit and an appropriate incentive structure to reflect such goals. It is intended that any such adjustments will, to the extent practicable, be made before or early in the applicable Year and communicated to Business Unit management so that they can be considered in the making and execution of business plans. -5- 9. Effective Date 9.1 This Plan, as amended and restated herein, shall be effective beginning as of 1 January 1994. 10. Amendment and Termination 10.1 This Plan may be amended or terminated at any time at the sole discretion of the Committee. 10 February 1994 -6- EX-10 9 Exhibit 10(q) CLARK EQUIPMENT COMPANY DEFERRED BENEFIT TRUST 12.27.94 -1- CLARK EQUIPMENT COMPANY DEFERRED BENEFIT TRUST THIS AGREEMENT, is made this 28th day of December, 1994 by and between CLARK EQUIPMENT COMPANY, a Delaware corporation (sometimes referred to as the "company"), and such subsidiaries of the company as become parties to this agreement with its consent (the company and such subsidiaries are referred to collectively as the "employers" and sometimes individually as an "employer"), and WACHOVIA BANK OF NORTH CAROLINA, N.A., and its successor or successors and assigns in the trust hereby evidenced, as trustee (the "trustee"), WITNESSETH THAT: WHEREAS, the employers have certain benefit obligations pursuant to certain employment agreements which are provided for through the Clark Equipment Company Supplemental Retirement Income Plan for Certain Executives as set forth in Exhibit I to this agreement (the "plan") which are provided on an unfunded basis for the benefit of certain employees of the employers; and WHEREAS, the company considers it desirable to establish a trust for the purpose of providing a method for the orderly accumulation of assets to be used to make certain payments payable under the plan except as such assets are required to be used to satisfy the claims of the employers' creditors; and WHEREAS, the purpose of this agreement is to establish such a trust (the "trust"); NOW, THEREFORE, in consideration of the mutual undertakings of the parties hereto, IT IS AGREED by the company and the trustee, as follows: -2- ARTICLE I Introduction 1.1. The Trust, the Plan, Participants. This agreement and the trust hereby evidenced shall be known as the "Clark Equipment Company Deferred Benefit Trust." The trust is established for the benefit of those current and former employees of the employers whose employment agreements are listed in Schedule A to Exhibit I hereof and their beneficiaries, which employees and beneficiaries are referred to as "participants." However, the participants shall not have any right or security interest in any specific asset of the trust or beneficial ownership in or preferred claim on the assets of the trust, it being understood that the assets of the trust shall be available for the claims of the employers' creditors as provided in Article V and all rights created under the plan or the trust shall be unsecured contractual rights against the employers. The provis- ions of the plan as they may be amended from time to time are incorporated into and form a part of this agreement and trust; provided, however, that the trustee's duties shall be limited to those duties expressly provided for herein without regard to the provisions of the plan. 1.2. Status of Trust. The trust shall be irrevocable. The trust is intended to constitute a grantor trust under Sections 671-678 of the Internal Revenue Code of 1986, as amended (the "Code"), and shall be construed accordingly. The assets held in the trust for the benefit of an employer shall constitute a separate trust under Sections 671-678 of the Code for that employer. 1.3. Employer Deposits. The company and each other employer will make contributions of cash or company owned life insurance policies (collectively "approved assets") to the trust at such times and in such amounts as such contributions are required by the terms of the plan. Such amounts of approved assets shall be held, invested and distributed by the trustee in accordance with the provisions of this agreement. 1.4. Acceptance. The trustee accepts the duties and obligations of the "trustee" hereunder, agrees to accept delivery of funds delivered to it by the employers pursuant to Section 1.3, and agrees to hold such funds (and any proceeds from the investment of such funds) in trust in accordance with this agreement. 1.5. The Committee. The Clark Equipment Company Employee Retirement Income Security Act Committee, or such other committee as is appointed by the Chief Executive Officer of the company, shall be the committee that is responsible for the administration of the trust (the committee"). The powers, rights and duties of the committee under this agreement are described below. The Secretary of the company will certify to the trustee from time to time the persons who are acting as the committee. The trustee may rely on the latest certificate received without further inquiry or verification. -3- ARTICLE II Management of the Trust Fund 2.1. The Trust Fund. Unless the context clearly implies or indicates otherwise, the term "trust fund" as of any date means all property of every kind then held under this agreement by the trustee or any custodian. 2.2. Trustee's General Powers, Rights and Duties. With respect to the trust fund and subject only to the limitations expressly provided in this agreement (including the powers reserved to the committee, investment managers and custodians) or imposed by applicable law, the trustee shall have the following powers, rights and duties in addition to those vested in it elsewhere in this agreement or by law: (a) To invest and reinvest part or all of the trust fund in any real or personal property (including investments in any stocks, bonds, debentures, mutual fund shares, notes, commercial paper, treasury bills, options, commodities, futures contracts, insurance policies, partnership interests, venture capital investments, any common, commingled or collective trust funds or pooled investment funds described in Section 2.3, any interest bearing deposits held by any bank or similar financial institution, and any other real or personal property) and to diversify such investments so as to minimize the risk of large losses unless under the circumstances it is clearly prudent not to do so; except that the trustee shall not directly invest in any stock, bonds, debentures or other assets of the company or any of its subsidiaries (other than company owned life insurance policies). (b) When directed by the committee, to apply for, pay premiums on, maintain in force on the lives of participants, or any other person, and dispose of individual ordinary or individual or group term or universal life insurance policies ("policies") for the benefit of the participants and containing such provisions as the committee may approve or direct; to acquire such a policy from an employer or from the person on whose life the policy is issued, but only if the trustee pays, transfers or otherwise exchanges for the policy no more than the cash surrender value of the policy and the policy is not subject to a mortgage or similar lien which the trustee would be required to assume; to exchange such a policy for cash from an employer but only if the cash provided by the employer is equal to or greater than the cash surrender value of the policy and to have with respect to such policies all of the rights, powers, options, privileges and benefits usually comprised in the term "incidents of ownership" and normally vested in an insured or owner of such policies. -4- (c) To retain in cash such amounts as the trustee considers advisable and as are permitted by applicable law and to deposit any cash so retained in any depository (including any bank acting as trustee) which the trustee may select; provided that such amounts shall at all times be held in one or more interest-bearing accounts. (d) To manage, sell, insure and otherwise deal with all real and personal property held by the trustee on such terms and conditions as the trustee shall decide. (e) To vote stock and other voting securities personally or by proxy (and to delegate the trustee's powers and discretions with respect to such stock or other voting securities to such proxy), to exercise subscription, conversion and other rights and options (and make payments from the trust fund in connection therewith), to take any action and to abstain from taking any action with respect to any reorganization, consoli- dation, merger, dissolution, recapitalization, refinancing and any other program or change affecting any property constituting a part of the trust fund (and in connection therewith to delegate the trustee's discretionary powers and to pay assessments, subscriptions and other charges from the trust fund), to hold or register any property from time to time in the trustee's name or in the name of a nominee or to hold it unregistered or in such form that title shall pass by delivery and to borrow from anyone, including any bank acting as trustee, to the extent permitted by law, such amounts from time to time as the trustee considers desirable to carry out this trust (and to mortgage or pledge all or part of the trust fund as security). (f) When directed by an investment manager to acquire, retain or dispose of such investments as the investment manager directs in accordance with this agreement. (g) To make payments from the trust fund to provide benefits that have become payable under the plan pursuant to Section 4.5 or that are required to be made to the creditors of an employer pursuant to Section 5.2. (h) To maintain in the trustee's discretion any litigation the trustee considers necessary in connection with the trust fund. (i) To withhold, if the trustee considers it advisable, all or any part of any payment required to be made hereunder as may be necessary and proper to protect the trustee or the trust fund against any liability or claim on account of any estate, inheritance, income or other tax or assessment attributable to any amount payable hereunder, and to discharge any such liability with any part or all of such payment so withheld, provided that at least ten days prior to discharging any such liability with any amount so withheld the trustee shall notify the committee in writing of the trustee's intent to do so, and the trustee shall -5- continue to withhold such payment if so directed by the committee in writing before such liability is discharged. (j) To maintain records reflecting all receipts and payments under this agreement and such other records as the committee specifies and the trustee agrees to, which records may be audited from time to time by the committee or anyone named by the committee. (k) To report to the committee as of each valuation date (as defined in Section 2.4), and at such other times as the committee may request, the then net worth of the trust fund (that is, the fair market value of all assets of each of the investment funds and of any other assets of the trust, less liabilities known to the trustee, other than liabilities to participants and amounts payable from the trust fund to creditors who are not entitled to benefits under the plan), on the basis of such data and information as the trustee con- siders reliable. (l) To furnish periodic accounts to the committee for such periods as the committee may specify, showing all investments, receipts, disbursements and other transactions involving the trust during the applicable period and the assets of each investment fund and any other assets of the trust fund held at the end of that period. (m) To furnish the employers with such information in the trustee's possession as the employers may need or desire for tax or other purposes. (n) To employ agents, attorneys, accountants, investment advisors or managers and other persons (who also may be employed by the employers, the committee or others), to delegate discretionary powers to such persons and to reasonably rely upon information and advice furnished by such persons; provided that each such delegation and the acceptance thereof by each such person shall be in writing; and provided further that the trustee may not delegate its responsibilities as to the management or control of the assets of the trust fund. (o) To perform all other acts which in the trustee's judgment are appropriate for the proper management, investment and distribution of the trust fund to the extent such duties have not been assigned to others as provided herein. Notwithstanding any powers granted to the trustee pursuant to this Section 2.2 or pursuant to applicable law, the trustee shall not have any power that could give this trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Code. -6- 2.3. Collective Investment Trusts. The trustee or any investment manager may invest any part or all of the trust assets for which it has investment responsibility in any common, collective or commingled trust fund or pooled investment fund that is maintained by a bank or trust company (including a bank or trust company acting as trustee) provided such invest- ments are consistent with applicable investment requirements and guidelines. To the extent that any trust assets are invested in any such fund, the provisions of the documents under which such common, collective or commingled trust fund or pooled investment fund are maintained shall govern any invest- ments therein. 2.4. Accounting. The committee shall maintain a bookkeeping account in the name of each employer which, pursuant to rules established by the committee, will reflect: (I) deposits made by that employer to the trust fund pursuant to Section 1.3; (ii) income, losses, and appreciation or depreciation in the value of trust assets resulting from investment of the trust fund to the extent such items are attributable to such employer's deposits; (iii) payments made from the trust fund to participants employed or formerly employed by that employer (or to their beneficiaries) in the form of benefits payable to them under the plan, or to such employer's creditors; and (iv) any other amounts charged to that employer's account, including its share of compensation and expenses described in Section 4.9. In addition, the committee shall maintain with each employer's bookkeeping account a subaccount ("plan subaccount") for each participant employed by the employer to reflect that portion of the employer's account attributable to the obligations to such participant. As of each valuation date such accounts and plan subaccounts shall be appropriately adjusted in accordance with such rules to reflect the then net worth of the trust fund, as determined as of that valuation date by the trustee and reported to the committee pursuant to Section 2.2(k). A "valuation date" is each December 31 and such other date or dates as the committee shall specify. 2.5. Common Fund. The trustee shall not be required to make any separate investment of the trust fund for the account of the plan as applied to the several employers and their respective employees in the absence of direction by the committee and may administer and invest the deposits made to the trust by all employers as one trust fund. If, for any purpose, it becomes necessary to determine as of any date the portion of the trust fund allocable to one of the employers, the committee shall specify such date as a special valuation date and, after all adjustments required as of that date have been made, such portion of the trust fund shall be an amount equal to the employer's proportionate interest in the -7- trust fund, determined in accordance with Section 2.4 above and any such determination by the committee shall be binding on all of the employers, participants and all other persons. The trustee also shall not be required to make any separate investment of the trust fund for the account of any creditor of any employer prior to receipt of directions to make payments to such creditor in accordance with Section 5.2. ARTICLE III Investment Funds, Investment Managers and Custodians 3.1. Investment Funds. From time to time the committee may direct the trustee to establish one or more investment funds (the "investment funds") for the purpose of reflecting the separate investment and reinvestment of the trust fund. The trustee shall have responsibility for the investment of the assets of an investment fund unless an investment manager has been appointed with respect to that fund. All income, losses, appreciation and depreciation attributable to the assets of an investment fund shall be credited to that fund. Investments of each investment fund shall be made in accordance with investment guidelines established by the committee for that investment fund. The committee shall provide each investment manager appointed with respect to an investment fund with the investment guidelines for that fund and with any modifications in such investment guidelines made from time to time by the committee. Notwithstand- ing the fact that an investment manager may be appointed with responsibility for the management of an investment fund, the trustee shall have the responsibility for the investment of cash balances held by it from time to time as a part of such investment fund in short term cash equivalents (such as short term commercial paper, treasury bills and similar securities, and for this purpose the trustee may invest in any appropriate common, commingled or collective short term investment fund). In addition, the trustee shall have the power, right and duty to sell any such short term investments as may be necessary to carry out the instructions of the investment manager with respect to the investment of the investment fund. 3.2. Investment Managers. The committee from time to time may appoint one or more professional investment advisers other than the trustee as an "investment manager" of the entire trust fund or any investment fund maintained as a part of the trust fund. Any such appointment shall be made by written notice to the investment manager and the trustee and shall specify the portion of the trust fund to be managed by the investment manager and the powers, rights and duties of the trustee that are allocated to the investment manager with respect to such portion of the trust fund. Upon such notice to the trustee of the appointment of an investment manager, the investment manager shall be authorized to direct the trustee regarding the investment and reinvestment of the assets of the portion of the trust fund subject to management by the investment manager and the trustee shall receive, hold, vote and transfer assets purchased or sold by the investment manager in accordance with its directions. The appointment of an investment manager shall continue in effect until the trustee receives written notice to the contrary from the committee or the investment manager. An investment manager may resign at any time upon thirty days' prior written notice to the commit- tee and the trustee. The -8- committee may remove an investment manager at any time upon prior written notice to the investment manager and the trustee. An investment manager shall have complete investment responsibility for the assets of the trust fund with respect to which it has been appointed as investment manager and, except as otherwise provided by law or this agreement, the trustee shall have no obligation as to the investment of such assets during the period they are subject to management by an investment manager. 3.3. Custodians. If a national banking association or a state bank is appointed by the committee as the investment manager of any investment fund, the committee also may designate such bank to be employed by the trustee as "custodian" of the assets from time to time forming part of that investment fund. In such event, the trustee shall enter into an appro- priate custodial agreement with the bank appointed as investment manager naming the investment manager as custodian of the investment fund and delegating the trustee's powers with respect to the management of the investment fund to the custodian. Upon such an appointment the trustee shall transfer the assets of the investment fund to the custodian and the custodian shall have responsibility for the holding and administration of the assets of the investment fund, as agent of the trustee, until its employment as custodian is terminated, at which time the custodian shall return all assets of the investment fund to the trustee. With respect to the appointment of such custodian, the trustee shall be entitled to indemnification under Section 4.8 notwithstanding that it has consented to the designation of a custodian and notwithstanding any indemnity agreement in a custodial agreement between the trustee and the custodian. In addition to its duties as investment manager, each custodian shall maintain the records and accounts and shall submit to the appropriate persons the periodic reports otherwise required of the trustee with respect to the portion of the trust fund held by the custodian. ARTICLE IV General Provisions 4.1. Restrictions on Reversion. Except as otherwise provided herein, none of the employers shall have any right, title or interest in the assets of the trust fund, nor will any part of the assets of the trust fund revert or be repaid to any employer until all benefits due under the plan have been paid pursuant to its terms; provided, however, that the assets of the trust shall be available for the claims of the employers' creditors as provided in Section 5.2. The employers may make withdrawals from the trust only if and to the extent that such withdrawals are expressly permitted by the terms of the plan. If an employer ceases to have any benefit obligations under the plan, any balance remaining in such employer's plan subaccount maintained pursuant to Section 2.4 after all benefits accrued under the plan have been paid, shall revert to such employer. -9- 4.2. Nonalienation of Trust Assets. To the extent permitted by law, the rights or interests of any participants to any benefits or future payments hereunder shall not be subject to attachment or garnishment or other legal process by any creditor of any such participant, nor shall any such participant have any right to alienate, anticipate, commute, pledge, encumber or assign (either at law or in equity) any of the benefits or rights which he may expect to receive (contingently or otherwise) under this agreement, except as may be required by the tax withholding provisions of the Code or of a state's income tax act. 4.3. Litigation. Any final judgment that is not appealed or appealable and which may be entered in any action or proceeding regarding this trust shall be binding and conclusive on the parties hereto and all persons having or claiming to have an interest in the trust. 4.4. Trustee's Actions Conclusive. Except as otherwise provided by law, the trustee's exercise or non-exercise of its powers and discretion in good faith shall be conclusive on all persons. No one shall be obliged to see to the application of any money paid or property delivered to the trustee, except to the extent such person is acting as an investment manager as respects such money or property. The certificate of the trustee that it is acting in accordance with this agreement will fully protect all persons dealing with the trustee. If there is a disagreement between the trustee and anyone as to any act or transaction reported in any accounting, the trustee shall have the right to a settlement of its account by any proper court. 4.5. Benefit Payments. Notwithstanding any other provisions of the plan or of this agreement, the only benefits that are payable to participants from the trust fund are the benefits payable pursuant to the plan as set forth in Exhibit I to this agreement. The committee from time to time shall direct the trustee in writing as respects the distribution from the trust fund of benefits that have become payable, but that have not been paid by an employer, under the plan to a participant (including any legal fees and expenses that are payable under the plan), including the amount and manner of payment of any such benefit. If a payment required under the terms of the plan has not been made to a participant (whether due to the failure of the committee to notify the trustee as required by this Section 4.5 or otherwise), then the participant may notify the trustee in writing of the amount (or a reasonable estimate of the amount) owed to him pursuant to the plan, and the date or dates such amount was due and payable. The trustee shall notify the committee and the participant's employer within 15 days of the receipt of such payment request. If the committee or the employer does not provide the trustee with a statement from an "independent party" as to the proper amount due and payable to the participant within 30 days of the date the trustee notified the committee and the employer of the payment request or the trustee determines that the party providing the statement is not "independent", the trustee shall make the payment or payments requested by the participant from the trust fund and may conclusively rely on such payment or payments being the appropriate amount. The trustee shall also notify the committee and employer of any such payments. Payment shall be made to a participant from the trust fund -10- in accordance with the terms of the plan until the earlier of: (i) all payments due to the participant under the plan, as requested by the participant in his notification to the trustee, have been satisfied; or (ii) the committee or employer provide a statement as described above. If a statement is so provided, appropriate adjustment, if any, in the amount paid and to be paid to the participant shall be made. The trustee shall be fully protected in acting without the committee's direction under this Section 4.5 and shall be indemnified and saved harmless as provided in Section 4.8. The trustee shall make such distributions from the trust fund in accordance with the provisions of this Section 4.5, subject to the provisions of Article V; provided, however, that payments to a participant shall be made only from assets of the trust that are attributable to the participant's former employer (as reflected in the account maintained for that employer pursuant to Section 2.4). If such assets are not sufficient that employer shall make the balance of each such payment when due. 4.6. Missing Persons. If any payment directed to be made by the trustee from the trust fund is not claimed by the person entitled thereto, the trustee shall notify the committee of that fact. None of the employers, the committee and the trustee shall have any obligation to search for or ascertain the whereabouts of any payee under this trust. 4.7. Liabilities Mutually Exclusive. To the extent permitted by law, each employer, the trustee, the committee and each investment manager shall be responsible only for its or his own acts or omissions. 4.8. Indemnification. To the extent permitted by law, none of the trustee, any present or former member of the committee, or any person who is or was a director, officer, or employee of an employer, shall be personally liable for any act done, or omitted to be done, in good faith in the adminis- tration of this trust. Any person to whom the committee or the company has delegated any portion of its responsibilities under the trust, any person who is or was a director, officer or employee of an employer, or any present or former member of the committee, and each of them, shall, to the extent permitted by law, be indemnified and saved harmless by the employers (to the extent not indemnified or saved harmless under any liability insurance or other indemnification arrangement with respect to this trust) from and against any and all liability or claim of liability to which they may be subjected by reason of any act done or omitted to be done in good faith in connection with the administration of the trust or the investment of the trust fund, including all expenses reasonably incurred in their defense if the employers fail to provide such defense after having been requested to do so in writing. The trustee shall be indemnified and saved harmless by the employers (to the extent not indemnified or saved harmless under any liability insurance or other indemnification arrangement with respect to this trust) only with respect to liability or claim of liability to which the trustee shall be subjected by reason of its good faith compliance with any directions given in accordance with the provisions of the trust by an investment manager, the committee, or any person duly authorized by the committee or the company, or by reason of its failure to take any action with respect to any assets of the trust fund that are subject to investment direc- tion from an investment manager in -11- the absence of direction from the investment manager, or by reason of its good faith compliance with the provisions of Section 4.5, including all expenses reasonably incurred in the trustee's defense if the employers fail to provide such defense after having been requested to do so in writing. 4.9. Compensation and Expenses. All costs, charges and expenses incurred by the trustee pursuant to Section 2.2(n) shall be paid from the trust fund to the extent not paid by the employers, and all other reasonable compensation, costs, charges and expenses incurred in the administration of this trust, as agreed upon between the committee and the trustee, or between the committee and any investment manager or custodian, will, to the extent not paid by the employers be paid from the trust fund as the committee shall direct; provided that expenses incurred in connection with the sale, investment and reinvestment of the trust fund (such as brokerage, postage, express and insurance charges and transfer taxes) shall be paid from the trust fund, which shall be reimbursed by the Company. 4.10. Action by Company. Any action required or permitted to be taken by the Company under the Trust may be taken by the Chief Executive Officer of the Company or his designee or as provided in the Company's Program for Adoption and Administration of Employee Benefit Plans, as amended from time to time. 4.11. Warranty. The employers warrant that all directions or authorizations by the committee, whether for the payment of money or otherwise, will comply with the provisions of the plan and this trust. 4.12. Evidence. Evidence required of anyone under this agreement shall be signed, made or presented by the proper party or parties and may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable. 4.13. Waiver of Notice. Any notice required under this agreement may be waived by the person entitled to such notice. 4.14. Counterparts. This agreement may be executed in two or more counterparts, any one of which will be an original without reference to the others. 4.15. Gender and Number. Where the context admits, words denoting the masculine gender shall include the feminine and neuter genders, the singular shall include the plural, and the plural shall include the singular. -12- 4.16. Scope of this Agreement. The plan and this trust will be binding on all persons entitled to benefits hereunder and their respective heirs and legal representatives, and upon the employers, the committee, the trustee, and any investment managers and custodians, and their successors and assigns. 4.17. Severability. If any provision of this agreement is held to be illegal or invalid, such illegality or invalidity shall not affect the remaining provisions of this agreement, and they shall be construed and enforced as if such illegal or invalid provision had never been inserted herein. 4.18. Statutory References. Any references in this agreement to a section of the Code shall include any comparable section or sections of any future legislation that amends, supplements or supersedes that section. 4.19. Applicable Law. The plan and the trust shall be construed in accordance with the laws of the State of Indiana. ARTICLE V Insolvency 5.1. Insolvency. An employer shall be considered "insolvent" for purposes of this trust if the employer is unable to pay its debts as they become due or if its affairs become the subject of reorganization or liquidation proceedings as a debtor under federal bankruptcy laws. 5.2. Payments During Insolvency. At all times during the existence of this trust assets of the trust attributable to each employer (as reflected in the account maintained for that employer pursuant to Section 2.4) shall be subject to the claims of its general creditors in the event of the insolvency of the employer. Subject to the immediately following sentence, the trustee shall have no duty to inquire as to whether or not any employer is insolvent, but if the trustee has knowledge that an employer is insolvent (as defined in Section 5.1), the trustee shall discontinue benefit payments that otherwise would be charged to that employer's account and will deliver or otherwise make available assets of the trust attributable to that employer to satisfy the claims of that employer's creditors as directed by a court of competent jurisdiction. If a person claiming to be a creditor of an employer alleges in writing to the trustee that said employer has become insolvent, the trustee shall determine whether said employer is insolvent, and, pending such determination, the trustee shall discontinue payment of benefits to participants employed or formerly employed by said employer (or to their beneficiaries); the trustee may rely on such evidence concerning said employer's insolvency as may be furnished to the trustee and that provides the trustee with a reasonable basis for making a determination concerning said employer's insolvency. If an employer becomes insolvent, the Secretary of the -13- employer shall have the duty to promptly inform the trustee of the employer's insolvency. The committee shall have the same duty if and when it becomes aware that an employer has become insolvent. Participants and their beneficiaries shall not be granted greater rights to the trust fund by virtue of their rights under the plan than other general creditors of the employers, but no provision of the trust shall diminish the rights of a participant to pursue his rights as a general creditor of an employer with respect to any benefits he is entitled to under the plan, or otherwise. If the trustee discontinues payment of benefits pursuant to this Section 5.2, the trustee shall resume the payment of benefits only after determining that the employer is not insolvent (or is no longer insolvent); the first payment following such discontinuance shall include the aggregate amount of all payments due to participants (or to their beneficiaries) for the period of such discontinuance less the aggregate amount of any payments received by said participants (or to their beneficiaries) during such period directly from their employer in lieu of payments provided for under this agreement. ARTICLE VI Resignation or Removal of Trustee 6.1. Resignation or Removal of Trustee. The trustee may resign at any time by giving thirty days' prior written notice to the employers, the committee, and the investment managers and custodians. The committee may remove a trustee by giving prior written notice to the trustee, the employers and the investment managers and custodians provided that such removal shall not become effective until the time immediately preceding the appointment of a successor trustee pursuant to Section 6.2. 6.2. Successor Trustees. In the event of the resignation or removal of the trustee, a successor trustee shall be appointed by the committee in writing as soon as practicable. Any successor trustee must be a bank or trust company which is established and operating under the laws of the United States, or a state within the United States, and which has a combined capital and surplus of a least $100,000,000. Written notice of such appointment shall be given by the committee to the employers, the predecessor trustee, and the investment managers and custodians. 6.3. Duties of Predecessor Trustee and Successor Trustee. A trustee that resigns or is removed shall promptly furnish to the committee and the successor trustee a final account of its administration of the trust. A successor trustee shall succeed to the right and title of the predecessor trustee in the assets of the trust fund and the predecessor trustee shall deliver the property comprising the trust fund to the successor trustee together with any instruments of transfer, conveyance, assignment and further assurances as the successor trustee may reasonably require. Each successor trustee shall have all the powers, rights and duties conferred by this agreement as if named the initial trustee. Subject to applicable law, no successor trustee shall be personally liable for any act or failure to act of a predecessor trustee. -14- ARTICLE VII Amendment and Termination 7.1. Amendment. This trust may be amended from time to time by the company, except as follows: (a) The duties and liabilities of the committee, the trustee and each investment manager and custodian under this agreement cannot be changed substantially without their consent. (b) Under no condition shall any amendment result in the return or repayment to any employer or any other corporation or other legal business entity related to an employer of any portion of the trust fund or the income therefrom, or result in the distribution of the trust fund for any purposes other than payment of obligations of the employers to their creditors, including participants. (c) This trust may not be amended so as to cause the reduction or cessation of any benefits a participant and his beneficiaries would receive now or in the future under the current terms of the plan as incorporated into and made a part of this agreement, nor may the trust be amended to make the trust revocable. An insurance company may assume that this agreement has not been amended or changed unless notice of such amendment is received by the insurance company at its home office. Notwithstanding the foregoing provisions of this Article VII, if a participant in the plan so requests and the Chief Executive Officer of the company approves, a separate plan and trust shall be established for such participant, with such terms as are agreed to by such participant and the company, the liabilities of the plan with respect to such participant shall be transferred to such new plan, and the proportion of the assets held in the trust fund equal to the proportion of the liabilities so transferred, shall be transferred to the separate trust for such participant under the new plan. 7.2. Termination. This trust shall not terminate, and all the rights, titles, powers, duties, discretions and immunities imposed on or reserved to the trustee, each employer, the committee and any investment managers and custodians shall continue in effect with respect to the trust, until all benefits payable to participants under the plan have been paid and all assets have been distributed by the trustee under the trust and the plan. Notwithstanding any other provision of this trust, the trust shall terminate one day prior to the expiration of a period of twenty-one years after the death of the last to die of any current or future employee of the employers who becomes a participant in the plan and who is alive on the day and year first above written. * * * -15- IN WITNESS WHEREOF, the company and the trustee have caused this agreement to be executed on their behalf and their respective seals to be hereunto affixed and attested by their respective officers thereunto duly authorized, the day and year first above written. CLARK EQUIPMENT COMPANY By /s/ William N. Harper Its Vice President ATTEST: /s/ John J. Moran, Jr. Its Assistant Secretary (Seal) WACHOVIA BANK OF NORTH CAROLINA, N.A. By /s/ Joe O. Long Its Senior Vice President ATTEST: /s/ John N. Smith, III Its Assistant Secretary (Seal) -16- EX-10 10 Exhibit 10(r) CLARK EQUIPMENT COMPANY SUPPLEMENTAL RETIREMENT INCOME PLAN FOR CERTAIN EXECUTIVES 12.27.94 -1- CLARK EQUIPMENT COMPANY SUPPLEMENTAL RETIREMENT INCOME PLAN FOR CERTAIN EXECUTIVES SECTION 1 Introduction 1.1. Plan. CLARK EQUIPMENT COMPANY SUPPLEMENTAL RETIREMENT INCOME PLAN FOR CERTAIN EXECUTIVES (the "Plan") is maintained by CLARK EQUIPMENT COMPANY (the "Company"), for the benefit of a select group of management and highly compensated employees of the Company and of those affiliates of the Company which adopt the Plan. The Plan is not funded or qualified for special tax treatment under the Internal Revenue Code of 1986, as amended from time to time (the "Code") and is intended to constitute a "top-hat plan" for purposes of the Employee Retirement Income Security Act ("ERISA"). 1.2. Effective Date and Plan Year. The Plan is established as of January 1, 1994. The "Plan Year" is the calendar year. 1.3. Employers. The Company and each other affiliate of the Company which adopts the Plan with the consent of the Company is referred to herein as an "Employer" and may be referred to collectively as the "Employers." 1.4. Purpose and Employment Agreements. The Plan has been established to provide certain supplemental retirement and separation benefits to a select group of management and highly compensated employees of the Company and affiliates of the Company that adopt the Plan. The provisions of the employment agreements providing for the payment of the benefit obligations listed in Schedule A and the terms of this document shall be considered the Plan document for purposes of ERISA. The benefits payable under the Plan are not intended to duplicate the payment of any benefits under an employment agreement listed in Schedule A. The benefits paid pursuant to the Plan shall be in satisfaction of, not in addition to, any obligation of an Employer to make a payment pursuant to the terms of any employment agreement between the Employer and a Participant covered by the Plan. SECTION 2 Participation and Supplemental Benefits 2.1. Participation. Each employee or former employee covered by an employment agreement listed in Schedule A shall be a "Participant" in the Plan upon entering into a participation agreement with the Company in a form satisfactory to the Company. No additional Participants may be added to the Plan. Each Participant shall continue to be a Participant until all benefits accrued for him hereunder have been paid as provided herein. -2- 2.2. Supplemental Benefits. The benefits provided under the Plan for each Participant are those specified in Schedule A and set forth in the specified provisions of the employment agreement applicable to such Participant, the terms and conditions of which are incorporated herein by reference and form a part of the Plan (the "Supplemental Benefit"). 2.3. Payment of Benefits. A Participant's Supplemental Benefit shall become payable beginning on the date that he or his Beneficiary becomes entitled to receive such benefit under the applicable employment agreement. Notwithstanding the terms of the Participant's employment agreement, payment of the Participant's Supplemental Benefit shall be made either (a) in a lump sum equal to the present value of the Participant's Supplemental Benefit as of the date such lump sum payment is made, or (b) in a series of monthly installments during the period that the Participant or his Beneficiary is entitled to payments pursuant to the employment agreement. By filing a written election with the Administrator not later than twelve months prior to the date that he is eligible to begin to receive Supplemental Benefits under the Plan, a Participant who is an active employee may elect the method in which his Supplemental Benefit shall be paid. The present value of the Participant's Supplemental Benefit shall be determined by using the mortality table then being used by the Company's actuaries for valuation purposes for the Clark Equipment Company Retirement Program for Salaried Employees (the "qualified plan") and the interest rate specified in Code Section 411(a)(11)(B)(ii) (or any successor section thereto) at the time the present value determination is made. Unless the Participant elects payment in monthly installments at least twelve months prior to the date that he is eligible to begin to receive Supplemental Benefits under the Plan, the Supplemental Benefit shall be payable in a lump sum on the date that Supplemental Benefits become payable; provided, however, that Participants who have already retired from the Company on the effective date of the Plan shall continue to receive Supplemental Benefits on a monthly basis. Notwithstanding the foregoing provisions of this subsection 2.3, a Participant, other than those who have retired from the Company prior to the effective date of the Plan, (or his Beneficiary) who is receiving Supplemental Benefits in monthly installments may request the Administrator to pay the then present value of the remaining balance of such benefits in a lump sum, and the Administrator may, in its discretion, but only with the approval of the Chief Executive Officer of the Company, grant such request and cause such lump sum payment to be made in an amount determined as described in this subsection. In addition, notwithstanding the foregoing provisions of this subsection 2.3, if a Participant or, if applicable, his surviving spouse, who is receiving Supplemental Benefits in monthly installments dies before the guaranteed total of sixty monthly payments provided for in his employment agreement have been paid, the present value of the balance of such sixty monthly payments, calculated as described in this subsection, or such other amount as is payable in such event under the terms of the employment agreement, shall be paid in a single lump sum to his estate or such other Beneficiary as is entitled to such payment under his employment agreement. 2.4. Benefits Provided by Employers. Benefits payable under this Plan to a Participant or his Beneficiary shall be paid directly by the Participant's Employer to the extent not paid by the trustee of the Clark Equipment Company Deferred Benefit Trust from such trust. No Employer shall be required to segregate any assets to be applied for the payment of benefits under this Plan. -3- 2.5. Beneficiary. As used in the Plan, a Participant's "Beneficiary" is any person, including a Participant's spouse, eligible to receive benefits under the applicable employment agreement or this Plan by reason of a Participant's service with an Employer. SECTION 3 Provisions Regarding Funding The Company has established and maintains the Clark Equipment Company Deferred Benefit Trust (the "Trust") to accumulate and hold assets to provide the benefits under the Plan, with the only exception being to the extent that such assets are required to be used to satisfy the claims of the Employers' creditors. The Company shall, subject to the right of the Employers' creditors, make periodic contributions to the Trust (at least annually) and maintain assets in the Trust to the extent necessary to maintain a level of funding (the "Plan funding level") for the benefits accrued under the Plan (regardless of whether such accrued benefits are fully vested or subject to any risk of forfeiture) that is at least equal to the actuarially determined value of those benefits (the "Plan benefit value"). Such actuarial determination shall be made at least annually (and in each case not more than twelve months after the last prior determination) using the same mortality table used by the actuary of the qualified plan for the purpose of determining funding requirements under ERISA and the interest rate specified in Code Section 411(a)(11)(B)(ii) (or any successor section thereto) at the time the Plan funding level deter- mination is made. In making such actuarial determination, all accrued benefits under the Plan which may become payable as a single lump sum shall be calculated as of the valuation date and assumed to be paid as soon as benefits could be paid if the Participant retired (if eligible) or otherwise left employment as of the valuation date, except that the amount of the benefits payable under the Plan for each Participant shall be assumed to be at the projected highest amount that would be payable if the Participant retired or otherwise terminated employment at any time during the next succeeding twelve month period. In the event that after a lump sum benefit settlement payment is made from the Trust to or on behalf of a Participant, due to retirement or other termination of employment, transfer of assets to a separate trust, or otherwise, the assets remaining in the Trust are less than 90% of the remaining liabilities of the Trust (based on the most recent valuation), a special actuarial determination of the Plan benefit value shall be made as provided herein and the Company shall then make such contributions to the Trust as are necessary to bring the Plan funding level up to the Plan benefit value. In the event that the Plan funding level exceeds 110% of the Plan benefit value, and the Company provides to the Trustee a certification by the actuary for the qualified plan of such funding status of the Plan, the Company may withdraw assets from the Trust to the extent of the surplus in excess of 110% of the Plan benefit value. The Company shall notify each Participant within thirty days after its notification of any determination of the Plan funding level if the accrued Plan benefits are not then fully funded, unless such funding deficiency is cured within such thirty-day period. The Company shall take all such actions as are necessary to assure that the type and quality of the assets held in the Trust will be such that they have sufficient liquidity to satisfy the ongoing cash needs of the Plan, and are subject to -4- no more investment risk than the assets in the trust under the qualified plan. The Company shall contribute only Company owned life insurance policies or cash to the Trust. The Company shall provide to each Participant a copy of the annual reports of both the actuary and the independent public accountants regarding the adequacy of Plan funding, the reasonableness of the assumptions used to determine such funding, and such other matters as the Company requests be included in such reports. The Company shall also provide to each Participant an annual statement showing that Participant's accrued benefit amount, the amount funded, and the future projected lump sum and annual benefit amounts expected at ages 55, 62 and 65. SECTION 4 General 4.1. Administrator. This Plan will be administered by an "Administrator" which shall be the Company, or at the Company's election, one or more employees of the Company who are designated by the Chief Executive Officer of the Company. No person who is an Administrator shall be liable for any act or action, whether of commission or omission, taken by any other person, or by any officer, agent, or employee; nor, except in circumstances involving his bad faith, for anything done or omitted to be done by himself; and the Company shall indemnify and hold each Administrator harmless from any claims of such liability and all costs (including attorney's fees) resulting therefrom. 4.2. Claims. Any claim for benefits or payments under the Plan by a Participant or a Beneficiary shall be made in writing and delivered to the Company. If the Participant, or any Beneficiary following the Participant's death (collectively, the "Claimant"), notifies the Company in writing that he believes he has been denied any benefit payable under this Plan, either in total or by the payment of an amount less than the full benefit or payment to which the Claimant would normally be entitled, the Company shall advise the Claimant in writing of the amount of the benefit if any, and the specific reasons for any denial of benefits. The Company shall also furnish the Claimant at that time with a written notice con- taining: (a) Specific references to pertinent provisions of the Plan; (b) A description of any additional material or information necessary for the Claimant to perfect the claim if possible, and an explanation of why such material or information is needed; and (c) An explanation of the claim review procedure set forth in this subsection 4.2. Such written notice shall be sent to the Claimant within 90 days of the date the claim is filed. This 90-day period may be extended by the Administrator for an additional 90 days, provided a Claimant is notified of the reason for the extension and a date on which the Claimant may expect to receive a decision on his claim. -5- Within 60 days of receipt of the information described above, a Claimant shall, if further review is desired, file a written request for reconsideration with the Administrator of the Plan. So long as the Claimant's request for review is pending (including such 60-day period), the Claimant or his duly authorized representative may review pertinent documents and may submit issues and comments in writing to the Administrator. A decision shall be made by the Administrator within 60 days of the filing by the Claimant of the request for reconsideration and shall be conveyed to the Claimant in writing and shall include specific reasons for the decision, which specifically reference the pertinent provisions of the Plan on which the decision is based. 4.3. Interests Not Transferable. The Company shall have the right to withhold from any payment under the Plan all taxes required to be withheld under the laws of the United States or any State, county, municipality or other taxing authority. Except as to any withholding of tax under such laws, the interest of any Participant, his spouse, minor children or other Beneficiary, under the Plan is not subject to the claims of their creditors and may not be voluntarily or involuntarily sold, transferred, assigned, alienated or encumbered. 4.4. Facility of Payment. Any amounts payable hereunder to any person under legal disability or who, in the judgment of the Administrator, is unable to properly manage his financial affairs may be paid to the legal representative of such person or may be applied for the benefit of such person in any manner which the Administrator may select. 4.5. Gender and Number. Where the context admits, words in the masculine gender shall include the feminine gender, the plural shall include the singular, and the singular shall include the plural. 4.6. Controlling Law. To the extent not superseded by the laws of the United States, the laws of Indiana shall be controlling in all matters relating to the Plan. 4.7. Successors. This Plan is binding on each Employer and will bind and inure to the benefit of any successor of an Employer, whether by way of purchase, merger, consolidation or otherwise. 4.8. Continued Employment. The establishment or existence of this Plan shall not be construed to give any Participant the right to be retained in the Employer's service. 4.9. Action by Company. Any action required or permitted to be taken by the Company under the Plan may be taken by the Chief Executive Officer of the Company or his designee or as provided in the Company's Program for Adoption and Administration of Employee Benefit Plans, as amended from time to time. 4.10. Plan Expenses. All expenses of the Plan and of the Trust shall be paid by the Company. The Company shall promptly reimburse the Trust for any costs, fees, charges or expenses that are initially paid from the trust fund. -6- SECTION 5 Amendment and Termination The Plan may be amended or terminated by action of the Board of Directors (or by the Human Effectiveness Committee or other duly authorized committee of the Board of Directors) of the Company only if such amendment or termination is consented to by all of those Participants and each Beneficiary of each deceased Participant affected by the amendment or termination, provided that in no event shall any Participant's Supplemental Benefit accrued to the date of such amendment or termination be eliminated or reduced by such action. If the Plan is terminated, all assets of the Trust, after payment of expenses of administration and liquidation, will be allocated and distributed to Participants and Beneficiaries to the extent necessary to satisfy all liabilities payable under the Plan. Any assets remaining in the Trust after satisfaction of all liabilities described above will be distributed in accordance with the terms of the Trust. Notwithstanding the foregoing provisions of this Section 5, if a Participant in the Plan so requests and the Chief Executive Officer of the Company approves, a separate plan and trust shall be established for such Participant, with such terms as are agreed to by such Participant and the Company, the liabilities of the Plan with respect to such Participant shall be transferred to such new plan, and the proportion of the assets of the Trust equal to the proportion of the liabilities so transferred, shall be transferred to the separate trust for such Participant under the new plan. IN WITNESS WHEREOF, the undersigned duly authorized officer of Clark Equipment Company has caused the foregoing to be executed this 28th day of December, 1994. CLARK EQUIPMENT COMPANY By /s/ William N. Harper Its Vice President -7- SCHEDULE A Benefit Obligations Provided Under Clark Equipment Company Supplemental Retirement Income Plan For Certain Executives 1. Those benefit obligations provided pursuant to that certain amended and restated employment agreement between Thomas C. Clarke and Clark Equipment Company dated November 12, 1992 as may be amended from time to time, including but not limited to the benefits provided for in Sections 3.1, 3.2, 9.8, 11.2 and Exhibit A of said agreement, and any lump sum payment of such benefit obligations as provided for in Section 4 of said agreement, but excluding the benefits provided for in Section 3.4 of said agreement. 2. Those benefit obligations provided pursuant to that certain amended and restated employment agreement between Thomas L. Doepker and Clark Equipment Company dated November 12, 1992 as may be amended from time to time, including but not limited to the benefits provided for in Sections 3.1, 3.2, 3.3, 3.5, 3.6, 4.3, 4.4, 4.5, 5.1, 5.2, 5.3, 6, 14.4, 14.7, 14.8, 16.2 and Exhibit A of said agreement, and any lump sum payment of such benefit obligations as provided for in Section 7 of said agreement, but excluding the benefits provided for in Section 3.4 of said agreement. 3. Those benefit obligations provided pursuant to that certain amended and restated employment agreement between William N. Harper and Clark Equipment Company dated November 12, 1992 as may be amended from time to time, including but not limited to the benefits provided for in Sections 3.1, 3.2, 3.3, 3.5, 3.6, 4.3, 4.4, 4.5, 5.1, 5.2, 5.3, 6, 14.4, 14.7, 14.8, 16.2 and Exhibit A of said agreement, and any lump sum payment of such benefit obligations as provided for in Section 7 of said agreement but excluding the benefits provided for in Section 3.4 of said agreement. 4. Those benefit obligations provided pursuant to that certain amended and restated employment agreement between Bernard D. Henely and Clark Equipment Company dated November 12, 1992 as may be amended from time to time, including but not limited to the benefits provided for in Sections 3.1, 3.2, 3.3, 3.5, 3.6, 4.3, 4.4, 4.5, 5.1, 5.2, 5.3, 6, 14.4, 14.7, 14.8, 16.2 and Exhibit A of said agreement, and any lump sum payment of such benefit obligations as provided for in Section 7 of said agreement but excluding the benefits provided for in Section 3.4 of said agreement. 5. Those benefit obligations provided pursuant to that certain amended and restated employment agreement between Leo J. McKernan and Clark Equipment Company dated November 12, 1992 as may be amended from time to time, including but not limited to the benefits provided for in Sections 3.1, 3.3, 3.4, 12.4, 12.7, 12.8, 13, 20 and Exhibit A of said agreement, and any lump sum payment of such benefit obligations as provided for in Section 6 of said agreement but excluding the benefits provided for in Section 3.2 of said agreement. A-1 6. Those benefit obligations provided pursuant to that certain amended and restated employment agreement between F. M. Sims and Clark Equipment Company dated November 12, 1992 as may be amended from time to time, including but not limited to the benefits provided for in Sections 3.6, 4.1, 4.2, 4.3, 5.2, 9, 20.4, 20.7, 20.8 and Exhibit A of said agreement, and any lump sum payment of such benefit obligations as provided for in Section 4.4 of said agreement. 7. Those benefit obligations provided pursuant to that certain amended and restated employment agreement between Robert N. Spolum and Clark Equipment Company dated September 1, 1992 as may be amended from time to time, including but not limited to the benefits provided for in Sections 3.1, 3.2, 4.2, 17.4, 17.7, 17.8 and Exhibit A of said agreement, and any lump sum payment of such benefit obligations as provided for in Section 3.5 of said agreement but excluding the benefits provided for in Section 3.4 of said agreement. A-2 EX-10 11 Exhibit 10(s) CLARK EQUIPMENT COMPANY SUPPLEMENTAL RETIREMENT INCOME PLAN FOR CERTAIN EXECUTIVES AMENDMENT No. 1 WHEREAS, Clark Equipment Company (the "Company") previously established the Clark Equipment Company Supplemental Retirement Income Plan for Certain Executives (the "Plan"); and WHEREAS, the Human Effectiveness Committee of the Board of Directors of the Company has approved the amendment of the Plan as described below; NOW, THEREFORE, the Plan is hereby amended effective as of February 15, 1995 in the following respect: 1. Schedule A , Item 6, of the Plan is amended to read as follows: "6. Those benefit obligations provided pursuant to that certain amended and restated employment agreement between F. M. Sims and Clark Equipment Company dated February 15, 1995 as may be amended from time to time, including but not limited to the benefits provided for in Sections 3.1, 3.2, 3.3, 3.5, 3.6, 9.4, 9.7, 11.2 and Exhibit A of said agreement, and any lump sum payment of such benefit obligations as provided for in Section 4 of said agreement, but excluding the benefits provided for in Section 3.4 of said agreement." WHEREFORE, pursuant to the authority delegated by the Human Effectiveness Committee of the Board of Directors of Clark Equipment Company, this Amendment No. 1 is made and executed on this 6th day of March 1995, to become effective as specified herein. CLARK EQUIPMENT COMPANY By: /s/ Leo J. McKernan Leo J. McKernan Chairman, President and Chief Executive Officer EX-10 12 Exhibit (10)(t) CLARK EQUIPMENT COMPANY SUPPLEMENTAL RETIREMENT INCOME PLAN FOR CERTAIN EXECUTIVES AMENDMENT No. 2 WHEREAS, Clark Equipment Company (the "Company") previously established the Clark Equipment Company Supplemental Retirement Income Plan for Certain Executives (the "Plan"); and WHEREAS, the Human Effectiveness Committee of the Board of Directors of the Company has approved the amendment of the Plan as described below; NOW, THEREFORE, the Plan is hereby amended effective as of March 27, 1995 in the following respect: 1. Subsection 2.3 and Section 3 of the Plan are each amended by replacing the phrase "the interest rate specified in Code Section 411(a)(11)(B)(ii) (or any successor section thereto)" with the phrase "the interest rate that would be used by the Pension Benefit Guaranty Corporation for purposes of determining the present value of a lump sum distribution on the termination of a plan subject to Title IV of the Employee Retirement Income Security Act of 1974, as amended, formerly referred to in Section 411(a)(11)(B)(ii) of the Internal Revenue Code of 1986". WHEREFORE, pursuant to the authority delegated by the Human Effectiveness Committee of the Board of Directors of Clark Equipment Company, this Amendment No. 2 is made and executed on this 28th day of March 1995, to become effective as specified herein. CLARK EQUIPMENT COMPANY By: /s/ Leo J. McKernan Leo J. McKernan Chairman, President and Chief Executive Officer EX-10 13 Exhibit 10(u) CLARK EQUIPMENT COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT TRUST 12.27.94 -1- CLARK EQUIPMENT COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT TRUST THIS AGREEMENT, is made this 28th day of December, 1994 by and between CLARK EQUIPMENT COMPANY, a Delaware corporation (sometimes referred to as the "company"), and such subsidiaries of the company as become parties to this agreement with its consent (the company and such subsidiaries are referred to collectively as the "employers" and sometimes individually as an "employer"), and WACHOVIA BANK OF NORTH CAROLINA, N.A., and its successor or successors and assigns in the trust hereby evidenced, as trustee (the "trustee"), WITNESSETH THAT: WHEREAS, the employers maintain the Clark Equipment Company Supplemental Executive Retirement Plan (the "plan"), a copy of which is attached hereto as Exhibit I, on an unfunded basis for the benefit of certain current, future and former employees of the employers; and WHEREAS, the company considers it desirable to establish a trust for the purpose of providing a method for the orderly accumulation of assets to be used to make certain payments payable under the plan except as such assets are required to be used to satisfy the claims of the employers' creditors; and WHEREAS, the purpose of this agreement is to establish such a trust (the "trust"); NOW, THEREFORE, in consideration of the mutual undertakings of the parties hereto, IT IS AGREED by the company and the trustee, as follows: ARTICLE I Introduction 1.1. The Trust, the Plan, Participants. This agreement and the trust hereby evidenced shall be known as the "Clark Equipment Company Supplemental Executive Retirement Trust." The trust is established for the benefit of current, future and former employees of the employers who are or become covered under the plan and their beneficiaries, as determined in accordance with the provisions of the plan, which employees and bene- ficiaries are referred to as "participants." However, the participants shall not have any right or security interest in any specific asset of the trust or beneficial ownership in or preferred claim on the assets of the trust, it being understood that the assets of the trust shall be available -2- for the claims of the employers' creditors as provided in Article V and all rights created under the plan or the trust shall be unsecured contractual rights against the employers. The provisions of the plan as they may be amended from time to time are incorporated into and form a part of this agreement and trust; provided, however, that the trustee's duties shall be limited to those duties expressly provided for herein without regard to the provisions of the plan. 1.2. Status of Trust. The trust shall be irrevocable. The trust is intended to constitute a grantor trust under Sections 671-678 of the Internal Revenue Code of 1986, as amended (the "Code"), and shall be construed accordingly. The assets held in the trust for the benefit of an employer shall constitute a separate trust under Sections 671-678 of the Code for that employer. 1.3. Employer Deposits. The company and each other employer will make contributions of cash or company owned life insurance policies (collectively "approved assets") to the trust at such times and in such amounts as such contributions are required by the terms of the plan. Such amounts of approved assets shall be held, invested and distributed by the trustee in accordance with the provisions of this agreement. 1.4. Acceptance. The trustee accepts the duties and obligations of the "trustee" hereunder, agrees to accept delivery of funds delivered to it by the employers pursuant to Section 1.3, and agrees to hold such funds (and any proceeds from the investment of such funds) in trust in accordance with this agreement. 1.5. The Committee. The Clark Equipment Company Employee Retirement Income Security Act Committee, or such other committee as is appointed by the Chief Executive Officer of the company, shall be the committee that is responsible for the administration of the trust (the committee"). The powers, rights and duties of the committee under this agreement are described below. The Secretary of the company will certify to the trustee from time to time the persons who are acting as the com- mittee. The trustee may rely on the latest certificate received without further inquiry or verification. ARTICLE II Management of the Trust Fund 2.1. The Trust Fund. Unless the context clearly implies or indicates otherwise, the term "trust fund" as of any date means all property of every kind then held under this agreement by the trustee or any custodian. -3- 2.2. Trustee's General Powers, Rights and Duties. With respect to the trust fund and subject only to the limitations expressly provided in this agreement (including the powers reserved to the committee, investment managers and custodians) or imposed by applicable law, the trustee shall have the following powers, rights and duties in addition to those vested in it elsewhere in this agreement or by law: (a) To invest and reinvest part or all of the trust fund in any real or personal property (including investments in any stocks, bonds, debentures, mutual fund shares, notes, commercial paper, treasury bills, options, commodities, futures contracts, insurance policies, partnership interests, venture capital investments, any common, com- mingled or collective trust funds or pooled investment funds described in Section 2.3, any interest bearing deposits held by any bank or similar financial institution, and any other real or personal property) and to diversify such investments so as to minimize the risk of large losses unless under the circumstances it is clearly prudent not to do so; except that the trustee shall not directly invest in any stock, bonds, debentures or other assets of the company or any of its subsidiaries (other than company owned life insurance policies). (b) When directed by the committee, to apply for, pay premiums on, maintain in force on the lives of participants, or any other person, and dispose of individual ordinary or individual or group term or universal life insurance policies ("policies") for the benefit of the participants and containing such provisions as the committee may approve or direct; to acquire such a policy from an employer or from the person on whose life the policy is issued, but only if the trustee pays, transfers or otherwise exchanges for the policy no more than the cash surrender value of the policy and the policy is not subject to a mortgage or similar lien which the trustee would be required to assume; to exchange such a policy for cash from an employer but only if the cash provided by the employer is equal to or greater than the cash surrender value of the policy and to have with respect to such policies all of the rights, powers, options, privileges and benefits usually comprised in the term "incidents of ownership" and normally vested in an insured or owner of such policies. (c) To retain in cash such amounts as the trustee considers advisable and as are permitted by applicable law and to deposit any cash so retained in any depository (including any bank acting as trustee) which the trustee may select; provided that such amounts shall at all times be held in one or more interest-bearing accounts. (d) To manage, sell, insure and otherwise deal with all real and personal property held by the trustee on such terms and conditions as the trustee shall decide. -4- (e) To vote stock and other voting securities personally or by proxy (and to delegate the trustee's powers and discretions with respect to such stock or other voting securities to such proxy), to exercise subscription, conversion and other rights and options (and make payments from the trust fund in connection therewith), to take any action and to abstain from taking any action with respect to any reorganization, consolidation, merger, dissolution, recapitalization, refinancing and any other program or change affecting any property constituting a part of the trust fund (and in connection therewith to delegate the trustee's discretionary powers and to pay assessments, subscriptions and other charges from the trust fund), to hold or register any property from time to time in the trustee's name or in the name of a nominee or to hold it unregistered or in such form that title shall pass by delivery and to borrow from anyone, including any bank acting as trustee, to the extent per- mitted by law, such amounts from time to time as the trustee considers desirable to carry out this trust (and to mortgage or pledge all or part of the trust fund as security). (f) When directed by an investment manager to acquire, retain or dispose of such investments as the investment manager directs in accordance with this agreement. (g) To make payments from the trust fund to provide benefits that have become payable under the plan pursuant to Section 4.5 or that are required to be made to the creditors of an employer pursuant to Section 5.2. (h) To maintain in the trustee's discretion any litigation the trustee considers necessary in connection with the trust fund. (i) To withhold, if the trustee considers it advisable, all or any part of any payment required to be made hereunder as may be necessary and proper to protect the trustee or the trust fund against any liability or claim on account of any estate, inheritance, income or other tax or assessment attributable to any amount payable hereunder, and to discharge any such liability with any part or all of such payment so withheld, provided that at least ten days prior to discharging any such liability with any amount so with- held the trustee shall notify the committee in writing of the trustee's intent to do so, and the trustee shall continue to withhold such payment if so directed by the committee in writing before such liability is discharged. (j) To maintain records reflecting all receipts and payments under this agreement and such other records as the committee specifies and the trustee agrees to, which records may be audited from time to time by the committee or anyone named by the committee. -5- (k) To report to the committee as of each valuation date (as defined in Section 2.4), and at such other times as the committee may request, the then net worth of the trust fund (that is, the fair market value of all assets of each of the investment funds and of any other assets of the trust, less liabilities known to the trustee, other than liabilities to participants and amounts payable from the trust fund to creditors who are not entitled to benefits under the plan), on the basis of such data and information as the trustee considers reliable. (l) To furnish periodic accounts to the committee for such periods as the committee may specify, showing all investments, receipts, disbursements and other transactions involving the trust during the applicable period and the assets of each investment fund and any other assets of the trust fund held at the end of that period. (m) To furnish the employers with such information in the trustee's possession as the employers may need or desire for tax or other purposes. (n) To employ agents, attorneys, accountants, investment advisors or managers and other persons (who also may be employed by the employers, the committee or others), to delegate discretionary powers to such persons and to reasonably rely upon information and advice furnished by such persons; provided that each such delegation and the ac- ceptance thereof by each such person shall be in writing; and provided further that the trustee may not delegate its responsibilities as to the management or control of the assets of the trust fund. (o) To perform all other acts which in the trustee's judgment are appropriate for the proper management, investment and distribution of the trust fund to the extent such duties have not been assigned to others as provided herein. Notwithstanding any powers granted to the trustee pursuant to this Section 2.2 or pursuant to applicable law, the trustee shall not have any power that could give this trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Code. 2.3. Collective Investment Trusts. The trustee or any investment manager may invest any part or all of the trust assets for which it has investment responsibility in any common, collective or commingled trust fund or pooled investment fund that is maintained by a bank or trust company (including a bank or trust company acting as trustee) provided such investments are consistent with applicable investment requirements and guidelines. To the extent that any trust assets are invested in any such fund, the provisions of the documents under which such common, collective or commingled trust fund or pooled investment fund are maintained shall govern any investments therein. -6- 2.4. Accounting. The committee shall maintain a bookkeeping account in the name of each employer which, pursuant to rules established by the committee, will reflect: (I) deposits made by that employer to the trust fund pursuant to Section 1.3; (ii) Income, losses, and appreciation or depreciation in the value of trust assets resulting from investment of the trust fund to the extent such items are attributable to such employer's deposits; (iii) payments made from the trust fund to participants employed or formerly employed by that employer (or to their beneficiaries) in the form of benefits payable to them under the plan, or to such employer's creditors; and (iv) any other amounts charged to that employer's account, including its share of compensation and expenses described in Section 4.9. In addition, the committee shall maintain within each employer's bookkeeping account a subaccount ("plan subaccount") in the name of each participant to reflect that portion of the employer's account attributable to such participant. As of each valuation date such accounts and plan subaccounts shall be appropriately adjusted in accordance with such rules to reflect the then net worth of the trust fund, as determined as of that valuation date by the trustee and reported to the committee pursuant to Section 2.2(k). A "valuation date" is each December 31 and such other date or dates as the committee shall specify. 2.5. Common Fund. The trustee shall not be required to make any separate investment of the trust fund for the account of the plan as applied to the several employers and their respective employees in the absence of direction by the committee and may administer and invest the deposits made to the trust by all employers as one trust fund. If, for any purpose, it becomes necessary to determine as of any date the portion of the trust fund allocable to one of the employers, the committee shall specify such date as a special valuation date and, after all adjustments required as of that date have been made, such portion of the trust fund shall be an amount equal to the employer's proportionate interest in the trust fund, determined in accordance with Section 2.4 above and any such determination by the committee shall be binding on all of the employers, participants and all other persons. The trustee also shall not be required to make any separate investment of the trust fund for the account of any creditor of any employer prior to receipt of directions to make payments to such creditor in accordance with Section 5.2. -7- ARTICLE III Investment Funds, Investment Managers and Custodians 3.1. Investment Funds. From time to time the committee may direct the trustee to establish one or more investment funds (the "investment funds") for the purpose of reflecting the separate investment and reinvestment of the trust fund. The trustee shall have responsibility for the investment of the assets of an investment fund unless an investment manager has been appointed with respect to that fund. All income, losses, appreciation and depreciation attributable to the assets of an investment fund shall be credited to that fund. Investments of each investment fund shall be made in accordance with investment guidelines established by the committee for that investment fund. The committee shall provide each investment manager appointed with respect to an investment fund with the investment guidelines for that fund and with any modifications in such investment guidelines made from time to time by the committee. Notwith- standing the fact that an investment manager may be appointed with responsibility for the management of an investment fund, the trustee shall have the responsibility for the investment of cash balances held by it from time to time as a part of such investment fund in short term cash equivalents (such as short term commercial paper, treasury bills and similar securities, and for this purpose the trustee may invest in any appropriate common, commingled or collective short term investment fund). In addition, the trustee shall have the power, right and duty to sell any such short term investments as may be necessary to carry out the instructions of the investment manager with respect to the investment of the investment fund. 3.2. Investment Managers. The committee from time to time may appoint one or more professional investment advisers other than the trustee as an "investment manager" of the entire trust fund or any investment fund maintained as a part of the trust fund. Any such appointment shall be made by written notice to the investment manager and the trustee and shall specify the portion of the trust fund to be managed by the investment manager and the powers, rights and duties of the trustee that are allocated to the investment manager with respect to such portion of the trust fund. Upon such notice to the trustee of the appointment of an investment manager, the investment manager shall be authorized to direct the trustee regarding the investment and reinvestment of the assets of the portion of the trust fund subject to management by the investment manager and the trustee shall receive, hold, vote and transfer assets purchased or sold by the investment manager in accordance with its directions. The appointment of an investment manager shall continue in effect until the trustee receives written notice to the contrary from the committee or the investment manager. An investment manager may resign at any time upon thirty days' prior written notice to the committee and the trustee. The committee may remove an investment manager at any time upon prior written notice to the investment manager and the trustee. An investment manager shall have complete investment responsibility for the assets of the trust fund with respect to which it has been appointed as investment manager and, except as otherwise provided by law or this agreement, the trustee shall have no obligation as to the investment of such assets during the period they are subject to management by an investment manager. -8- 3.3. Custodians. If a national banking association or a state bank is appointed by the committee as the investment manager of any investment fund, the committee also may designate such bank to be employed by the trustee as "custodian" of the assets from time to time forming part of that investment fund. In such event, the trustee shall enter into an appropriate custodial agreement with the bank appointed as investment manager naming the investment manager as custodian of the investment fund and delegating the trustee's powers with respect to the management of the investment fund to the custodian. Upon such an appointment the trustee shall transfer the assets of the investment fund to the custodian and the custodian shall have responsibility for the holding and administration of the assets of the investment fund, as agent of the trustee, until its employment as custodian is terminated, at which time the custodian shall return all assets of the investment fund to the trustee. With respect to the appointment of such custodian, the trustee shall be entitled to indem- nification under Section 4.8 notwithstanding that it has consented to the designation of a custodian and notwithstanding any indemnity agreement in a custodial agreement between the trustee and the custodian. In addition to its duties as investment manager, each custodian shall maintain the records and accounts and shall submit to the appropriate persons the periodic reports otherwise required of the trustee with respect to the portion of the trust fund held by the custodian. ARTICLE IV General Provisions 4.1. Restrictions on Reversion. Except as otherwise provided herein, none of the employers shall have any right, title or interest in the assets of the trust fund, nor will any part of the assets of the trust fund revert or be repaid to any employer until all benefits due under the plan have been paid pursuant to its terms; provided, however, that the assets of the trust shall be available for the claims of the employers' creditors as provided in Section 5.2. The employers may make withdrawals from the trust only if and to the extent that such withdrawals are expressly permitted by the terms of the plan. If an employer ceases to have any benefit obligations under the plan, any balance remaining in such employer's plan subaccount maintained pursuant to Section 2.4 after all benefits accrued under the plan have been paid, shall revert to such employer. 4.2. Nonalienation of Trust Assets. To the extent permitted by law, the rights or interests of any participants to any benefits or future payments hereunder shall not be subject to attachment or garnishment or other legal process by any creditor of any such participant, nor shall any such participant have any right to alienate, anticipate, commute, pledge, encumber or assign (either at law or in equity) any of the benefits or rights which he may expect to receive (contingently or otherwise) under this agreement, except as may be required by the tax withholding provisions of the Code or of a state's income tax act. -9- 4.3. Litigation. Any final judgment that is not appealed or appealable and which may be entered in any action or proceeding regarding this trust shall be binding and conclusive on the parties hereto and all persons having or claiming to have an interest in the trust. 4.4. Trustee's Actions Conclusive. Except as otherwise provided by law, the trustee's exercise or non-exercise of its powers and discretion in good faith shall be conclusive on all persons. No one shall be obliged to see to the application of any money paid or property delivered to the trustee, except to the extent such person is acting as an investment manager as respects such money or property. The certificate of the trustee that it is acting in accordance with this agreement will fully protect all persons dealing with the trustee. If there is a disagreement between the trustee and anyone as to any act or transaction reported in any accounting, the trustee shall have the right to a settlement of its account by any proper court. 4.5. Benefit Payments. Notwithstanding any other provisions of the plan or of this agreement, the only benefits that are payable to participants from the trust fund are the benefits payable pursuant to the plan. The committee from time to time shall direct the trustee in writing as respects the distribution from the trust fund of benefits that have become payable, but that have not been paid by an employer, under the plan to a participant (including any legal fees and expenses that are payable under the plan), including the amount and manner of payment of any such benefit. If a payment required under the terms of the plan has not been made to a participant (whether due to the failure of the committee to notify the trustee as required by this Section 4.5 or otherwise), then the participant may notify the trustee in writing of the amount (or a reasonable estimate of the amount) owed to him pursuant to the plan, and the date or dates such amount was due and payable. The trustee shall notify the committee and the participant's employer within 15 days of the receipt of such payment request. If the committee or the employer does not provide the trustee with a statement from an "independent party" as to the proper amount due and payable to the participant within 30 days of the date the trustee notified the committee and the employer of the payment request or the trustee determines that the party providing the statement is not "independent", the trustee shall make the payment or payments requested by the participant from the trust fund and may conclusively rely on such payment or payments being the appropriate amount. The trustee shall also notify the committee and employer of any such payments. Payment shall be made to a participant from the trust fund in accordance with the terms of the plan until the earlier of: (i) all payments due to the participant under the plan, as requested by the participant in his notification to the trustee, have been satisfied; or (ii) the committee or employer provide a statement as described above. If a statement is so provided, appropriate adjustment, if any, in the amount paid and to be paid to the participant shall be made. The trustee shall be fully protected in acting without the committee's direction under this Section 4.5 and shall be indemnified and saved harmless as provided in Section 4.8. The trustee shall make such distributions from the trust fund in accordance with the provisions of this Section 4.5, subject to the provisions of Article V; provided, however, that payments to a participant shall be made only from assets of the trust -10- that are attributable to the participant's former employer (as reflected in the account maintained for that employer pursuant to Section 2.4). If such assets are not sufficient that employer shall make the balance of each such payment when due. 4.6. Missing Persons. If any payment directed to be made by the trustee from the trust fund is not claimed by the person entitled thereto, the trustee shall notify the committee of that fact. None of the employers, the committee and the trustee shall have any obligation to search for or ascertain the whereabouts of any payee under this trust. 4.7. Liabilities Mutually Exclusive. To the extent permitted by law, each employer, the trustee, the committee and each investment manager shall be responsible only for its or his own acts or omissions. 4.8. Indemnification. To the extent permitted by law, none of the trustee, any present or former member of the committee, or any person who is or was a director, officer, or employee of an employer, shall be personally liable for any act done, or omitted to be done, in good faith in the administration of this trust. Any person to whom the committee or the company has delegated any portion of its responsibilities under the trust, any person who is or was a director, officer or employee of an employer, or any present or former member of the committee, and each of them, shall, to the extent permitted by law, be indemnified and saved harmless by the employers (to the extent not indemnified or saved harmless under any liability insurance or other indemnification arrangement with respect to this trust) from and against any and all liability or claim of liability to which they may be subjected by reason of any act done or omitted to be done in good faith in connection with the administration of the trust or the investment of the trust fund, including all expenses reasonably incurred in their defense if the employers fail to provide such defense after having been requested to do so in writing. The trustee shall be indemnified and saved harmless by the employers (to the extent not indemni- fied or saved harmless under any liability insurance or other indemni- fication arrangement with respect to this trust) only with respect to liability or claim of liability to which the trustee shall be subjected by reason of its good faith compliance with any directions given in accordance with the provisions of the trust by an investment manager, the committee, or any person duly authorized by the committee or the company, or by reason of its failure to take any action with respect to any assets of the trust fund that are subject to investment direction from an investment manager in the absence of direction from the investment manager, or by reason of its good faith compliance with the provisions of Section 4.5, including all expenses reasonably incurred in the trustee's defense if the employers fail to provide such defense after having been requested to do so in writing. 4.9. Compensation and Expenses. All costs, charges and expenses incurred by the trustee pursuant to Section 2.2(n) shall be paid from the trust fund to the extent not paid by the employers, and all other reasonable compensation, costs, charges and expenses incurred in the administration of this trust, as agreed upon between the committee and the -11- trustee, or between the committee and any investment manager or custodian, will, to the extent not paid by the employers be paid from the trust fund as the committee shall direct; provided that expenses incurred in con- nection with the sale, investment and reinvestment of the trust fund (such as brokerage, postage, express and insurance charges and transfer taxes) shall be paid from the trust fund, which shall be reimbursed by the Company. 4.10. Action by Company. Any action required or permitted to be taken by the Company under the Trust may be taken by the Chief Executive Officer of the Company or his designee or as provided in the Company's Program for Adoption and Administration of Employee Benefit Plans, as amended from time to time. 4.11. Warranty. The employers warrant that all directions or authorizations by the committee, whether for the payment of money or otherwise, will comply with the provisions of the plan and this trust. 4.12. Evidence. Evidence required of anyone under this agreement shall be signed, made or presented by the proper party or parties and may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable. 4.13. Waiver of Notice. Any notice required under this agreement may be waived by the person entitled to such notice. 4.14. Counterparts. This agreement may be executed in two or more counterparts, any one of which will be an original without reference to the others. 4.15. Gender and Number. Where the context admits, words denoting the masculine gender shall include the feminine and neuter genders, the singular shall include the plural, and the plural shall include the singular. 4.16. Scope of this Agreement. The plan and this trust will be binding on all persons entitled to benefits hereunder and their respective heirs and legal representatives, and upon the employers, the committee, the trustee, and any investment managers and custodians, and their successors and assigns. 4.17. Severability. If any provision of this agreement is held to be illegal or invalid, such illegality or invalidity shall not affect the remaining provisions of this agreement, and they shall be construed and enforced as if such illegal or invalid provision had never been inserted herein. -12- 4.18. Statutory References. Any references in this agreement to a section of the Code shall include any comparable section or sections of any future legislation that amends, supplements or supersedes that section. 4.19. Applicable Law. The plan and the trust shall be construed in accordance with the laws of the State of Indiana. ARTICLE V Insolvency 5.1. Insolvency. An employer shall be considered "insolvent" for purposes of this trust if the employer is unable to pay its debts as they become due or if its affairs become the subject of reorganization or liquidation proceedings as a debtor under federal bankruptcy laws. 5.2. Payments During Insolvency. At all times during the existence of this trust assets of the trust attributable to each employer (as reflected in the account maintained for that employer pursuant to Section 2.4) shall be subject to the claims of its general creditors in the event of the insolvency of the employer. Subject to the immediately following sentence, the trustee shall have no duty to inquire as to whether or not any employer is insolvent, but if the trustee has knowledge that an employer is insolvent (as defined in Section 5.1), the trustee shall discontinue benefit payments that otherwise would be charged to that employer's account and will deliver or otherwise make available assets of the trust attributable to that employer to satisfy the claims of that employer's creditors as directed by a court of competent jurisdiction. If a person claiming to be a creditor of an employer alleges in writing to the trustee that said employer has become insolvent, the trustee shall determine whether said employer is insolvent, and, pending such determi- nation, the trustee shall discontinue payment of benefits to participants employed or formerly employed by said employer (or to their beneficiaries); the trustee may rely on such evidence concerning said employer's insolvency as may be furnished to the trustee and that provides the trustee with a reasonable basis for making a determination concerning said employer's insolvency. If an employer becomes insolvent, the Secretary of the employer shall have the duty to promptly inform the trustee of the employer's insolvency. The committee shall have the same duty if and when it becomes aware that an employer has become insolvent. Participants and their beneficiaries shall not be granted greater rights to the trust fund by virtue of their rights under the plan than other general creditors of the employers, but no provision of the trust shall diminish the rights of a participant to pursue his rights as a general creditor of an employer with respect to any benefits he is entitled to under the plan, or otherwise. If the trustee discontinues payment of benefits pursuant to this Section 5.2, the trustee shall resume the payment of benefits only after determining that the employer is not insolvent (or is no longer insolvent); the first payment following such discontinuance shall include the aggregate amount of all payments due to participants (or to their beneficiaries) for the period of such discontinuance less the aggregate amount of any payments received -13- by said participants (or to their beneficiaries) during such period directly from their employer in lieu of payments provided for under this agreement. ARTICLE VI Resignation or Removal of Trustee 6.1. Resignation or Removal of Trustee. The trustee may resign at any time by giving thirty days' prior written notice to the employers, the committee, and the investment managers and custodians. The committee may remove a trustee by giving prior written notice to the trustee, the employers and the investment managers and custodians provided that such removal shall not become effective until the time immediately preceding the appointment of a successor trustee pursuant to Section 6.2. 6.2. Successor Trustees. In the event of the resignation or removal of the trustee, a successor trustee shall be appointed by the committee in writing as soon as practicable. Any successor trustee must be a bank or trust company which is established and operating under the laws of the United States, or a state within the United States, and which has a combined capital and surplus of at least $100,000,000. Written notice of such appointment shall be given by the committee to the employers, the predecessor trustee, and the investment managers and custodians. 6.3. Duties of Predecessor Trustee and Successor Trustee. A trustee that resigns or is removed shall promptly furnish to the committee and the successor trustee a final account of its administration of the trust. A successor trustee shall succeed to the right and title of the predecessor trustee in the assets of the trust fund and the predecessor trustee shall deliver the property comprising the trust fund to the successor trustee together with any instruments of transfer, conveyance, assignment and further assurances as the successor trustee may reasonably require. Each successor trustee shall have all the powers, rights and duties conferred by this agreement as if named the initial trustee. Subject to applicable law, no successor trustee shall be personally liable for any act or failure to act of a predecessor trustee. ARTICLE VII Amendment and Termination 7.1. Amendment. This trust may be amended from time to time by the company, except as follows: (a) The duties and liabilities of the committee, the trustee and each investment manager and custodian under this agreement cannot be changed substantially without their consent. -14- (b) Under no condition shall any amendment result in the return or repayment to any employer or any other corporation or other legal business entity related to an employer of any portion of the trust fund or the income therefrom, or result in the distribution of the trust fund for any purposes other than payment of obligations of the employers to their creditors, including participants. (c) This trust may not be amended so as to cause the reduction or cessation of any benefits a participant and his beneficiaries would receive now or in the future under the current terms of the plan as incorporated into and made a part of this agreement, nor may the trust be amended to make the trust revocable. An insurance company may assume that this agreement has not been amended or changed unless notice of such amendment is received by the insurance company at its home office. Notwithstanding the foregoing provisions of this Article VII, if a participant in the plan so requests and the Chief Executive Officer of the company approves, a separate plan and trust shall be established for such participant, with such terms as are agreed to by such participant and the company, the liabilities of the plan with respect to such participant shall be transferred to such new plan, and the pro- portion of the assets held in the trust fund equal to the proportion of the liabilities so transferred, shall be transferred to the separate trust for such participant under the new plan. 7.2. Termination. This trust shall not terminate, and all the rights, titles, powers, duties, discretions and immunities imposed on or reserved to the trustee, each employer, the committee and any investment managers and custodians shall continue in effect with respect to the trust, until all benefits payable to participants under the plan have been paid and all assets have been distributed by the trustee under the trust and the plan. Notwithstanding any other provision of this trust, the trust shall terminate one day prior to the expiration of a period of twenty-one years after the death of the last to die of any current or future employee of the employer who becomes a participant in the plan and who is alive on the day and year first above written. * * * IN WITNESS WHEREOF, the company and the trustee have caused this agreement to be executed on their behalf and their respective seals to be hereunto affixed and attested by their respective officers thereunto duly authorized, the day and year first above written. CLARK EQUIPMENT COMPANY By /s/ William N. Harper Its Vice President -15- ATTEST: /s/ John J. Moran, Jr. Its Assistant Secretary (Seal) WACHOVIA BANK OF NORTH CAROLINA, N.A. By /s/ Joe O. Long Its Senior Vice President ATTEST: /s/ John N. Smith, III Its Assistant Secretary (Seal) -16- EX-10 14 Exhibit 10(v) CLARK EQUIPMENT COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN 12.27.94 -1- CLARK EQUIPMENT COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN SECTION 1 Introduction 1.1. Plan. CLARK EQUIPMENT COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (the "Plan") is maintained by CLARK EQUIPMENT COMPANY (the "Company") for the benefit of eligible employees of the Company and of those affiliates of the Company which adopt the Plan for the benefit of their eligible employees. The Plan is not funded or qualified for special tax treatment under the Internal Revenue Code of 1986, as amended from time to time (the "Code"), and is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. 1.2. Effective Date and Plan Year. The Plan is established as of January 1, 1994. The "Plan Year" is the calendar year. 1.3. Employers. The Company and each other affiliate of the Company which adopts the Plan with the consent of the Company is referred to herein as an "Employer" and may be referred to collectively as the "Employers." 1.4. Purpose and Employment Agreements. The Plan has been established to supplement benefits provided by the Clark Equipment Company Retirement Program for Salaried Employees (the "qualified plan"), a plan which is intended to meet the requirements for qualification under Section 401(a) of the Code. To the extent benefits are limited under the qualified plan either (1) by application of the provisions of Code Section 401(a)(17) or Code Section 415, or by any other provision of the Code or other law or regulation that limits either the amount of pension benefits or the amount of compensation that can be used to determine pension benefits, or (2) by the fact that the compensation used for the calculation of benefits under the qualified plan does not include cash bonus amounts paid pursuant to the Company's Incentive Compensation Plan for Corporate Office Management, the Company's Incentive Compensation Plan for Business Unit Management, or any other cash incentive compensation plan applicable to officers or executives of the Company (collectively, the "Company's incentive compensation plans"), "Supplemental Benefits" are provided under the terms and condi- tions of this Plan. The Supplemental Benefits payable under the Plan are not intended to duplicate the payment of any Supplemental Benefits (as defined herein) pursuant to the terms of any employment agreement between the Employer and a Participant covered under the Plan. Accordingly, the Supplemental Benefits paid pursuant to the Plan shall be in satisfaction of, not in addition to, any obligation of an Employer to make such payments pursuant to an employment agreement with a Participant covered by the Plan. Schedule A to the Plan lists the employment agreement obligations to provide Supplemental Benefits that will be provided through the Plan. -2- SECTION 2 Participation and Supplemental Benefits 2.1. Eligibility and Participation. To be eligible and become a Participant in the Plan, a person must, on or after the effective date of the Plan, be both (1) either an employee of an Employer or one of the Retired Executives specified herein and (2) a participant in the qualified plan whose benefits are limited as described in this subsection 2.1 and enter into a participation agreement with the Company in a form satisfactory to the Company. No additional Participants may be added to the Plan after March 31, 1995 unless at the time they become Participants their accrued benefits are fully funded as provided in Section 3. Each eligible employee of an Employer will become a Participant hereunder as of the first day of the first plan year under the qualified plan for which the benefits of such employee that would otherwise accrue or be payable under such plan are not accrued or payable because such benefits are limited either (1) in accordance with Code Section 415, Code Section 401(a)(17), or by any other provision of the Code or other law or regulation that limits either the amount of pension benefits or the amount of compensation that can be used to determine pension benefits or (2) by the fact that the com- pensation used for the calculation of benefits under the qualified plan does not include cash bonus amounts paid (either before or after the effective date of the Plan) pursuant to the Company's incentive compensation plans, and thereafter the employee shall be eligible for benefits in accordance with subsection 2.2 as a "Participant" hereunder. In addition, as of the effective date of the Plan, Thomas C. Clarke and Robert N. Spolum, both retired executives of the Company (the "Retired Executives") shall be considered "Participants" in the Plan, but only to the extent of the Company's obligations to them for Supplemental Benefits (as defined herein) pursuant to the employment agreements identified in Schedule A hereof. Not-withstanding the foregoing provisions of this subsection 2.1, Frank M. Sims shall not be a Participant in the Plan. A person who becomes a Participant in the Plan shall continue to be a Participant until all benefits accrued for him hereunder have been paid as provided herein. 2.2. Supplemental Benefits. At the time that a Participant or his Beneficiary is entitled to benefits under the qualified plan, the Participant or Beneficiary shall be entitled to the "Supplemental Benefit" accrued for him hereunder. As of any date a Participant's accrued Supplemental Benefit shall be (A) the full amount of the benefit computed for such Participant using the pension formula under the qualified plan as of such date (based on total credited service under the qualified plan) except that, for such calculation, (1) the limitations of Code Section 415 and Code Section 401(a)(17), and of any other provision of the Code or other law or regulation that limits either the amount of pension benefits or the amount of compensation that can be used to determine pension benefits, are disregarded and (2) except with respect to the Retired Executives and those Participants who are not officers of the Company, the Participant's cash bonus payments received from an Employer pursuant to the Company's incentive compensation plans, regardless of whether paid before or after the effective date of the Plan, are included in his basic annual compensation rate (as defined in the qualified plan) as of January 1 of the -3- year in which each such bonus payment is made, less (B) the maximum amount of the benefit that can be provided under the terms of the qualified plan after application of the limitations imposed by the Code or other laws or regulations. For the purpose of the Plan, the term "officers of the Company" means the Chairman, President and Chief Executive Officer and all Vice Presidents. In computing the Supplemental Benefit, all offsets against the benefits payable under the qualified plan due to benefits payable from the Clark Equipment Company Leveraged Employee Stock Ownership Plan shall be disregarded. The Supplemental Benefit shall include all of the surviving spouse and optional forms of benefits available with respect to benefits payable from the qualified plan, and be subject to the same adjustment factors applicable to such forms of benefits. In determining the Supplemental Benefit for either of the Retired Executives and for Participants who are not officers of the Company, the cash bonus payments received by them from an Employer pursuant to the Company's incentive compensation plan shall not be included in the calculation. Notwithstanding the foregoing provisions of this subsection 2.2 or any other provisions of the Plan, with respect to a Participant who is a party to an employment agreement listed in Schedule A hereto, if at the time of the death of such Participant the Section of such employment agreement first identified in such Schedule A does not provide for the payment of Supplemental Benefits to the surviving spouse of such Participant, no Supplemental Benefits shall be payable to such spouse under the Plan. 2.3. Payment of Benefits. A Participant's Supplemental Benefit shall become payable beginning on the date that he or his Beneficiary begins receiving benefits under the qualified plan. Payment of a Participant's Supplemental Benefit shall be made either (a) in a lump sum equal to the present value of the Participant's Supplemental Benefit as of the date such lump sum payment is made, or (b) in a series of monthly in- stallments during the period that the Participant or his Beneficiary is entitled to payments from the qualified plan. If such payments are made in monthly installments, the Supplemental Benefit shall be paid at the same times and in the same form as the benefits payable to the Participant or his Beneficiary from the qualified plan. By filing a written election with the Administrator not later than twelve months prior to the date that he is eligible to begin to receive Supplemental Benefits under the Plan, a Participant may elect the method in which his Supplemental Benefit shall be paid. The present value of the Participant's Supplemental Benefit shall be determined by using the mortality table then being used by the Company's actuaries for valuation purposes for the qualified plan and the interest rate specified in Code Section 411(a)(11)(B)(ii) (or any successor section thereto) at the time the present value determination is made. Unless the Participant elects payment in monthly installments at least twelve months prior to the date that he is eligible to begin to receive Supplemental Benefits under the Plan, the Supplemental Benefit shall be payable in a lump sum on the date that Supplemental Benefits become payable; provided, however, the Retired Executives shall continue to receive Supplemental Benefits on a monthly basis. Notwithstanding the foregoing provisions of this subsection 2.3, a Participant other than the Retired Executives (or his Beneficiary) who is receiving Supplemental Benefits in monthly installments may request the Administrator to pay the then present value of the remaining balance of such benefits in a lump sum, and the Administrator may, in its discretion, but only with the approval of the Chief Executive -4- Officer of the Company, grant such request and cause such lump sum payment to be made in an amount determined as described in this subsection. In addition, notwithstanding the foregoing provisions of this subsection 2.3, if a Participant who is receiving Supplemental Benefits in monthly installments dies before the guaranteed number of monthly payments provided for in an applicable optional form of benefits have been paid, the present value of the balance of such guaranteed monthly payments, calculated as described in this subsection, shall be paid in a single lump sum to his estate or such other beneficiary as is entitled to such payment. 2.4. Benefits Provided by Employers. Benefits payable under this Plan to a Participant or his Beneficiary shall be paid directly by the Participant's Employer to the extent not paid by the trustee of the Clark Equipment Company Supplemental Executive Retirement Trust from such trust. No Employer shall be required to segregate any assets to be applied for the payment of benefits under this Plan. 2.5. Beneficiary. As used in the Plan, a Participant's "Beneficiary" is any person, including a Participant's spouse, eligible to receive benefits under the qualified plan or this Plan by reason of a Participant's service with an Employer. Unless the Participant has, in accordance with rules established from time to time by the Administrator, designated otherwise, his Beneficiary or Beneficiaries under this Plan shall be the same person or persons as his Beneficiary or Beneficiaries under the qualified plan. SECTION 3 Provisions Regarding Funding The Company has established and maintains the Clark Equipment Company Supplemental Executive Retirement Trust (the "Trust") to accumulate and hold assets to provide the benefits under the Plan, with the only exception being to the extent that such assets are required to be used to satisfy the claims of the Employers' creditors. The Company shall, subject to the right of the Employers' creditors, make periodic contributions to the Trust (at least annually) and maintain assets in the Trust to the extent necessary to maintain a level of funding (the "Plan funding level") for the benefits accrued under the Plan (regardless of whether such accrued benefits are fully vested or subject to any risk of forfeiture) that is at least equal to the actuarially determined value of those benefits (the "Plan benefit value"). Such actuarial determination shall be made at least annually (and in each case not more than twelve months after the last prior determination) assuming earliest possible commencement of benefits and using the same mortality table used by the actuary of the qualified plan for the purpose of determining funding requirements under ERISA and the interest rate specified in Code Section 411(a)(11)(B)(ii) (or any successor section thereto) at the time the Plan funding level determination is made provided, that with respect to the period, if any, from the valuation date to the date a benefit could first become payable (solely because of Plan provisions restricting benefit commencement) the interest rate used to discount such benefits for such period shall be the interest rate then being used by the Company's actuaries for the annual Code Section 412(a) valuation of the qualified plan. In making such actuarial determination, -5- all accrued benefits under the Plan which may become payable as a single lump sum shall be calculated as of the valuation date and assumed to be paid as soon as benefits could be paid if the Participant retired (if then eligible) or otherwise left employment as of the valuation date, except that the amount of the benefits payable under the Plan for each Participant shall be assumed to be at the projected highest amount that would be payable if the Participant retired or otherwise terminated employment at any time during the next succeeding twelve-month period. In the event that after a lump sum benefit settlement payment is made from the Trust to or on behalf of a Participant, due to retirement or other termination of employment, transfer of assets to a separate trust, or otherwise, the assets remaining in the Trust are less than 90% of the remaining liabilities of the Trust (based on the most recent valuation), a special actuarial determination of the Plan benefit value shall be made as provided herein and the Company shall then make such contributions to the Trust as are necessary to bring the Plan funding level up to the Plan benefit value. In the event that the Plan funding level exceeds 110% of the Plan benefit value, and the Company provides to the Trustee a certification by the actuary for the qualified plan of such funding status of the Plan, the Company may withdraw assets from the Trust to the extent of the surplus in excess of 110% of the Plan benefit value. The Company shall notify each Participant within thirty days after its notification of any determination of the Plan funding level if the accrued Plan benefits are not then fully funded, unless such funding deficiency is cured within such thirty-day period. The Company shall take all such actions as are necessary to assure that the type and quality of the assets held in the Trust will be such that they have sufficient liquidity to satisfy the ongoing cash needs of the Plan, and are subject to no more investment risk than the assets in the trust under the qualified plan. The Company shall contribute only Company owned life insurance policies or cash to the Trust. The Company shall provide to each Participant a copy of the annual reports of both the actuary and the independent public accountants regarding the adequacy of Plan funding, the reasonableness of the assumptions used to determine such funding, and such other matters as the Company requests be included in such reports. The Company shall also provide to each Participant an annual statement showing that Participant's accrued benefit amount, the amount funded, and the future projected lump sum and annual benefit amounts expected at ages 55, 62 and 65. SECTION 4 General 4.1. Administrator. This Plan will be administered by an "Administrator" which shall be the Company, or at the Company's election, one or more employees of the Company who are designated as "Administrator" by the Chief Executive Officer of the Company. No person who is an Administrator shall be liable for any act or action, whether of commission or omission, taken by any other person, or by any officer, agent, or employee; nor, except in circumstances involving his bad faith, for anything done or omitted to be done by himself; and the Company shall indemnify and hold each Administrator harmless from any claims of such liability and all costs (including attorney's fees) resulting therefrom. -6- 4.2. Claims. Any claim for benefits or payments under the Plan by a Participant or a Beneficiary shall be made in writing and delivered to the Company. If the Participant, or any Beneficiary following the Participant's death (collectively, the "Claimant"), notifies the Company in writing that he believes he has been denied any benefit payable under this Plan, either in total or by the payment of an amount less than the full benefit or payment to which the Claimant would normally be entitled, the Company shall advise the Claimant in writing of the amount of the benefit if any, and the specific reasons for any denial of benefits. The Company shall also furnish the Claimant at that time with a written notice containing: (a) Specific references to pertinent provisions of the Plan; (b) A description of any additional material or information necessary for the Claimant to perfect the claim if possible, and an explanation of why such material or information is needed; and (c) An explanation of the claim review procedure set forth in this subsection 4.2. Such written notice shall be sent to the Claimant within 90 days of the date the claim is filed. This 90-day period may be extended by the Administrator for an additional 90 days, provided a Claimant is notified of the reason for the extension and a date on which the Claimant may expect to receive a decision on his claim. Within 60 days of receipt of the information described above, a Claimant shall, if further review is desired, file a written request for reconsideration with the Administrator of the Plan. So long as the Claimant's request for review is pending (including such 60-day period), the Claimant or his duly authorized repre- sentative may review pertinent documents and may submit issues and comments in writing to the Administrator. A decision shall be made by the Administrator within 60 days of the filing by the Claimant of the request for reconsideration and shall be conveyed to the Claimant in writing and shall include specific reasons for the decision, which specifically reference the pertinent provisions of the Plan on which the decision is based. 4.3. Interests Not Transferable. The Company shall have the right to withhold from any payment under the Plan all taxes required to be withheld under the laws of the United States or any State, county, municipality or other taxing authority. Except as to any withholding of tax under such laws, the interest of any Participant, his spouse, minor children or other Beneficiary, under the Plan is not subject to the claims of their creditors and may not be voluntarily or involuntarily sold, transferred, assigned, alienated or encumbered. 4.4. Facility of Payment. Any amounts payable hereunder to any person under legal disability or who, in the judgment of the Administrator, is unable to properly manage his financial affairs may be paid to the legal representative of such person or may be applied for the benefit of such person in any manner which the Administrator may select. -7- 4.5. Gender and Number. Where the context admits, words in the masculine gender shall include the feminine gender, the plural shall include the singular, and the singular shall include the plural. 4.6. Controlling Law. To the extent not superseded by the laws of the United States, the laws of Indiana shall be controlling in all matters relating to the Plan. 4.7. Successors. This Plan is binding on each Employer and will bind and inure to the benefit of any successor of an Employer, whether by way of purchase, merger, consolidation or otherwise. 4.8. Continued Employment. The establishment or existence of this Plan shall not be construed to give any Participant the right to be retained in the Employer's service. 4.9. Action by Company. Any action required or permitted to be taken by the Company under the Plan may be taken by the Chief Executive Officer of the Company or his designee or as provided in the Company's Program for Adoption and Administration of Employee Benefit Plans, as amended from time to time. 4.10. No Guarantee of Retirement Benefits. The Plan is intended to pay benefits in addition to, and not in lieu of, any benefits to which a Participant or Beneficiary may be entitled under the qualified plan. If any benefits to which a Participant or Beneficiary may be entitled under the qualified plan are not paid for any reason, including, but not limited to, the lack of sufficient assets of the qualified plan to pay such benefits, such benefits shall not be paid from the Plan. 4.11. Qualified Domestic Relations Order. In the event a Participant's benefit under the qualified plan is subject to a qualified domestic relations order as defined in Section 414(p) of the Code, the Supplemental Benefit provided by this Plan shall be calculated and paid as if no qualified domestic relations order was in existence. 4.12. Amendment or Termination of Qualified Plan. In no event shall any amendment or the termination of the qualified plan after the effective date of the Plan reduce or eliminate the benefits accrued for any Participant in the Plan to the date of such amendment or termination. 4.13. Plan Expenses. All expenses of the Plan and of the Trust shall be paid by the Company. The Company shall promptly reimburse the Trust for any costs, fees, charges or expenses that are initially paid from the trust fund. SECTION 5 Amendment and Termination The Plan may be amended or terminated by action of the Board of Directors (or by the Human Effectiveness Committee or other duly authorized committee of the Board of Directors) of the Company only if such amendment or termination is consented to by all of those Participants and each -8- Beneficiary of each deceased Participant affected by the amendment or termination, provided that in no event shall any Participant's Supplemental Benefit accrued to the date of such amendment or termination be eliminated or reduced by such action. If the Plan is terminated, all assets of the Trust, after payment of expenses of administration and liquidation, will be allocated and distributed to Participants and Beneficiaries to the extent necessary to satisfy all liabilities payable under the Plan. Any assets remaining in the Trust after satisfaction of all liabilities described above will be distributed in accordance with the terms of the Trust. Not- withstanding the foregoing provisions of this Section 5, if a Participant in the Plan so requests and the Chief Executive Officer of the Company approves, a separate plan and trust shall be established for such Participant, with such terms as are agreed to by such Participant and the Company, the liabilities of the Plan with respect to such Participant shall be transferred to such new plan, and the proportion of the assets of the Trust equal to the proportion of the liabilities so transferred, shall be transferred to the separate trust for such Participant under the new plan. IN WITNESS WHEREOF, the undersigned duly authorized officer of Clark Equipment Company has caused the foregoing to be executed this 28th day of December, 1994. CLARK EQUIPMENT COMPANY By /s/ William N. Harper Its Vice President -9- SCHEDULE A Employment Agreement Benefit Obligations Provided under Clark Equipment Company Supplemental Executive Retirement Plan 1. Those benefit obligations provided pursuant to Section 3.4 of that certain amended and restated employment agreement between Thomas C. Clarke and Clark Equipment Company dated November 12, 1992 as may be amended from time to time, and any lump sum payment of such benefit obligations as provided for in Section 4 of said agreement. 2. Those benefit obligations provided pursuant to Section 3.4 of that certain amended and restated employment agreement between Thomas L. Doepker and Clark Equipment Company dated November 12, 1992 as may be amended from time to time, and any lump sum payment of such benefit obligations as provided for in Section 7 of said agreement. 3. Those benefit obligations provided pursuant to Section 3.4 of that certain amended and restated employment agreement between William N. Harper and Clark Equipment Company dated November 12, 1992 as may be amended from time to time, and any lump sum payment of such benefit obligations as provided for in Section 7 of said agreement. 4. Those benefit obligations provided pursuant to Section 3.4 of that certain amended and restated employment agreement between Bernard D. Henely and Clark Equipment Company dated November 12, 1992 as may be amended from time to time, and any lump sum payment of such benefit obligations as provided for in Section 7 of said agreement. 5. Those benefit obligations provided pursuant to Section 3.2 of that certain amended and restated employment agreement between Leo J. McKernan and Clark Equipment Company dated November 12, 1992 as may be amended from time to time, and any lump sum payment of such benefit obligations as provided for in Section 6 of said agreement. 6. Those benefit obligations provided pursuant to Section 3.4 of that certain amended and restated employment agreement between Robert N. Spolum and Clark Equipment Company dated September 1, 1992 as may be amended from time to time, and any lump sum payment of such benefit obligations as provided for in Section 3.5 of said agreement. A-1 EX-10 15 Exhibit 10(w) CLARK EQUIPMENT COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AMENDMENT No. 1 WHEREAS, Clark Equipment Company (the "Company") previously established the Clark Equipment Company Supplemental Executive Retirement Plan (the "Plan"); and WHEREAS, the Human Effectiveness Committee of the Board of Directors of the Company has approved the amendment of the Plan as described below; NOW, THEREFORE, the Plan is hereby amended effective as of February 15, 1995 in the following respects: 1. Subsection 2.1 of the Plan is amended by deleting the penultimate sentence of such subsection, which had excluded Frank M. Sims from being a Participant in the Plan. 2. Schedule A of the Plan is amended by adding thereto a new item 7 reading as follows: "7. Those benefit obligations provided pursuant to Section 3.4 of that certain amended and restated employment agreement between Frank M. Sims and Clark Equipment Company dated February 15, 1995 as may be amended from time to time, and any lump sum payment of such benefit obligations as provided for in Section 4 of said agreement." WHEREFORE, pursuant to the authority delegated by the Human Effectiveness Committee of the Board of Directors of Clark Equipment Company, this Amendment No. 1 is made and executed on this 6th day of March 1995, to become effective as specified herein. CLARK EQUIPMENT COMPANY By: /s/ Leo J. McKernan Leo J. McKernan Chairman, President and Chief Executive Officer EX-10 16 Exhibit (10)(x) CLARK EQUIPMENT COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AMENDMENT No. 2 WHEREAS, Clark Equipment Company (the "Company") previously established the Clark Equipment Company Supplemental Executive Retirement Plan (the "Plan"); and WHEREAS, the Human Effectiveness Committee of the Board of Directors of the Company has approved the amendment of the Plan as described below; NOW, THEREFORE, the Plan is hereby amended effective as of March 27, 1995 in the following respects: 1. Subsection 2.2 of the Plan is amended to read in its entirety as follows: "2.2. Supplemental Benefits. At the time that a Participant or his Beneficiary is entitled to benefits under the qualified plan, the Participant or Beneficiary shall be entitled to the "Supplemental Benefit" accrued for him hereunder. As of any date a Participant's accrued Supplemental Benefit shall be (A) the full amount of the benefit computed for such Participant using the pension formula under the qualified plan as of such date (based on total credited service under the qualified plan) except that, for such calculation, (1) the limitations of Code Section 415 and Code Section 401(a)(17), and of any other provision of the Code or other law or regulation that limits either the amount of pension benefits or the amount of compensation that can be used to determine pension benefits, are disregarded and (2) except with respect to the Retired Executives and any other Participants whose employment with the Company terminated prior to March 1, 1995, the Participant's cash bonus payments received from an Employer pursuant to the Company's incentive compensation plans, regardless of whether paid before or after the effective date of the Plan, are included in his basic annual compensation rate (as defined in the qualified plan) as of January 1 of the year in which each such bonus payment is made, less (B) the maximum amount of the benefit that can be provided under the terms of the qualified plan after application of the limitations imposed by the Code or other laws or regulations. In computing the Supplemental Benefit, all offsets against the benefits payable under the qualified plan due to benefits payable from the Clark Equipment Company Leveraged Employee Stock Ownership Plan shall be disregarded. The Supplemental Benefit shall include all of the surviving spouse and optional forms of benefits available with respect to benefits payable from the qualified plan, and be subject to the same adjustment factors applicable to such forms of benefits. In determining the Supplemental Benefit for either of the Retired Executives and any other Participants whose employment with the Company terminated prior to March 1, 1995, the cash bonus payments received by them from an Employer pursuant to the Company's incentive compensation plan shall not be included in the calculation. Notwithstanding the foregoing -1- provisions of this subsection 2.2 or any other provisions of the Plan, with respect to a Participant who is a party to an employment agreement listed in Schedule A hereto, if at the time of the death of such Participant the Section of such employment agreement first identified in such Schedule A does not provide for the payment of Supplemental Benefits to the surviving spouse of such Participant, no Supplemental Benefits shall be payable to such spouse under the Plan." 2. Subsection 2.3 and Section 3 of the Plan are each amended by replacing the phrase "the interest rate specified in Code Section 411(a)(11)(B)(ii) (or any successor section thereto)" with the phrase "the interest rate that would be used by the Pension Benefit Guaranty Corporation for purposes of determining the present value of a lump sum distribution on the termination of a plan subject to Title IV of the Employee Retirement Income Security Act of 1974, as amended, formerly referred to in Section 411(a)(11)(B)(ii) of the Internal Revenue Code of 1986". 3. Section 5 of the Plan is amended by inserting the word "adversely" just before the word "affected" in the first sentence thereof. WHEREFORE, pursuant to the authority delegated by the Human Effectiveness Committee of the Board of Directors of Clark Equipment Company, this Amendment No. 2 is made and executed on this 28th day of March 1995, to become effective as specified herein. CLARK EQUIPMENT COMPANY By: /s/ Leo J. McKernan Leo J. McKernan Chairman, President and Chief Executive Officer -2- EX-10 17 Exhibit (10)(y) Clark Equipment Company 100 North Michigan Street P.O. Box 7008 South Bend, IN 46634 PARTICIPATION AGREEMENT January 10, 1995 Participant Address Dear Participant: Clark Equipment Company ("CLARK") has established the Clark Equipment Company Supplemental Retirement Income Plan For Certain Executives (the "Plan"), effective as of January 1, 1994, to provide supplemental benefits for certain executives of CLARK and its affiliates. In further consideration of the future services to be rendered by you, CLARK proposes to include you as a participant in the Plan, subject to the terms and conditions described herein and the terms of the Plan. Specifically, CLARK proposes the following: 1. Participation. You will become a participant in the Plan upon your execution of this letter ("this Agreement"). 2. Funding. CLARK has established the Clark Equipment Company Deferred Benefit Trust (the "Trust") to accumulate and hold assets to provide the benefits of the Plan. CLARK agrees that it will fund and maintain assets in the Trust as provided in the Plan, subject to the terms of the Plan and of the Trust including, without limitation, the provisions of the Trust protecting the rights of CLARK's creditors in the event of CLARK's insolvency. 3. No Employment Guarantee. Nothing contained in this Agreement shall constitute an agreement, either by you or by CLARK, to continue your employment with CLARK. 4. Plan and Trust Continuation. CLARK agrees that it will continue to maintain, and will not amend or terminate, the Plan and the Trust except as expressly permitted by the terms of the Plan and the Trust. A copy of the Trust, which includes the Plan as Exhibit I, is attached. If the foregoing is entirely satisfactory to you, please sign and return the attached copy of this letter whereupon it shall constitute an agreement between us as of the date first set forth above. Very truly yours, CLARK EQUIPMENT COMPANY Accepted and Agreed to: By /s/ Frank M. Sims /s/ Participant Frank M. Sims Senior Vice President Attachment (SRIPCE) 12.27.94 EX-10 18 Exhibit (10)(z) Clark Equipment Company 100 North Michigan Street P.O. Box 7008 South Bend, IN 46634 PARTICIPATION AGREEMENT January 10, 1995 Participant Address Dear Participant: Clark Equipment Company ("CLARK") has established the Clark Equipment Company Supplemental Executive Retirement Plan (the "Plan"), effective as of January 1, 1994, to provide supplemental benefits for certain executives of CLARK and its affiliates. In further consideration of the future services to be rendered by you, CLARK proposes to include you as a participant in the Plan, subject to the terms and conditions described herein and the terms of the Plan. Specifically, CLARK proposes the following: 1. Participation. You will become a participant in the Plan upon your execution of this letter ("this Agreement"). 2. Funding. CLARK has established the Clark Equipment Company Supplemental Executive Retirement Trust (the "Trust") to accumulate and hold assets to provide the benefits of the Plan. CLARK agrees that it will fund and maintain assets in the Trust as provided in the Plan, subject to the terms of the Plan and of the Trust including, without limitation, the provisions of the Trust protecting the rights of CLARK's creditors in the event of CLARK's insolvency. 3. No Employment Guarantee. Nothing contained in this Agreement shall constitute an agreement, either by you or by CLARK, to continue your employment with CLARK. 4. Plan and Trust Continuation. CLARK agrees that it will continue to maintain, and will not amend or terminate, the Plan and the Trust except as expressly permitted by the terms of the Plan and the Trust. A copy of the Trust, which includes the Plan as Exhibit I, is attached. If the foregoing is entirely satisfactory to you, please sign and return the attached copy of this letter whereupon it shall constitute an agreement between us as of the date first set forth above. Very truly yours, CLARK EQUIPMENT COMPANY Accepted and Agreed to: By /s/ Frank M. Sims /s/ Participant Frank M. Sims Attachment Senior Vice President (SERP) 12.27.94 EX-10 19 Exhibit (10)(aa) CLARK EQUIPMENT COMPANY RETIREMENT PLAN FOR OUTSIDE DIRECTORS Adopted the 21st day of March, 1994, by action of the Human Effectiveness Committee of the Board of Directors of Clark Equipment Company ("Clark"). 1. Statement of Purpose 1.1 This Plan is adopted in order to encourage and reward long-term service on the Board of Directors of Clark by those Directors who are not employees of Clark and whose loyal service on the Board is of great benefit to the Company. 2. Definitions Whenever used in this Plan the following terms shall have the following meanings: 2.1 "Board of Directors" or "Board" means the Board of Directors of the Company. 2.2 "Company" means Clark Equipment Company. 2.3 "Director" means a member of the Board of Directors of the Company. 2.4 "Outside Director" means a Director who is not an employee of the Company or any of its subsidiaries. 2.5 "Plan" means the Clark Equipment Company Retirement Plan for Outside Directors, as set forth herein. 2.6 "Retired Director" means a Director who is eligible for Retirement Benefits in accordance with the terms of the Plan. 2.7 "Retirement" means ceasing to be a Director and qualifying for Benefits under the Plan. 2.8 "Retirement Benefits" or "Benefits" means the amounts payable under the Plan to a Retired Director. 2.9 "Service" means the continuous period of time that the Director has served as an Outside Director. Service will be credited at the rate of 1/12 year for each month (or fraction of a month) served as an Outside Director, including any such time accrued prior to the effective date of this Plan. No service will accrue under this Plan for any Outside Director who is entitled to any benefits from any other pension plan sponsored, maintained or contributed to by the Company or any of its subsidiaries. 3. Eligibility. In order to be eligible for Retirement Benefits, the Director must, at the time that he or she ceases to be a Director, be an Outside Director, be at least 65 years of age and have at least five years of Service. -1- 4. Benefit Amount. The Retirement Benefits payable to a Director will be paid monthly in installments equal to one-twelfth (1/12th) of the annual cash retainer in effect for such Director (excluding Board and Committee meeting fees) immediately preceding his or her separation from service on the Board of Directors. 5. Benefit Commencement and Duration. The payment of Retirement Benefits will begin with the first month following the later of the Director's 70th birthday or his or her separation from Service on the Board and will continue until the earlier of (a) the completion of the payment of the number of monthly payments equal to the number of months of Service that the Director had at the time of his or her Retirement, (b) the death of the Retired Director, or (c) such time as the Human Effectiveness Committee of the Board reasonably determines that the Retired Director has violated the provisions of Section 11 or Section 12 of this Plan. 6. Source of Benefits. The Benefits payable under this Plan will be paid by the Company to the Retired Director. 7. Interpretation and Administration. The Plan will be interpreted and administered by the Human Effectiveness Committee of the Board, which shall determine eligibility for and amount, and authorize the payment, of Retirement Benefits. 8. Inalienability. The Benefits payable pursuant to this Plan are payable solely to the eligible Retired Director. No right or title to, or other interest in, such Benefits shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber or charge shall be void. 9. Incompetency. In the event that a Retired Director shall be determined by a court to be incompetent to look after his or her own affairs, any Benefits payable under the Plan to such Retired Director shall be paid to the guardian, conservator, committee or other legal representative appointed for him or her by such court. 10. No Right to Continue. Nothing contained herein shall be construed to confer on any Director the right to continue to be nominated as a Director, or to serve as a Director, of the Company. 11. Confidentiality. No benefits will be payable pursuant to this Plan to any Retired Director who uses, discloses, gives, sells, publishes or otherwise divulges to any person, firm or corporation any confidential information regarding the Company, VME Group N.V., or any of their subsidiaries, affiliates or joint venture companies. The term "confidential information" shall include but not be limited to any aspect of such companies' business, trade secrets, strategies, potential acquisitions or divestitures, discussions relating to acquisitions or divestitures, financial statements or other financial information, employee relations and employee compensation information, forecasts, operations, business plans, product marketing and sales, prices, discounts, products, product specifications, designs, plans, processes, data and know-how, ideas, technical information and -2- intellectual property, except such information as is otherwise made publicly available by such companies. 12. Non-Compete. No benefits will be payable pursuant to this Plan to any Retired Director who engages in any manner in competition with the Company, VME Group N.V., or any of their subsidiaries, affiliates or joint venture companies anywhere in the world with respect to any aspect of the business which at any time is being conducted by the Company or any of such other companies (collectively, the "Business"), including without limitation, the design, manufacture, sale or distribution of products or the providing of services which are similar to or competitive with those of any of such companies, or becoming a director, employee or representative of any person, firm or company which engages in such activity in competition with the Business. 13. Effective Date. This Plan shall become effective when adopted by the Human Effectiveness Committee of the Board and shall apply to those eligible Outside Directors whose Service on the Board terminates on or after such date. 3.9.94 -3- EX-13 20 EXHIBIT 13 CLARK EQUIPMENT COMPANY PORTIONS OF ANNUAL REPORT TO STOCKHOLDERS INCORPORATED BY REFERENCE INTO FORM 10-K MANAGEMENT'S DISCUSSION AND ANALYSIS GENERAL OVERVIEW Organizational Changes In the second quarter of 1994, the Company completed the sale of Clark Automotive Products Corporation (CAPCO) through an initial public offering. CAPCO manufactures transmissions, primarily for on-highway applications, for sale in Brazil and North America. Clark sold approximately 91% of its interest in CAPCO and received net proceeds of approximately $103 million. A gain of approximately $33 million was realized on the sale. The results of CAPCO have been deconsolidated to reflect its operations as discontinued in the Statement of Income for all periods presented. In May 1994, the Company purchased Blaw-Knox Construction Equipment Corporation (Blaw-Knox). Blaw-Knox is a leading manufacturer of asphalt pavers sold in North America and other world markets. The purchase price was approximately $145 million. The balance sheet and the results of operations of Blaw-Knox are included in the consolidated accounts of Clark subsequent to the acquisition date. If Blaw-Knox had been consolidated with Clark from January 1, 1993, pro forma sales would have been $984.6 million in 1994 and $780.0 million in 1993. As reported by the Company on a Form 8-KA filed on July 27, 1994, the pro forma impact on Clark of the acquisition of Blaw-Knox as of January 1, 1993, would have increased full-year 1993 net income from continuing operations by $0.19 per share, and would have increased first quarter 1994 net income from continuing operations by $0.12 per share. VME Group N.V. (VME) is a joint venture owned 50% by the Company and 50% by AB Volvo of Sweden that manufactures and sells construction and earth-moving equipment. On March 5, 1995, Clark agreed to sell its shares in VME to Volvo for $573 million. VME is reflected as a discontinued operation in the Statement of Income for all periods presented. The Company sold its Clark Material Handling Company (CMHC) business unit to Terex Corporation (Terex) on July 31, 1992, and recorded a gain of $8.5 million in the third quarter of 1992. The Statement of Income for 1992 has deconsolidated CMHC, reflecting its operations as a discontinued operation. Operational Review Clark's continuing operations, consisting of the Melroe, Blaw-Knox, and Clark-Hurth Components business units, improved substantially in 1994 compared with 1993, reflecting strong economic growth in the industries served. Sales in 1994 increased 36.8% over 1993 and Clark reported net income from continuing operations of $62.8 million, or $3.61 per share, compared with $21.6 million, or $1.24 per share, for 1993. The sales increase was the result of improved sales levels at both Clark-Hurth Components and Melroe, and includes incremental sales of approximately -1- $65.6 million from the acquisition of Blaw-Knox in May 1994. The 1994 results included special items that, in aggregate, lowered net income by $2.5 million, or $0.14 per share. These were: 1) an after-tax expense of $7.0 million for stock incentive programs resulting from increases during the year in the Company's stock price; 2) an after-tax gain of $2.7 million on the sale of certain overseas bonds; and 3) an after-tax gain of $1.8 million on the sale of a facility in Atlanta, Georgia. Included in the results for 1993 were several special items that, in aggregate, lowered net income by $8.7 million, or $0.50 per share. They were: 1) a $3.3 million after-tax charge for manpower reductions at Clark-Hurth Components; 2) an after-tax expense of $9.7 million for stock incentive programs resulting from an increase in the Company's stock price; 3) an after-tax refund of $3.5 million from the U.S. Customs Service as settlement of a disputed drawback claim; 4) a $2.2 million after-tax charge for the field retrofit of one skid-steer loader model with an additional hydraulic lock-out system to prevent potential misuse; and 5) a decrease in the Company's tax provision by $3.0 million, reflecting the impact of the 1993 retroactive increase in U.S. tax rates on recorded deferred tax assets. Clark's results from discontinued operations increased to $99.1 million, or $5.69 per share, in 1994 from $20.3 million, or $1.17 per share, in 1993. VME reported significantly higher earnings of $64.9 million, or $3.73 per share, in 1994 compared with $7.8 million, or $0.45 per share, in 1993. This increase resulted from improved economic conditions and higher operating margins resulting from past cost-containment efforts. Also included in discontinued operations are the results of CAPCO, which in 1994 had income of $34.2 million, or $1.96 per share, primarily related to the gain on the sale of CAPCO. This compared with $12.5 million, or $0.72 per share, for CAPCO operations in 1993. Net income, including continuing and discontinued operations and the impacts of accounting changes, was $161.9 million, or $9.30 per share, in 1994 compared with $48.0 million, or $2.76 per share, in 1993. The 1993 results include a change in accounting for income taxes at VME, which contributed $6.2 million, or $0.35 per share, to Clark's earnings. In 1993, Clark's net results for continuing operations improved approximately 79.6% compared with 1992 results, reflecting increased sales and margins. Sales in 1993 increased 5.1% over 1992 and Clark reported net income from continuing operations of $21.6 million compared with $12.0 million for 1992. The profitability of VME improved from 1992, reflecting higher production, better price realization, savings from cost-reduction activities, and the devaluation of the Swedish krona. Clark reported equity income in VME operations of $7.8 million in 1993 compared with a loss of $48.1 million in 1992. Clark's share of the 1992 loss included an $8.5 million restructuring charge to close VME's St. Thomas, Ontario, plant and restructure its North American production operations. The charge encompassed employee termination costs, the write-down of certain assets, and moving and start-up costs for production transferred to Asheville, North Carolina, from St. Thomas. -2- In the years ended December 31, 1993 and 1992, the Company has reflected accounting changes in the Statement of Income. Effective January 1, 1992, the Company adopted the provisions of Statement of Financial Accounting Standards (FAS) No. 109, "Accounting for Income Taxes." Adoption of this Statement resulted in the recognition of a cumulative tax benefit of $92 million related to the recognition of previously unrecognized net deferred tax assets. Effective January 1, 1993, VME adopted FAS No. 109. Clark's share of the cumulative tax benefit resulting from this accounting change was $6.2 million. At the same time, VME also adopted FAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and will recognize its estimated postretirement obligation for health and life insurance benefits on a transitional basis over 20 years. A charge of $1.4 million, which represents Clark's share, is included in the 1994 and 1993 VME results. RESULTS OF OPERATIONS Continuing Operations: Sales in 1994 totaled $946.6 million, an increase of 36.8% from the 1993 level of $692.0 million. The 1993 sales increased 5.1% from the 1992 level of $658.5 million. The 1994 sales increase of $254.6 million relates mostly to volume improvement and includes incremental sales of $65.6 million from the acquisition of Blaw-Knox in May 1994. Minor price increases also contributed to the sales improvement. Favorable foreign currency translation increased sales by about $0.5 million. Strength in North American construction machinery markets was the primary cause of the 1994 sales increase. Selected European markets also showed some improvement. Excluding Blaw-Knox sales, North American sales increased by $128.5 million, or 28.2%, in 1994 when compared with 1993, and overseas sales increased $60.5 million, or 25.5%, when comparing the same period. The 1993 sales increase of $33.5 million over 1992 related to volume and price improvements and offset an unfavorable foreign currency translation impact of about $29 million. North American sales increased $88.8 million, or 24.3%, and overseas sales decreased $55.3 million, or 18.9%, when comparing 1993 with 1992. The North American increase was mostly volume-related, while about 53% of the overseas decrease was related to changes in foreign currency translation rates. Gross margins were $199.1 million, or 21.0% of sales, in 1994 compared with $134.9 million, or 19.5% of sales, in 1993. The gross margin percentage increased in 1994 over 1993 as a result of improved capacity utilization at Clark-Hurth Components and the contribution of Blaw-Knox. Gross margins were $114.2 million, or 17.3% of sales, in 1992. The progressive improvement in each of these years relates to higher utilization levels and realizing benefits from cost-containment programs implemented beginning in 1990. -3- The Company translates its financial statements in accordance with FAS No. 52. The impacts of foreign currency and exchange transactions included in cost of goods sold were gains of $0.6 million in 1994 and losses of $0.8 million and $1.0 million in 1993 and 1992, respectively. The Company exports certain products manufactured in the United States, principally for sale in European countries. In addition, certain products are manufactured in Europe for export sale, primarily in other European countries. These sales are typically invoiced in the currency of the country in which the products are sold. The relative strength or weakness of the currency of the country in which the products are manufactured can impact the profitability of these sales. The Company uses forward exchange contracts to reduce some of the uncertainty related to these sales transactions. Through use of forward exchange contracts, the Company is able to predetermine the value it will receive for these sales in terms of the currency where the product is manufactured. This enables the Company to better estimate its gross margins relating to these sales and to take appropriate steps in advance to improve margins through overall cost-reduction or pricing actions. The Company limits its use of forward exchange contracts so that it is reasonably assured that the transactions it intends to protect will occur. The Company has adopted a policy of reflecting these contracts at their market value to the extent that significant unrealized gains or losses exist. In accordance with this policy, a loss of approximately $0.8 million was recorded at December 31, 1994. Prior to the adoption of this policy, the Company followed a practice of recognizing significant losses currently and reflecting market value gains as derivative transactions closed. At December 31, 1994 and 1993, the Company had forward exchange contracts of $82 million and $95 million, respectively. The 1994 contracts mature periodically over the next 12 months and foreign-denominated sales transactions are expected to occur coincidental with the expiration of these instruments. The fair value of these contracts approximated the book value, as adjusted at each of the reporting periods. The Company believes that it has entered foreign exchange contracts covering about half of its 1995 expected cross-border sales. Cross-border sales transactions not effectively covered by forward exchange contracts are subject to currency fluctuations which could have an effect on future profit levels. Research and development expenses of $15.6 million, $17.0 million, and $14.7 million were included in cost of goods sold in 1994, 1993, and 1992, respectively. The level of spending reflects the Company's commitment to develop new products and further enhance the quality of existing products through use of the latest technologies. Due to reductions in domestic inventory levels, $1.8 million of LIFO income was recorded as a reduction of cost of goods sold in the fourth quarter of 1992. LIFO adjustments were not material in 1994 or 1993. -4- Selling and, general administrative expenses were $107.7 million, or 11.4% of sales, in 1994 compared with $102.7 million, or 14.8% of sales, in 1993 and $87.9 million, or 13.4% of sales, in 1992. The 1994 increase in the expenses from 1993 was principally related to volume- and promotional-related selling expenses. It also includes incremental expense of about $4.1 million due to the Blaw-Knox acquisition in May 1994, partially offset by a reduction of $4.4 million in expense related to stock incentive programs. The decrease as a percentage of sales resulted from higher sales and the fixed nature of certain of these expenses. The 1993 increase in expenses from 1992 was related to higher sales volume, retiree health care costs, and compensation-related matters, including stock incentive programs, which accounted for essentially all of the overall expense increase. Operating income from continuing operations in 1994 increased about 184% to $91.4 million from the 1993 level of $32.2 million. This compares with $26.3 million in 1992. The increased level of operating income for 1994 and 1993 is attributable to higher sales and higher gross margins, partially offset by increases in selling, general and administrative expenses. Other income was $20.7 million in 1994, compared with $15.0 million in 1993 and $14.9 million in 1992. The 1994 increase of $5.7 million from 1993 resulted from gains of about $4.2 million on the sale of certain overseas bonds and $2.8 million on the sale of a facility in Atlanta, Georgia. These gains were partially offset by reduced miscellaneous revenues and a decrease of $0.4 million in interest income. In August 1994, Melroe and Marubeni Corporation, a Japanese firm, completed a joint venture agreement to export Bobcat skid-steer loaders and attachments manufactured in North Dakota and market them in Japan. The new company, which is owned equally by Melroe and Marubeni, is headquartered in Yokohama, Japan. The Company's investment at December 31, 1994, was $1.1 million and is accounted for by the equity method. Clark has recorded an equity loss of $0.5 million for its share of the 1994 partial year operation and has classified this loss in other income. Other income in 1993 includes $1.7 million of interest from a duty drawback refund received from the U.S. Customs Service and an additional $1.8 million of interest resulting from the settlement of U.S. tax audits for 1989 through 1991. Excluding these items from 1993 interest income, the 1994 interest income was higher by $3.1 million, as a result of higher interest rates on invested cash. Interest expense was $20.0 million in 1994, compared with $21.4 million in 1993 and $23.5 million in 1992. The decrease in each year is due to lower average debt balances outstanding in each succeeding period. Pre-tax income from continuing operations was $92.1 million in 1994, $25.8 million in 1993, and $17.8 million in 1992. The year-to-year improvement reflects higher sales, improved gross margins, and the impact of expense-control actions taken in prior years, principally during 1991. -5- Tax provisions of $29.3 million, $4.2 million, and $5.8 million were recorded in 1994, 1993, and 1992, respectively. The effective tax rate in 1994 was 31.8%, which is somewhat less than the U.S. statutory rate as a result of the utilization of certain previously unrecognized foreign net operating loss carryforwards, which reduced the income tax provision by $3.3 million, and the existence of certain components of U.S. income which are not subject to tax. The 1993 effective tax rate was 16.3%. The U.S. corporate income tax rate was increased from 34% to 35% retroactive to January 1, 1993, and a tax credit of $3.0 million was recorded as net U.S. deferred tax assets were revalued at the higher tax rate. Without this item, the effective tax rate would have been 27.9% for 1993. The effective tax rate for 1992 was 32.4%. The tax rates in both years have been reduced by the utilization of capital loss carryforwards and other credits in the United States and net operating loss carryforwards at certain foreign locations. These impacts reduced the overall tax provisions by approximately $1.2 million in 1993 and $1.9 million in 1992. DISCONTINUED OPERATIONS Results from discontinued operations were income of $99.1 million in 1994 and $20.3 million in 1993, and losses of $38.1 million in 1992. The components of these results are as follows: Amounts in millions 1994 1993 1992 Income (loss): VME Group N.V. (50%) $64.9 $ 7.8 $(48.1) CAPCO operations 1.3 12.5 8.2 gain on sale 32.9 CMHC operations (7.1) gain on sale 8.5 Insurance subsidiary 0.4 $99.1 $20.3 $(38.1) VME Group N.V. Equity in the net results of VME, Clark's 50%-owned joint venture, was income of $64.9 million and $7.8 million in 1994 and 1993, respectively, and losses of $48.1 million in 1992. VME sales were $1,566 million in 1994, compared with $1,240 million in 1993 and $1,357 million in 1992. The 1994 VME earnings improvements were driven by higher sales volumes, improved price realization, and lower interest costs due to declining debt levels. North American markets continued to show strength in all product lines and certain markets in Western Europe, such as Great Britain and Scandinavia, also improved. The 1993 improvement in operating performance over 1992 was the result of higher capacity utilization; improved margins due to better price realization, partially accounted for by the devaluation of the Swedish krona; and savings from cost-reduction activities initiated in 1992. Clark's share of the 1992 loss was $48.1 million, and included the impacts of Swedish currency devaluation of approximately $2.0 million and a special charge of approximately $8.5 million to close VME's St. Thomas, Ontario, plant and restructure its North American production operations. -6- The charge encompassed employee termination costs, the write-down of certain assets, and moving and start-up costs for production transferred to Asheville, North Carolina, from St. Thomas. On November 17, 1993, VME and Hitachi Construction Machinery Co. Ltd., both worldwide suppliers of construction and mining equipment, signed an agreement to establish a joint venture company in the rigid hauler business. The joint venture company, named Euclid-Hitachi Heavy Equipment Inc., became operational on January 1, 1994. Its headquarters is located in Cleveland, Ohio. During 1992, the Company and AB Volvo each invested $15 million of additional capital into VME, along with an additional $35 million in subordinated loans. Discontinued operations in 1992 included the results of an insurance subsidiary which had been held for sale. The subsidiary continues to be liquidated, and due to immateriality, these results have been reclassified into other income in 1993 and 1994. The investment in this operation has been classified on the Company's Balance Sheet in "other assets" for the periods presented. ACCOUNTING CHANGES Effective January 1, 1992, the Company adopted FAS No. 109. This resulted in the recognition of a cumulative net tax benefit of $92 million related to the recognition of previously unrecognized net deferred tax assets. In adopting FAS No. 109, the Company considered the cyclicality of its business, the nature of its prior operating losses, and the probable turnaround of temporary book and tax differences. Through this assessment, management has concluded that with the restructuring actions undertaken in prior years, including the sale of CMHC, Clark will be sufficiently profitable in the long-term to realize the tax benefits related to its temporary differences. In the adoption, Clark generally did not reflect benefits related to foreign net operating loss carryforwards or U.S. capital loss carryforwards, due to the limited nature of the carryforward periods and limitations on use. The underlying business conditions surrounding the operations that gave rise to the operating loss carryforwards were also considered. At December 31, 1994, the Company is continuing to follow a policy of recognizing the benefit of these carryforwards when realized. Effective January 1, 1993, VME adopted FAS No. 109; Clark's share of the cumulative tax benefit resulting from this accounting change was $6.2 million. VME also adopted FAS No. 106, effective January 1, 1993, and will recognize its estimated obligation on a transitional basis over 20 years. A charge of $1.4 million, which represents Clark's share, is included in the VME results in both 1994 and 1993. -7- CONTINGENCIES Environmental The Company is involved in environmental clean-up activities or litigation in connection with eight former waste disposal sites and four former plant locations. The Company also is involved in an environmental clean-up action at one current location. Additionally, the Company is a defendant in a lawsuit filed by the United States Environmental Protection Agency (EPA) that seeks civil penalties for alleged violations of the Clean Water Act, arising out of the discharge of certain metal finishing wastewaters generated at a current plant operating site. At each of the eight waste disposal sites, Clark contracted with independent waste disposal operators to properly handle the disposal of its waste. The EPA also has identified other parties responsible for clean-up costs at the waste disposal sites. The Company has and will continue to accrue for these costs when the liability can be reasonably estimated. As of December 31, 1994 and 1993, the Company had reserves of approximately $16.0 million and $16.4 million, respectively, for potential future environmental clean-up costs. The environmental reserves represent Clark's current estimate of its liability for environmental clean-up costs and are not reduced by any possible recoveries from insurance companies. The Company's estimate of its liability is based upon: 1) the estimated costs of investigating and remediating the environmental contamination at each site and 2) the Company's estimated share of the liability at the site. Estimated costs of remediation can change as the site investigation and remediation progresses and additional information becomes available. Further, these estimated costs can change if the selected remedial action at a site is not effective and additional work is required. In addition, the development of new remediation technologies could impact these costs. In estimating its share of the potential liability at a site, the Company takes into account the contributions to the clean-up costs that will be paid by other potentially responsible parties. The Company's share of the potential liability could therefore change if other potentially responsible parties become financially insolvent or dispute their liability. As a result of the possibility of changes in remedial cost estimates and in the Company's share of liability, the Company continually monitors the adequacy of its reserves and makes adjustments as necessary. Based upon the information presently available to it, the Company does not believe that it will incur any material costs in excess of the amount of its reserves as a result of any such changes. Although management cannot determine whether or not a material effect on future operations is reasonably likely to occur, it believes that the recorded reserve levels are appropriate estimates of its potential liability for environmental clean-up costs. Further, management believes that the additional maximum exposure level in excess of the recorded reserve level would not be material to the financial condition of the Company. Although settlement of the reserves will cause future cash outlays, it is not expected that such outlays will materially impact the Company's liquidity position. The Company's expenditures in 1994 and 1993 -8- relating to environmental compliance and clean-up activities approximated $2.1 million and $2.6 million, respectively. Sale of CMHC The Company sold its forklift truck business, CMHC, to Terex in 1992. As part of the sale, Terex and CMHC assumed substantially all of the obligations of the Company relating to CMHC operations, including: 1) contingent liabilities of the Company with respect to floor plan and rental repurchase agreements, 2) certain guarantees of obligations of third parties, and 3) existing and future product liability claims involving CMHC products. In the event that Terex and CMHC fail to perform or are unable to discharge any of the assumed obligations, the Company could be required to discharge such obligations. Uncertainty exists as to the ultimate effect on Clark if Terex and CMHC fail to perform these obligations and commitments. While the aggregate losses associated with these obligations could be material, the Company does not believe such an event would materially affect the Company's ability to meet its cash requirements. In their latest report on the financial statements that were filed as a part of Terex's 10-K for 1992, Terex's independent accountants indicated that Terex's recurring losses, its capital deficiency, and its inability to borrow additional funds under a bank lending agreement raised doubts about Terex's ability to continue as a going concern. Terex has filed its report on Form 10-Q for the third quarter of 1994 which indicates that it has reported net income for the three and nine month periods ended September 30, 1994, of $1.0 million and $.2 million, respectively. This compares with losses of $15 million and $45 million for the three and nine month periods ended September 30, 1993. The third quarter and nine month 1994 results include $4.3 million and $29.1 million, respectively, of gains related to sales of non-strategic assets. According to this Form 10-Q, cost-reduction actions have been implemented during 1994 and additional asset sales are expected to be completed in the fourth quarter of 1994. In its 10-Q, Terex indicates that with its existing credit facilities and through its other financing and cash-generating activities, it expects to be able to meet its obligations on a timely basis. Other Clark has certain other contingent liabilities that have arisen in the normal course of business. These, along with additional details on the sale of CMHC, are discussed further in the Notes to Consolidated Financial Statements, pages 34 to 38. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1994, the Company's cash and short-term investments amounted to $228.6 million compared with $235.8 million at December 31, 1993. At December 31, 1994, the Company's current ratio was 2.4 to 1 compared with 2.2 to 1 at December 31, 1993. The decrease in cash is -9- principally due to the expenditure of approximately $145 million for the acquisition of Blaw-Knox, partially offset by proceeds from the sale of CAPCO of approximately $103 million and cash flow from all other activities of approximately $35 million. In the first quarter of 1993, the Company filed a shelf registration statement with the SEC to register $150 million of medium-term notes. The Company sold approximately $90 million of medium-term notes during the second quarter of 1993. Approximately $60 million is available under this registration statement for future issuance by the Company. Cash provided by continuing operations was $92.0 million in 1994, compared with $43.1 million in 1993 and $49.0 million in 1992. At the end of 1994, working capital increased to $290.5 million from $255.0 million at the end of 1993. On April 6, 1994, the Company entered into a $100 million Master Credit Agreement with nine banks. The new Agreement has a term of three years and replaces a previous agreement of $66.2 million. There were no outstanding borrowings under the respective credit facilities as of December 31, 1994 and 1993. On February 21, 1995, the Company extended the term of this Agreement to April 6, 1998, and increased the amount available thereunder to $200 million through February 20, 1996, at which time it will revert to $100 million. On February 3, 1995, the Company announced that it will make a tender offer to purchase for cash all of the outstanding shares of Club Car, Inc., a leading manufacturer of golf cars and light utility vehicles. The purchase price is expected to aggregate approximately $237 million, plus transaction costs. For the year ended September 30, 1994, Club Car reported sales of approximately $186 million, and at September 30, 1994, had tangible net worth of about $17 million. The Company expects to fund this acquisition with its available cash, through use of its revolving credit facility, and eventually through use of net proceeds from the sale of VME, which should amount to about $430 million after payment of taxes and costs of the transactions. The Company also announced on February 3, 1995, that its Board of Directors has authorized the repurchase of as many as 3 million shares of its common stock. It is expected that proceeds from the VME sale will be partially used to fund this repurchase program. The Company believes that it has adequate liquidity either through cash reserves, its line of credit, or through its access to public and private markets to meet its operating needs and strategic objectives. -10- CAPITAL INVESTMENT Worldwide capital expenditures by continuing operations for facilities, manufacturing equipment, and tooling were as follows: Amounts in millions 1994 1993 1992 By Type Capital facilities and equipment. . . . . . $28.5 $20.9 $25.3 Tooling. . . . . . 7.1 4.6 6.1 Total expenditures. . . . . . $35.6 $25.5 $31.4 By Location North America. . . . . . $25.3 $19.8 $19.0 Foreign locations. . . . . . 10.3 5.7 12.4 Total expenditures. . . . . . $35.6 $25.5 $31.4 Depreciation of fixed assets was $31.4 million in 1994, $28.5 million in 1993, and $29.8 million in 1992. During the third quarter of 1994, the Melroe business unit announced plans to expand its Bobcat skid-steer loader manufacturing facility in Gwinner, North Dakota. The $15.0 million project is slated for completion in mid-1995. It will add more than 160,000 square feet of space to the existing 567,000-square-foot Gwinner plant, and include a new, 112,500- square-foot building to house Bobcat loader assembly and a 50,000-square-foot fabrication shop addition. CAPITALIZATION At December 31, debt as a percent of total capitalization (total debt and stockholders' equity) was 32.5% in 1994, 46.9% in 1993, and 47.9% in 1992. The improvement in the ratio relates to increased stockholders' equity, principally current year income of $161.9 million and favorability in the cumulative translation adjustment account. Total debt at December 31, 1994, decreased to $217.4 million from the December 31, 1993, level of $236.9 million. Stockholders' equity at year-end was $452.2 million in 1994, $268.2 million in 1993, and $252.6 million in 1992. At December 31, stockholders' equity per share was $25.98 in 1994, $15.41 in 1993, and $14.56 in 1992. OUTLOOK The backlog from continuing operations at the end of 1994 was $221 million, including $20 million for Blaw-Knox, compared with a backlog of $125 million at December 31, 1993. Looking ahead, the Company believes the outlook for 1995 is excellent. Demand for the first quarter is unusually strong. Given current order levels and performance, the Company anticipates that first quarter 1995 sales and earnings will offset the normal seasonal decline and exceed fourth quarter 1994 results. Overall, it is expected that 1995 will be another strong year for Clark's businesses. -11- BALANCE SHEET
Amounts in thousands December 31 1994 1993 ASSETS: Current Assets: Cash, cash equivalents and short-term investments $ 228,604 $ 235,828 Accounts and notes receivable, less allowances of $6.0 million and $5.5 million, respectively 109,545 79,144 Refundable income taxes - 3,543 Inventories 123,728 104,841 Deferred tax assets net 24,384 29,202 Other current assets 8,862 9,213 TOTAL CURRENT ASSETS 495,123 461,771 Investments and advances associated companies 12,555 122,106 Investments and advances discontinued operations VME Group N.V 195,943 - Deferred tax assets-net 100,402 97,357 Property, plant and equipment-net 181,139 201,924 Assets held for sale - 6,765 Goodwill 167,272 67,461 Other assets 41,465 45,890 TOTAL ASSETS $1,193,899 $1,003,274 LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities: Notes payable $ 11,944 $ 22,512 Accounts payable and accrued liabilities 157,128 150,142 Income taxes payable 1,547 4,139 Accrued postretirement benefits 21,132 19,560 Deferred income taxes 715 800 Current installments on long-term debt 12,140 9,612 TOTAL CURRENT LIABILITIES 204,606 206,765 Long-term borrowings 193,294 204,770 Other non-current liabilities 93,994 79,686 Accrued postretirement benefits 241,837 233,239 Deferred income taxes 8,008 10,661 TOTAL LIABILITIES 741,739 735,121 Contingencies (pages 34 to 38) Stockholders' Equity: Capital stock, common 143,960 143,958 Capital in excess of par value 180,107 179,582 Retained earnings 254,643 92,708 Cumulative translation and other adjustments (47,211) (67,083) 531,499 349,165 Less common stock held in treasury, at cost 53,470 49,728 Less value of LESOP shares 25,869 31,284 TOTAL STOCKHOLDERS' EQUITY 452,160 268,153 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,193,899 $1,003,274 See Notes to Financial Statements -12- /TABLE STATEMENT OF INCOME
Amounts in thousands, except per share data Years ended December 31 1994 1993* 1992* NET SALES $946,599 $ 692,022 $658,535 OPERATING COSTS AND EXPENSES: Cost of goods sold 747,492 557,138 544,294 Selling, general and administrative expenses 107,668 102,699 87,905 855,160 659,837 632,199 Operating income 91,439 32,185 26,336 Other income 20,671 15,016 14,934 Interest expense (19,966) (21,426) (23,481) Pre-tax income from continuing operations 92,144 25,775 17,789 Provision for income taxes 29,329 4,196 5,773 Income from continuing operations 62,815 21,579 12,016 Discontinued operations: Income (loss) from operations 66,236 20,290 (46,577) Gain on sales 32,884 - 8,519 Income (loss) from discontinued operations 99,120 20,290 (38,058) Income (loss) before effect of changes in accounting principles 161,935 41,869 (26,042) Effect of accounting changes income taxes - 6,150 92,000 NET INCOME $161,935 $ 48,019 $ 65,958 INCOME(LOSS) PER SHARE: From continuing operations $ 3.61 $ 1.24 $ .69 From discontinued operations 5.69 1.17 (2.19) From effect of accounting changes - .35 5.31 Net income $ 9.30 $ 2.76 $ 3.81 See Notes to Financial Statements *Restated to reflect the deconsolidation of the automotive business and reflect the equity in net income of VME Group N.V. as a discontinued operation. -13-
STATEMENT OF CASH FLOWS
Amounts in thousands Years ended December 31 1994 1993* 1992* CASH FLOWS FROM OPERATING ACTIVITIES: Net income $161,935 $ 48,019 $ 65,958 Less (income) loss from discontinued operations (66,236) (20,290) 46,577 Adjustments to reconcile net income to net cash provided by operating activities: Effect of accounting changes - (6,150) (92,000) Depreciation 31,444 28,532 29,836 Amortization of intangibles 3,514 2,083 2,482 Net gain on sale of a business (32,884) - (8,519) Exchange (gain) loss (608) 796 981 Employee benefit expense funded with treasury stock 1,549 800 908 Loss of unconsolidated company 500 - - Changes in assets and liabilities, net of the effects of business dispositions and acquisition: Decrease (increase) in receivables and other current assets (19,604) (7,828) 11,643 Decrease (increase) in refundable income taxes 3,543 (3,543) 7,400 Increase in inventory (14,889) (11,580) (1,921) Decrease in net deferred tax assets 1,474 174 4,066 Increase (decrease) in payables and accruals 11,756 27,467 (25,432) Decrease (increase) in other non-current assets 6,868 2,059 (3,612) Increase (decrease) in other long-term liabilities 3,480 (17,624) 10,584 Other 193 172 78 Net cash provided by operating activities 92,035 43,087 49,029 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of businesses (net of businesses' cash) 103,405 - 80,454 Cost of acquisition-net of cash acquired (145,363) - - Additions to properties (35,571) (25,469) (31,438) Sales of properties 10,309 1,040 556 Decrease (increase) in short-term investments 20,400 (79,700) (47,506) Decrease (increase) in investments and advances associated companies (1,938) (2) 45 Net cash provided (used) in investing activities (48,758) (104,131) 2,111 CASH FLOWS FROM FINANCING ACTIVITIES: Additions to long-term borrowings - 91,006 - Payments on long-term debt (8,062) (82,290) (21,929) Increase (decrease) in notes payable current (12,888) 9,708 (21,442) Proceeds from sale of stock under option plans 11 330 - Other 2,454 129 311 Net cash provided (used) in financing activities (18,485) 18,883 (43,060) Effect of exchange rate changes on cash 1,499 (2,162) (2,990) Cash flows from discontinued operations (13,115) 8,527 (43,968) Increase (decrease) in cash and cash equivalents 13,176 (35,796) (38,878) Cash and cash equivalents at beginning of year 35,228 71,024 109,902 Cash and cash equivalents at end of year 48,404 35,228 71,024 Short-term investments (cost approximates market) 180,200 200,600 120,900 Cash, cash equivalents, and short-term investments $228,604 $235,828 $191,924 See Notes to Financial Statements *Restated to reflect the deconsolidation of previously owned businesses and reflect VME Group N.V. as a discontinued operation.
-14- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation - The financial statements of Clark Equipment Company (Clark or the Company) include the accounts of all majority-owned subsidiaries. All material intercompany balances and transactions are eliminated. The Company's investments in associated companies owned 20% or more are accounted for using the equity method. Investments in companies owned less than 20% are carried at cost. Changes in Reporting Entity - In the second quarter of 1994, the Company completed the sale of Clark Automotive Products Corporation (CAPCO) through an initial public offering. CAPCO was a business unit of Clark that manufactured transmissions, primarily for on-highway applications, for sale in Brazil and North America. Clark sold approximately 91% of its interest in CAPCO and received net proceeds of approximately $103 million. A gain of approximately $33 million was realized on the sale. The results of CAPCO have been deconsolidated to reflect the operations of this segment on a discontinued basis in the Statement of Income for all periods presented. The notes pertaining to the Statement of Income do not include amounts related to CAPCO. On May 13, 1994, the Company purchased Blaw-Knox Construction Equipment Corporation (Blaw-Knox). Blaw-Knox is a leading manufacturer of asphalt pavers sold in North America and other world markets. The purchase price was approximately $145 million. The balance sheet and the results of operations of Blaw-Knox are included in the consolidated accounts of Clark subsequent to the acquisition date. If Blaw-Knox had been consolidated with Clark from January 1, 1993, pro forma sales (unaudited) would have been $984.6 million in 1994 and $780.0 million in 1993. As reported by the Company on a Form 8-KA filed on July 27, 1994, the pro forma impact (unaudited) on Clark of the acquisition of Blaw-Knox as of January 1, 1993, would have increased full-year 1993 net income from continuing operations by $0.19 per share, and would have increased first quarter 1994 net income from continuing operations by $0.12 per share. VME Group N.V. (VME) is a joint venture owned 50% by the Company and 50% by AB Volvo of Sweden that manufactures and sells construction and earth-moving equipment. On March 5, 1995, Clark agreed to sell its shares in VME to Volvo for $573 million. VME is reflected as a discontinued operation in the Statement of Income for all periods presented. The Company sold its Clark Material Handling Company (CMHC) business unit to Terex Corporation (Terex) on July 31, 1992, and recorded a gain of $8.5 million in the third quarter of 1992. The Statement of Income for 1992 has deconsolidated CMHC, reflecting its operations as a discontinued operation. Due to the reporting of -15- CMHC on a discontinued basis, the notes pertaining to the Statement of Income do not include amounts related to CMHC. Currency Translation-Financial statements of subsidiaries operating outside of the United States are translated into U.S. dollar equivalents in accordance with Statement of Financial Accounting Standards (FAS) No. 52. Foreign currency exchange results reflected in the Statement of Income were gains of $3.7 million in 1994 (including gains of $3.1 million from equity investments), losses of $9.2 million in 1993 (including losses of $8.4 million from equity investments), and losses of $10.8 million in 1992 (including losses of $9.8 million from equity investments). Revenue Recognition-The Company's policy is to recognize sales at the time of shipment. The Company allows dealers to return a certain level of parts under formal parts return programs. The estimated liability for these programs approximated $1.2 million in 1994 and $0.9 million in 1993, and is accrued in the Balance Sheet. Cash, Cash Equivalents, and Short-Term Investments-Cash equivalents and short-term investments include temporary investments of $208.1 million and $231.3 million at December 31, 1994 and 1993, respectively. Temporary investments are recorded at cost plus accrued interest, which approximates market value. Statement of Cash Flows - For purposes of the Statement of Cash Flows, the Company considers all highly liquid investments with a maturity of three months or less from the purchase date to be cash equivalents. The Company's cash flows from continuing operations were reduced by cash paid for interest of $19.4 million, $18.8 million, and $19.2 million and income taxes of $28.1 million, $10.8 million, and $5.0 million during 1994, 1993, and 1992, respectively. The Statement of Cash Flows for all years presented has been prepared based on the continuing operations of the Company. As such, the discontinued cash flows of CAPCO, VME, and CMHC have been reflected separately within the Statement of Cash Flows. Fair Value of Financial Instruments-The Company estimates the fair value of all financial instruments where the face value differs from the fair value, primarily long-term debt and forward exchange contracts, based upon quoted amounts or the current rates available for similar financial instruments. If fair value accounting had been used at December 31, 1994 and 1993, instead of the historic basis of accounting used in the financial statements, long-term debt would exceed the reported level by approximately $4 million and $20 million, respectively, and the value of forward exchange contracts would approximate the amounts reflected in the financial statements. -16- Inventories-Inventories at December 31, 1994 and 1993, net of valuation allowances of $13.3 million and $12.1 million, respectively, are classified as follows: Amounts in millions 1994 1993 Raw materials $ 37.1 $ 38.9 Work in process and finished goods 86.6 65.9 $123.7 $104.8 Inventories are valued at the lower of cost or market by the last-in, first-out (LIFO) method for substantially all domestic inventories and by the first-in, first-out (FIFO) method for all foreign inventories. If the FIFO method of inventory accounting had been used worldwide, inventories would have increased by $28.4 million at December 31, 1994, and $27.2 million at December 31, 1993. Inventory subject to LIFO approximates 65% of total inventory at December 31, 1994. During 1992, certain domestic inventory quantities were reduced. These reductions resulted in the liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years. The effect decreased cost of goods sold related to continuing operations by approximately $1.8 million in the fourth quarter of 1992. LIFO adjustments were not material in 1994 or 1993. Properties and Depreciation-Property, plant and equipment are carried at cost. Expenditures for maintenance and repairs are charged to expense as incurred. Expenditures for major renewals and betterments are capitalized. The Company generally uses the straight-line method of depreciation. Depreciation lives generally range from eight to 50 years for land improvements, eight to 50 years for buildings, and three to 25 years for machinery and equipment. Properties retired or sold are removed from the property accounts, with gains or losses on disposal included in income. The year-end property, plant and equipment balances for the past two years are classified as follows: Amounts in millions 1994 1993 Land $ 10.5 $ 6.9 Land improvements 4.9 5.5 Buildings 76.0 75.6 Machinery and equipment 291.0 399.3 382.4 487.3 Accumulated depreciation (201.3) (285.4) $181.1 $201.9 Assets Held for Sale - Assets held for sale at December 31, 1993, represented one of CMHC's former manufacturing facilities. This facility was sold in 1994 for an amount approximating the value reflected in the 1993 balance sheet. -17- Goodwill Amortization - The Company is generally amortizing goodwill on a straight-line method over a 40-year period. Goodwill shown in the consolidated financial statements relates to: 1) the Company's 1990 acquisition of Hurth Axle S.p.A., an Italy-based company, which is remeasured into U.S. dollars using current exchange rates (current balance: $68.9 million); and 2) the Company's 1994 acquisition of Blaw-Knox (current balance: $98.4 million). The amortization recorded for 1994, 1993, and 1992 was $3.5 million, $2.1 million, and $2.5 million, respectively. Accumulated amortization at December 31, 1994 and 1993, was $11.4 million and $7.9 million, respectively. The Company periodically reviews the value of its goodwill to determine if an impairment has occurred. The Company measures the potential impairment of recorded goodwill by the undiscounted value of expected future operating cash flows in relation to its net capital investment in the subsidiary. Based on its review, the Company does not believe that an impairment of its goodwill has occurred. Costs and Expenses - Provisions are made currently for estimated future costs under present product warranties. The costs of health and life insurance postretirement benefits are accrued and charged against income as earned in accordance with the provisions of FAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Annual expenses under the provisions of this Statement represent a combination of the interest and service cost provisions of the annual accrual, along with the actual benefits provided and paid for active employees. Benefits provided and paid on behalf of retirees are charged directly against the established reserve. The accounting for health care benefits anticipates future cost-sharing changes that are consistent with the Company's expressed intent. Effective January 1, 1993, VME adopted FAS No. 106 and will recognize its estimated obligation on a transitional basis over 20 years. Income Taxes - Prior to 1992, the Company accounted for income taxes using Accounting Principles Board Opinion No. 11. Effective January 1, 1992, the Company adopted FAS No. 109, "Accounting for Income Taxes." This adoption resulted in the recognition of a cumulative net tax benefit of $92 million related to the recognition of previously unrecognized net deferred tax assets. Effective January 1, 1993, VME also adopted FAS No. 109, and Clark's share of the cumulative tax benefit resulting from this accounting change was $6.2 million. The tax cost on foreign earnings remitted to the United States in 1994 and 1992 was $1.0 million and $0.6 million in the respective years. There was no cost on 1993 remittances. The Company considers undistributed earnings of its foreign subsidiaries at December 31, 1994, to be permanently invested. -18- Guarantees and Contingencies - Guarantees and contingencies are accrued when a loss is considered probable and the amount is measurable. Income Per Share - Income per share amounts are based on the weighted average number of shares and the dilutive common equivalent shares outstanding during the years. Derivative Instruments - The Company uses forward exchange contracts to reduce some of the uncertainty related to the currency impacts surrounding certain cross-border sales transactions. Through use of these forward exchange contracts, the Company is able to predetermine the value it will receive for these sales in terms of the currency where the product is manufactured. This enables the Company to better estimate its gross margins relating to these sales and to take appropriate steps in advance to improve margins through overall cost-reduction or pricing actions. The Company limits its use of forward exchange contracts so that it is reasonably assured that the transactions it intends to protect will occur. The Company has adopted a policy of reflecting these contracts at their market value to the extent that significant unrealized gains or losses exist. In accordance with this policy, a loss of approximately $0.8 million was recorded at December 31, 1994. Prior to the adoption of this policy, the Company followed a practice of recognizing significant losses currently and reflecting market value gains as derivative transactions closed. At December 31, 1994 and 1993, the Company had forward exchange contracts of $82 million and $95 million, respectively. The 1994 contracts mature periodically over the next 12 months, and foreign-denominated sales transactions are expected to occur coincidental with the expiration of these instruments. The fair value of these contracts approximated the adjusted face value at each of the reporting periods. The Company believes that it has entered forward exchange contracts covering about half of its anticipated 1995 cross-border sales. Cross-border sales transactions not effectively covered by forward exchange contracts are subject to currency fluctuations, which could have an effect on future profit levels. The Company also has entered into an interest rate swap contract to convert $10 million of fixed rate debt to a floating rate instrument. The differential impact of this swap contract is settled routinely with the corresponding financial institution, and the interest costs included in the Financial Statements reflect the floating rate implicit in the swap contract. DISCONTINUED OPERATIONS As previously mentioned on page 15, on March 5, 1995, Clark agreed to sell its shares in VME to AB Volvo of Sweden. In the preparation of these financial statements, the operations of VME have been reflected on a discontinued basis in the Statement of Income for all years presented. -19- VME Group N.V. The Company's investments in VME were $195.9 million and $122.1 million in 1994 and 1993, respectively. VME is a joint venture owned 50% each by the Company and AB Volvo of Sweden. Following are condensed financial data of VME: Amounts in millions Year ended December 31, 1994 1993 1992 Net sales $1,566 $1,240 $1,357 Gross profit 424 281 188 Net income (loss) 132 30 (94) As at December 31, 1994 1993 Current assets $ 660 $ 531 Non-current assets 293 258 Current liabilities 409 314 Non-current liabilities and deferred taxes 164 247 The $6.8 million difference between the Company's investment and its equity in VME net assets at December 31, 1994, relates primarily to additional equity contributions made in prior years, which are treated as goodwill. Goodwill amortization approximated $1.1 million in each year presented. During the second half of 1992, the Company and AB Volvo each invested $15 million in VME's capital, and each made subordinated loans of an additional $35 million. The subordinated loans bear interest of 1.3% over LIBOR and mature in January 1996. Effective January 1, 1993, VME adopted FAS No. 109, "Accounting for Income Taxes," and recorded a benefit of $12.3 million. VME also adopted FAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," effective January 1, 1993, and will recognize its estimated obligation on a transitional basis over 20 years. A charge of $2.8 million is included in VME's 1994 and 1993 net income related to this change in accounting. Clark's share of each of these accounting changes is consistent with its 50% ownership position in VME. Transactions with VME are conducted on the basis of normal commercial relationships, at prevailing market prices, and are considered immaterial. CAPCO As previously mentioned on page 15, the initial public offering of CAPCO was completed in the second quarter of 1994. In the preparation of these financial statements, the results of CAPCO have been deconsolidated to reflect the operations of this segment on a discontinued basis in the Statement of Income for all years presented. -20- Condensed income statement information related to CAPCO for the first four months of 1994 and the two years ended December 31, 1993 and 1992, follows: Amounts in millions 1994 1993 1992 Net sales $54.2 $184.4 $145.5 Pre-tax income from operations 2.3 20.7 12.8 Net income from operations 1.3 12.5 8.2 Gain on sale 32.9 Included in CAPCO's pre-tax income from operations is a foreign loss of $3.3 million in 1994 and income of $8.4 million and $2.0 million in 1993 and 1992, respectively. Net income in 1993 and 1992 benefited from the utilization of operating loss carryforwards in Brazil in the respective amounts of $3.7 million and $1.3 million. Included in the gain on the sale of this business is a tax provision of $3.0 million. CMHC In July 1992, the Company sold its material handling business, Clark Material Handling Company (CMHC). This business has been classified in the Statement of Income as a discontinued operation for all years presented. Condensed income statement information related to CMHC through July 31, 1992, follows: Amounts in millions 1992 Net sales $248.5 Pre-tax loss from operations (11.2) Net loss from operations (7.0) Gain on sale 8.5 Included in the pre-tax loss from operations is foreign income of $2.6 million. Included in the gain on the sale of CMHC is a tax benefit of $7.6 million. Other Discontinued operations in 1992 include the results of an insurance subsidiary which had been held for sale. The subsidiary continues to be liquidated, and due to immateriality, these results have been reclassified to other income in 1993 and 1994. The investment in this operation has been reclassified on the Company's Balance Sheet to "other assets" for both periods presented. -21- INVESTMENTS AND ADVANCES ASSOCIATED COMPANIES Marubeni Bobcat Sales Company In August 1994, Melroe Company, a business unit of Clark, and Marubeni Corporation, a Japanese firm, completed a joint venture agreement to export Bobcat skid-steer loaders and attachments manufactured in North Dakota and market them in Japan. The new company, which is owned equally by Melroe and Marubeni, is headquartered in Yokohama, Japan. The Company's investment at December 31, 1994, was $1.1 million and is accounted for by the equity method. Clark has recorded an equity loss of $0.5 million for its share of the 1994 losses and has classified this loss in other income. Investment in CAPCO In the second quarter of 1994, the Company sold approximately 91% of its interest in CAPCO to the public through an initial public offering. The Company's remaining 9% investment, which is classified as available for sale, is valued at $11.4 million at December 31, 1994, and includes an adjustment of $4.6 million to increase the cost basis of the investment to fair market value in accordance with FAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." ACCRUED LIABILITIES Accounts payable and accrued liabilities include the following: Amounts in millions 1994 1993 Trade payables $ 87.1 $ 65.0 Accrued payrolls and related taxes 30.3 34.8 Accrued warranty 12.1 15.5 Accrued pension 4.6 12.5 Other 23.0 22.3 $157.1 $150.1 Other non-current liabilities include the following: Amounts in millions 1994 1993 Accrued pension $16.5 $ 2.4 Accrued product liability 17.1 14.8 Environmental 13.7 13.5 Income taxes payable 15.2 15.4 Discontinued operations reserves 8.5 9.6 Other 23.0 24.0 $94.0 $79.7 -22- OTHER INCOME Following is a summary of the major elements of other income for the years ended December 31: Amounts in millions 1994 1993 1992 Interest income $11.0 $11.4 $10.6 Gain on sale of assets 7.0 - - Sundry items, net 2.7 3.6 4.3 $20.7 $15.0 $14.9 The 1994 gain on sale of assets relates to the sale of certain overseas bonds of $4.2 million and the sale of a parts facility in Atlanta, Georgia, for $2.8 million. The 1993 interest income includes income of $1.7 million from a duty drawback refund received from the U.S. Customs Service, and interest of $1.8 million due from the settlement of U.S. tax audits for 1989 through 1991. Interest income received on the subordinated loan to VME amounted to $2.0 million in 1994 and $1.6 million in 1993. SUPPLEMENTARY INCOME STATEMENT INFORMATION Amounts in millions 1994 1993 1992 Maintenance and repairs $18.0 $16.3 $16.9 Taxes, other than payroll and income taxes 9.7 7.7 8.4 Rents 4.4 4.8 5.0 Advertising costs 6.3 6.0 6.7 Research and development costs 15.6 17.0 14.7 INCOME TAXES Following is a segregation of pre-tax income from continuing operations as reported by U.S. and foreign companies: Amounts in millions 1994 1993 1992 Pre-tax income (loss) Continuing operations: United States $78.0 $27.0 $12.7 Foreign 14.1 (1.2) 5.1 $92.1 $25.8 $17.8 -23- The elements of the provision for income taxes are as follows: Amounts in millions 1994 1993 1992 Current income taxes: Federal $19.9 $2.1 $(1.1) Foreign 2.1 1.7 2.4 State 2.5 .3 .6 Total current 24.5 4.1 1.9 Deferred (prepaid) income taxes: United States recurring 4.1 4.5 4.5 change in tax rates - (3.0) - Foreign .7 (1.4) (.6) Total deferred 4.8 .1 3.9 Provision for income taxes on continuing operations $29.3 $4.2 $ 5.8 The U.S. corporate income tax rate increased from 34% to 35% in 1993. A tax credit of $3.0 million was recorded in 1993 as net U.S. deferred tax assets were revalued at the higher tax rate. Deferred tax assets before valuation allowances approximate $148 million as of December 31, 1994, and $160 million as of December 31, 1993. These assets consist of: Amounts in millions 1994 1993 Expected future tax benefits relating to postretirement benefits $ 97 $ 94 Self-insurance and warranty reserves 10 11 Environmental reserves 6 6 Pension and deferred compensation commitments 15 15 Loss and credit carryforwards 17 27 Other items 3 7 Gross deferred tax assets 148 160 Valuation allowances (23) (33) Net deferred tax assets $125 $127 Valuation allowances relate largely to net operating foreign tax credit and capital loss carryforwards. A valuation allowance of approximately $6 million also has been established related to certain temporary differences for which deferred tax assets have been provided but for which the ultimate realization of tax benefits is not certain. Deferred tax liabilities as of December 31, 1994 and 1993, of $8.7 million and $11.5 million, respectively, are comprised of differences in the recorded book and tax basis of assets. -24- As of December 31, 1994, the Company has foreign net operating loss, U.S. capital loss, and foreign tax credit carryforwards, the tax benefits of which approximate $7 million, $8 million, and $2 million, respectively, for which no financial statement benefit has been recognized. Approximately $1.6 million of these operating loss benefits expire by 1998, while the remainder have an indefinite carryforward period. The capital loss expires in 1997. The foreign tax credit carryforward expires in 1996. Benefit relating to these carryforwards has not been reflected because of the limited carryforward periods and the limitations on their use. Future benefit may occur to the extent capital gains or foreign-sourced income are recognized prior to the expiration of the carryforwards. During 1993 and 1992, pre-tax capital gain income relating to continuing operations of approximately $3.0 million and $1.8 million, respectively, was earned, favorably impacting the Company's tax provision. At the time of the adoption of FAS No. 109, no net benefit was given to the foreign operating loss carryforwards because of the limited carryforward periods and/or the uncertain business conditions relating to the operations giving rise to such carryforwards. With respect to these carryforwards, the Company at December 31, 1994, has continued to follow the policy that the benefit of these carryforwards will be recognized when realized. As such, future recognition of these carryforwards will be reflected if the foreign entities have sufficient earnings before the expiration periods of the respective loss carry-forwards. The 1994 tax provision has been reduced by $3.3 million as a result of the utilization of such carryforwards. Future tax benefits of these carryforwards could aggregate $7 million if all such carryforwards become realizable. The deferred tax asset valuation reserve was approximately $23 million at December 31, 1994, compared with $33 million at December 31, 1993 and $31 million at December 31, 1992. The reduction in the 1994 balance resulted principally from the utilization of net operating and capital loss carryforwards. A tax benefit of approximately $8 million was realized as a result of the utilization of capital loss carryforwards in conjunction with the sale of CAPCO in May 1994. The increase in the 1993 valuation allowance compared with the level at December 31, 1992, was the result of additional net operating loss carry-forwards at certain locations, a revised estimate of the capital loss carryforward, and a revision of foreign tax credit carryforwards resulting from an Internal Revenue Service audit. The reserve was reduced by $3.7 million as a result of the realization of net operating loss carryforwards at CAPCO's Brazilian operations. The valuation allowance at December 31, 1992, of $31 million was $22.3 million less than that originally provided at the time of the adoption of FAS No. 109. Approximately $19.5 million of this -25- difference relates to the temporary differences of CMHC, net of the unrealized capital loss benefit. Valuation reserves for future tax benefits of CMHC were provided at the time of the adoption of FAS No. 109 because it was expected that such benefits would accrue to the purchaser. The remaining difference reflects the domestic utilization of capital loss carryforward benefits and the utilization of operating loss carryforwards at certain foreign locations in 1992. A reconciliation of the net effective tax rate for continuing operations to the U.S. statutory federal income tax rate for the three years ended December 31, 1994, is as follows: Amounts in millions 1994 1993 1992 U.S. federal statutory rate 35.0% 35.0% 34.0% Increase (decrease) in rate resulting from: Revaluation of deferred tax assets for change in U.S. tax rates - (11.6) - Utilization of net operating and capital loss carryforwards and other credits (3.6) (4.5) (10.9) Higher foreign taxes 2.0 2.7 7.2 Change in reserve for potential disallowances (2.3) - - Foreign distributions, net of foreign tax credits 1.1 - 2.6 Income not subject to tax (2.0) (3.1) (2.4) Other, net 1.6 (2.2) 1.9 Net effective tax rate 31.8% 16.3% 32.4% Undistributed earnings and basis differentials approximate $45.3 million at December 31, 1994. Any future dividends declared and remitted are expected to be solely from the current earnings of the respective operations. Undistributed earnings and existing basis differentials will become subject to tax in the event that they are remitted or if the Company should sell such operations. It is not expected that the additional tax that would be required if earnings were to be distributed would be material. -26- LONG-TERM AND SHORT-TERM DEBT Following is a summary of long-term debt of the Company and its consolidated subsidiaries due after one year, as of December 31: Amounts in millions 1994 1993 Medium-term notes having maturities ranging from June 14, 1995, to May 15, 2023, and interest rates ranging from a floating LIBOR plus .55% to a fixed 8.35% (face amount $90,250,000) $ 79.7 $ 89.6 9 3/4% notes due March 1, 2001 (face amount $100,000,000) 99.7 99.7 6% industrial development revenue bonds, payable $400,000 in 1998 and $900,000 annually in 1999 to 2002 4.0 4.0 Hurth obligations due in periods ranging from 1995 to 2000, at an average rate of 9.5% 9.9 11.5 $193.3 $204.8 Required payments on long-term debt are $12.1 million in 1995, $23.2 million in 1996, $1.9 million in 1997, $12.3 million in 1998, $2.8 million in 1999, and $153.1 million thereafter. In the second quarter of 1993, the Company issued approximately $90 million of medium-term notes under a $150 million shelf registration statement. These include $50 million of 30-year notes at an average rate of approximately 8.20%. The remaining notes have maturities ranging from June 14, 1995, to July 1, 1998, at rates ranging from a floating LIBOR plus .55% to a fixed 6.25%. On April 6, 1994, the Company entered into a $100 million Master Credit Agreement with nine banks. The new Agreement has a term of three years and replaces a previous agreement of $66.2 million. The Agreement carries restrictions on minimum net worth and debt-to-capitalization ratios. At December 31, 1994 and 1993, there were no amounts outstanding under the respective credit facilities and the Company was in compliance with the facility requirements. On February 21, 1995, the Company extended the term of this Agreement to April 6, 1998, and increased the amount available thereunder to $200 million through February 20, 1996, at which time it will revert to $100 million. -27- At December 31, worldwide short-term bank lines of credit, subject to cancellation upon notice by the bank or the Company, were: Amounts in millions 1994 1993 1992 Lines of credit $56.2 $46.2 $44.3 Unused lines of credit 44.3 23.7 31.1 Maximum borrowings during year 26.7 22.5 42.7 Average borrowings 16.0 18.2 27.0 Average rate on foreign borrowings outstanding at December 31 5.9% 8.2% 9.6% Daily weighted average interest rate 7.4% 11.2% 10.8% CAPITAL STOCK The Company has authorization for 40,000,000 shares of $7.50 par value Common Stock. There were 17,400,975 shares and 17,401,903 shares outstanding at December 31, 1994 and 1993, respectively. These shares include 2,053,996 shares held in the LESOP trust. Shares held as treasury stock were 1,793,709 shares and 1,792,431 shares at the respective year-ends. The Company also has authorization for 3,000,000 shares of $1.00 par value Preferred Stock, none of which have been issued. In 1987, the Board of Directors adopted a Rights Plan, which was amended in 1990 and will expire in 1997. The Rights Plan may become operative in the event that certain change of control conditions occur. -28- STOCK OPTIONS Following is a summary of the changes in options under the 1975 and 1985 stock option plans for each of the last three years: 1994 1993 1992 Outstanding at January 1, at an average price per share of $18.57, $20.08, and $25.05, respectively 172,151 306,030 114,662 Options granted at an average price per share of $18.50 in 1992 - - 219,581 Canceled or lapsed (500) (40,002) (28,213) Exercise of previously granted options at an average grant price per share of $18.58 and $19.71, respectively (59,632) (29,278) - Exercise of options with appreciation rights (104,281) (64,599) - Outstanding at December 31, at an average price per share of $18.50, $18.57, and $20.08, respectively 7,738 172,151 306,030 In addition to the above options, there were performance units outstanding at December 31 of 259,951 in 1994, 492,840 in 1993, and 568,776 in 1992, which had average exercise prices of $20.57, $19.58, and $21.88 in the respective years. These performance units are equivalent to free-standing stock appreciation rights. When the performance units are surrendered, the grantee receives a cash payment for each unit surrendered, equal to the amount by which the price of Clark stock on the date of surrender exceeds the exercise price. The accrued liability of the options with stock appreciation rights and the performance units at December 31 was $6.7 million in 1994, $11.9 million in 1993, and less than $0.1 million in 1992. The related expense was $11.1 million, $15.5 million, and less than $0.1 million in each of the respective years. -29- On May 10, 1994, the stockholders of the Company approved the 1994 Long-Term Incentive Plan (LTIP), which provides for certain stock-based compensation plans, including stock options and stock appreciation rights. The stockholders authorized 850,000 shares for issuance under the LTIP. As of December 31, 1994, no options have been granted under the LTIP. PENSION COSTS The Company has non-contributory defined benefit pension plans covering certain of its U.S. employees and certain employees and retirees of previously owned businesses. The plans covering salaried employees provide benefits based upon years of service and final average compensation. The plans covering hourly employees provide monthly benefits based upon a flat rate and years of service. Assets of the U.S. plans are invested primarily in U.S. government and agency bonds, equities, fixed income securities, and insurance contracts. The Company's funding policy for its qualified plans generally is to contribute no less than the minimum amount required by law and no more than the maximum amount that can be deducted for federal income tax purposes. Some of the Company's foreign subsidiaries also have defined benefit pension arrangements. These plans are not required to report to governmental agencies pursuant to ERISA, and do not otherwise determine the actuarial value of accumulated benefits or net assets available for benefits. Consolidated worldwide 1994 pension expense for defined benefit plans was $11.5 million, compared with $9.2 million in 1993 and $6.8 million in 1992. The components of pension expense for each of these years is as follows: Amounts in millions 1994 1993 1992 Current service cost $ 3.6 $ 2.9 $ 3.1 Interest cost 25.6 25.2 24.9 Return anticipated on plan assets for the year (actual $2.8 million, $70.9 million, and $10.4 million for the respective years) (23.8) (22.7) (23.6) Other components of pension expense, net 4.8 2.7 1.4 U.S. pension expense 10.2 8.1 5.8 Non-U.S. pension expense 1.3 1.1 1.0 $11.5 $ 9.2 $ 6.8 -30- The following tables reconcile the funded status of the Company's U.S. pension plans and the amounts recognized on the Company's Balance Sheet: Amounts in millions Assets Accumulated Exceed Benefits Accumulated Exceed December 31, 1994 Benefits Assets Accumulated benefit obligation, including non-vested benefits of $11.3 million. . . . . $ 81.5 $229.9 Projected benefit obligation. . . . . . . . . $ 96.8 $232.4 Unrecognized past service cost. . . . . . . . .7 (5.7) Unrecognized net loss from past experience different from that assumed. . . . . . . . . (16.5) (34.6) Unrecognized transition asset. . . . . . . . . 1.1 .3 Plan assets at fair value (121.2) (178.9) Adjustment required to recognize minimum liability. . . . . . . . . . . . . . 37.8 Accrued (prepaid) pension cost . . . . . . . $(39.1) $ 51.3 December 31, 1993 Accumulated benefit obligation, including non-vested benefits of $13.5 million. . . . . $ 90.9 $237.0 Projected benefit obligation. . . . . . . . . $110.0 $237.0 Unrecognized past service cost. . . . . . . . - (1.2) Unrecognized net loss from past experience different from that assumed . . . . . . . . . (34.6) (30.0) Unrecognized transition asset . . . . . . . . 1.4 .4 Plan assets at fair value . . . . . . . . . . (111.5) (194.8) Adjustment required to recognize minimum liability . . . . . . . . . . . . 30.8 Accrued (prepaid) pension cost . . . . . . . . $(34.7) $ 42.2 The discount rates used to determine the projected benefit obligation were 8.25% in 1994 and 7.25% in 1993. The rate of increase in future compensation for determining the projected benefit obligation was 5.4%. The expected rate of return on plan assets ranged from 8.25% to 8.5% in 1994 and from 8.75% to 8.85% in 1993. -31- Balance sheet liabilities for worldwide pensions totaled $21.1 million and $14.9 million at December 31, 1994 and 1993, respectively. Of these figures, U.S. plans accounted for $12.2 million and $7.5 million in 1994 and 1993, respectively, while foreign plans accounted for $8.9 million and $7.4 million in 1994 and 1993, respectively. The Company also has certain defined contribution plans in the United States and Italy. Expense relating to these plans totaled $4.4 million, $2.9 million, and $4.0 million in 1994, 1993, and 1992, respectively. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS The Company provides certain health care and life insurance benefits for retired employees, including certain retirees of previously owned businesses, including CAPCO. Substantially all of the Company's U.S. employees may become eligible for these benefits upon retirement. The coverage is provided on a non-contributory basis for most retirees who retired prior to August 1986, and on a contributory basis for post-August 1986 retirees and all active employees. The Company does not fund its postretirement benefit plans. The following table presents a reconciliation of the Accumulated Postretirement Benefit Obligation (APBO) to the liability for such costs recognized on the Company's Balance Sheet as of December 31, 1994 and 1993: Amounts in millions 1994 1993 Accumulated Postretirement Benefit Obligation (APBO): Retirees $229.8 $251.5 Fully eligible active participants 15.4 12.8 Other active participants 23.5 20.3 Total APBO 268.7 284.6 Unrecognized past service cost 10.3 11.6 Unrecognized loss from changes in assumptions (16.0) (43.4) Accrued postretirement benefit cost $263.0 $252.8 -32- Net periodic postretirement benefit expense for each of the three years ended December 31 was comprised of the following components: Amounts in millions 1994 1993 1992 Service cost of benefit earned $ 1.9 $ 1.3 $ 1.4 Interest cost on APBO 21.0 21.5 21.2 Other (.6) (.6) Net periodic postretirement benefit expense $22.9 $22.2 $22.0 In measuring the projected APBO for 1994, 1993, and 1992, medical inflation trend rates were initially assumed at 13%, 13%, and 13%, with such rates trending downward to 5%, 5%, and 5%, respectively, by 2000. The weighted average discount rates used in each year were 8.5%, 7.5%, and 8.25%. If the health care cost trend rate were to be increased by 1%, the APBO as of December 31, 1994, would increase by approximately $24.9 million, and the net periodic postretirement expense would increase by approximately $2.3 million. LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN The Company has a Leveraged Employee Stock Ownership Plan (LESOP) for eligible U.S. employees. The Company loaned the LESOP $85 million, which the LESOP used to purchase 2,741,936 shares of Clark Common Stock from the Company. Clark has agreed to make future contributions to the LESOP to service this debt. The related obligation offsets the note due from the LESOP in Clark's Balance Sheet. The Clark Common Stock purchased with the loan proceeds is held by the LESOP trustee as collateral for the loan owed to Clark. Each year, the Company makes contributions to the LESOP which in turn are used to make loan principal and interest payments. With each principal and interest payment, the LESOP allocates a portion of the Common Stock to participating employees. As of December 31, 1994 and 1993, there were 1,905,212 and 1,730,551 shares, respectively, allocated to participants. The LESOP is designed to fund the Company's contributions to the Clark Savings and Investment Plan and the Clark Retirement Program for Salaried Employees. Currently, the Plan is only being used to fund the salaried retirement program. The benefits of the LESOP are integrated with those of the Clark Retirement Program for Salaried Employees, a defined benefit pension plan. Benefits accrued by each participant under the pension plan after 1984 are offset by the value (converted to a pension equivalent basis) of his or her account in the LESOP, so that the LESOP satisfies part or all of the benefit obligation and reduces the funding requirements of the pension plan. In the event that a participant's LESOP account exceeds the pension benefit after 1984, the participant is entitled to the full LESOP benefit. -33- The outstanding balance of the loan from Clark to the LESOP is repayable in semi-annual installments of $2.6 million, with the aggregate amount then remaining unpaid to be paid on July 1, 2001. Interest is payable quarterly at a rate equal to LIBOR plus .25% for the period October 1, 1992, through final maturity. The outstanding balance under the loan as of December 31, 1994, was $35.2 million. At the time the LESOP was established, the value of shares purchased was established as an offset to Clark's equity. This offset is reduced as shares are allocated to participants in conjunction with Clark's annual contributions to the LESOP. CONTINGENCIES Environmental The Company is involved in environmental clean-up activities or litigation in connection with eight former waste disposal sites and four former plant locations. The Company also is involved in an environmental clean-up action at one current location. Additionally, the Company is a defendant in a lawsuit filed by the United States Environmental Protection Agency (EPA) that seeks civil penalties for alleged violations of the Clean Water Act, arising out of the discharge of certain metal finishing wastewaters generated at a current plant operating site. At each of the eight waste disposal sites, Clark contracted with independent waste disposal operators to properly handle the disposal of its waste. The EPA also has identified other parties responsible for clean-up costs at the waste disposal sites. The Company has and will continue to accrue for these costs when the liability can be reasonably estimated. As of December 31, 1994 and 1993, the Company had reserves of approximately $16.0 million and $16.4 million, respectively, for potential future environmental clean-up costs. The environmental reserves represent Clark's current estimate of its liability for environmental clean-up costs and are not reduced by any possible recoveries from insurance companies. The Company's estimate of its liability is based upon: 1) the estimated costs of investigating and remediating the environmental contamination at each site and 2) the Company's estimated share of the liability at the site. Estimated costs of remediation can change as the site investigation and remediation progresses and additional information becomes available. Further, these estimated costs can change if the selected remedial action at a site is not effective and additional work is required. In addition, the development of new remediation technologies could impact these costs. In estimating its share of the potential liability at a site, the Company takes into account the contributions to the clean-up costs that will be paid by other potentially responsible parties. The Company's share of the potential liability could therefore change -34- if other potentially responsible parties become financially insolvent or dispute their liability. As a result of the possibility of changes in remedial cost estimates and in the Company's share of liability, the Company continually monitors the adequacy of its reserves and makes adjustments as necessary. Based upon the information presently available to it, the Company does not believe that it will incur any material costs in excess of the amount of its reserves as a result of any such changes. Although management cannot determine whether or not a material effect on future operations is reasonably likely to occur, it believes that the recorded reserve levels are appropriate estimates of its potential liability for environmental clean-up costs. Further, management believes that the additional maximum exposure level in excess of the recorded reserve level would not be material to the financial condition of the Company. Although settlement of the reserves will cause future cash outlays, it is not expected that such outlays will materially impact the Company's liquidity position. The Company's expenditures in 1994 and 1993 relating to environmental compliance and clean-up activities approximated $2.1 million and $2.6 million, respectively. Sale of CMHC The Company sold its forklift truck business, CMHC, to Terex in 1992. As part of the sale, Terex and CMHC assumed substantially all of the obligations of the Company relating to CMHC operations, including: 1) contingent liabilities of the Company with respect to floor plan and rental repurchase agreements, 2) certain guarantees of obligations of third parties, and 3) existing and future product liability claims involving CMHC products. In the event that Terex and CMHC fail to perform or are unable to discharge any of the assumed obligations, the Company could be required to discharge such obligations. 1) Repurchase Agreements At the time of the sale, the Company had agreed with an independent finance company to repurchase approximately $220 million of CMHC dealer floor plan and rental inventory in the event of a default by individual dealers for whom the inventory was financed. Since the sale, dealer floor plan and rental inventory obligations have been liquidating in the normal course of business and stand at approximately $42 million at December 31, 1994. These obligations will continue to liquidate in an orderly fashion. The Company will not be required to perform these repurchase obligations unless the dealer defaults on the underlying obligations and Terex and CMHC default on their repurchase obligations. Should that occur, the collateral value securing the obligations should be sufficient to reduce any loss to an immaterial amount. -35- 2) Third-Party Guarantees The Company has guaranteed approximately $16 million of obligations of third parties relating to the CMHC operation. Approximately $10 million of these guarantees relate to national account rental arrangements with a number of large, creditworthy customers. Approximately $6 million relate to capital loans given by a finance company to independent CMHC dealers, which are secured by a lien on substantially all of the dealer's assets. These guaranteed obligations are expected to liquidate over time. The Company believes, based on past experience, that the national account customers and dealers, who are the primary obligors, will meet their obligations, resulting in immaterial losses to the Company regardless of whether CMHC and Terex are able to perform their obligations. 3) Product Liability Claims CMHC had approximately $45 million of reserves relating to existing product liability claims at the time of the sale. Future accidents are likely to occur, which could result in increased product liability exposure over time. The Company could incur losses relating to these product liability claims if CMHC and Terex fail to perform their obligations. The impact of any such losses would be mitigated by available tax benefits and by insurance coverage that is available for catastrophic losses. Cash settlement of product liability claims are generally made over extended periods of time, thereby significantly reducing the impact on cash flow in any one year. Uncertainty exists as to the ultimate effect on Clark if Terex and CMHC fail to perform these obligations and commitments. While the aggregate losses associated with these obligations could be material, the Company does not believe such an event would materially affect the Company's ability to meet its cash. requirements. In their latest report on the financial statements that were filed as a part of Terex's 10-K for 1992, Terex's independent accountants indicated that Terex's recurring losses, its capital deficiency, and its inability to borrow additional funds under a bank lending agreement raised doubts about Terex's ability to continue as a going concern. Terex has filed its report on Form 10-Q for the third quarter of 1994 which indicates that it has reported net income for the three and nine month periods ended September 30, 1994, of $1.0 million and $.2 million, respectively. This compares with losses of $15 million and $45 million for the three and nine month periods ended September 30, 1993. The third quarter and nine month 1994 results include $4.3 million and $29.1 million, respectively, of gains related to sales of non-strategic assets. According to this Form 10-Q, cost-reduction actions have been implemented during 1994 and additional asset sales are expected to -36- be completed in the fourth quarter of 1994. In its 10-Q, Terex indicates that with its existing credit facilities and through its other financing and cash-generating activities, it expects to be able to meet its obligations on a timely basis. Other The Company is self-insured with respect to product liability risk, although insurance coverage is obtained for catastrophic losses. The Company has pending approximately 57 claims, with respect to which approximately 30 suits have been filed alleging damages for injuries or deaths arising from accidents involving products manufactured by the Company's continuing operations. In the aggregate, these claims could be material to the Company. At December 31, 1994 and 1993, the Company had reserves of approximately $19.1 and $16.6 million, respectively, related to product liability exposures for known claims and for claims anticipated to have been incurred that have not yet been reported. The reserves, which have been determined based upon actuarial calculations using historical claims experience, have been grossed up by expected recoveries from insurance companies of $5.7 million and $5.0 million, respectively. The Company is involved in numerous other lawsuits arising out of the ordinary conduct of its business. These lawsuits pertain to various matters, including warranties, civil rights, and other issues. The ultimate results of these claims and proceedings at December 31, 1994, are subject to a high degree of estimation and cannot be determined with complete precision. However, in the opinion of management, either adequate provision for anticipated costs have been made through insurance coverage or accruals, or the ultimate costs will not materially affect the consolidated financial position of the Company. The Company has given certain guarantees to third parties and has entered into certain repurchase arrangements relating to product distribution and product financing activities involving the Company's continuing operations. As of December 31, 1994, guarantees are approximately $25 million and repurchase arrangements relating to product financing by an independent finance company approximate $82 million. It is not practicable to determine the additional amount subject to repurchase solely under dealer distribution agreements. Under the repurchase arrangements relating to product distribution and product nancing activities, when dealer terminations do occur, a newly selected dealer generally acquires the assets of the prior dealer and assumes any related financial obligation. Accordingly, the risk of loss to Clark is minimal, and historically Clark has incurred only immaterial losses relating to these arrangements. The Company enters into forward exchange contracts to protect margins on projected future sales denominated in foreign currencies. Settlement dates on executed contracts are generally not more than 18 months in advance of the original execution date. -37- At December 31, 1994, forward exchange contracts of approximately $82 million were outstanding. Maximum risk of loss on these contracts is limited to the amount of the difference between the spot rate at the date of contract delivery and the contracted rate. The Company believes that future sales revenue will generate sufficient foreign currency to meet these commitments. BUSINESS SEGMENT INFORMATION The business conducted by the Company's continuing operations is the design, manufacture, and sale of skid-steer loaders, highway paving and construction equipment, and axles and transmissions for off-highway equipment. Sales to the U.S. government account for less than 1% of total sales. The Company operates in one industry segment, that being "off-highway" products in the capital goods industry. Melroe produces skid-steer loaders, compact excavators, and a limited number of agricultural products. Blaw-Knox manufactures asphalt pavers. Clark-Hurth Components produces off-highway axles and transmissions used principally in construction, mining, and material handling applications. Sales and operating profit reflect amounts sourced from the identified geographic areas. Identifiable assets are those that are used in the Company's operations in each geographic area. Corporate assets are principally cash, short-term investments, equity investments, deferred tax assets, and fixed assets maintained for general corporate purposes. Unallocated corporate and other expenses include certain continuing costs related to previously disposed businesses. These are principally "interest" costs related to discounted pension and retiree health care liabilities. There was no single customer from which at least 10% of total revenue was derived during 1992-1994. In addition to the European sales reflected on page 42 that are manufactured and sourced from European locations, Clark manufactures in the United States and exports to Europe and other foreign locations. These amounts are as follows: Amounts in millions 1994 1993 1992 Canada $ 31.5 $ 23.2 $ 19.2 Europe 125.1 108.1 136.2 South America 18.0 11.5 9.5 Asia/Pacific 27.3 17.2 13.7 $201.9 $160.0 $178.6 -38- GEOGRAPHIC SEGMENTS Amounts in millions
Sales Operating Profit Identifiable Assets 1994 1993 1992 1994 1993 1992 1994 1993 1992 SOURCE: North America $763.3 $562.3 $501.4 $116.5 $64.9 $55.5 $436.7 $251.5 $228.7 Europe 183.3 129.7 157.1 15.9 4.2 3.9 244.2 200.5 238.4 Transfers between areas: North America 26.5 16.3 15.0 Europe 26.8 12.0 10.9 Eliminations (53.3) (28.3) (25.9) (10.6) (7.9) (6.8) 946.6 692.0 658.5 132.4 69.1 59.4 670.3 444.1 460.3 Unallocated corporate and other (20.3) (21.9) (18.1) 327.7 341.2 269.4 Interest expense (20.0) (21.4) (23.5) Continuing operations* $946.6 $692.0 $658.5 $ 92.1 $25.8 $17.8 998.0 785.3 729.7 Discontinued operations 195.9 218.0 229.0 Total $1,193.9 $1,003.3 $958.7 *Pre-tax income and assets from continuing operations. -39-
CHANGES IN STOCKHOLDERS' EQUITY Amounts in millions, except share data
Retained Fair Market Capital in Earnings Value of Cumulative Value Capital Excess of (Accumulated LESOP Treasury Translation Pension Adjustment- Stock Par Value Deficit) Shares Stock Adjustment Adjustment CAPCO Total Balance, DECEMBER 31, 1991 $143.9 $179.0 $(20.9) $(40.6) $(52.0) $41.5 $(13.4) $ - $237.5 Net income 66.0 66.0 LESOP shares allocated to employees 4.9 4.9 Pension liability in excess of unrecognized prior service cost, net of tax-Clark (.5) (.5) Pension liability in excess of unrecognized prior service cost, net of tax-VME. (4.0) (4.0) Shares issued-treasury (39,647 shares) (.2) 1.1 .9 Amortization of unearned restricted stock .2 .2 Effect of exchange rates (52.4) (52.4) Balance, DECEMBER 31, 1992 143.9 179.2 44.9 (35.7) (50.9) (10.9) (17.9) - 252.6 Net income 48.0 48.0 LESOP shares allocated to employees 4.4 4.4 Pension liability in excess of unrecognized prior service cost, net of tax-Clark (6.8) (6.8) Pension liability in excess of unrecognized prior service cost, net of tax-VME (6.3) (6.3) Shares issued-treasury (48,164 shares) .1 .3 (.2) 1.2 1.4 Amortization of unearned restricted stock .1 .1 Effect of exchange rates (25.2) (25.2) Balance, DECEMBER 31, 1993 144.0 179.6 92.7 (31.3) (49.7) (36.1) (31.0) - 268.2 Net income 161.9 161.9 LESOP shares allocated to employees 5.4 5.4 Pension liability in excess of unrecognized prior service cost, net of tax-Clark (3.1) (3.1) Reclassification of pension liability in excess of unrecognized prior service cost, net of tax-VME 12.3 12.3 Shares issued-treasury (78,744 shares) .7 1.5 2.2 Stock purchase plan awards (.2) (.2) LESOP forfeiture (80,022 shares) (5.3) (5.3) Effect of exchange rates 6.2 6.2 Unrecognized gain on invest- ment available for sale 4.6 4.6 Balance, DECEMBER 31,1994 $144.0 $180.1 $254.6 $(25.9) $(53.5) $(29.9) $(21.8) $ 4.6 $452.2 -40-
QUARTERLY INFORMATION (UNAUDITED) Amounts in millions, except per share data
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year 1994 1993 1993 1994 1993 1994 1993 1994 1993 Net sales* $205.2 $163.0 $242.5 $187.4 $249.2 $167.1 $249.7 $174.5 $946.6 $692.0 Gross profit* 43.1 33.8 52.5 40.3 53.2 30.7 50.3 30.1 199.1 134.9 Income before effect of a change in accounting principle 26.9 2.5 62.5 10.8 32.3 10.1 40.2 18.4 161.9 41.8 Effect of accounting change 6.2 6.2 Net income 26.9 8.7 62.5 10.8 32.3 10.1 40.2 18.4 161.9 48.0 Information per share of Common Stock: Income before effect of a change in accounting principle $1.54 $.15 $3.59 $.62 $1.86 $.58 $2.31 $1.06 $9.30 $2.41 Effect of accounting change. .35 .35 Net income. 1.54 .50 3.59 .62 1.86 .58 2.31 1.06 9.30 2.76 Common Stock prices: High 65 5/8 24 1/8 69 1/8 34 3/4 71 1/8 48 1/2 70 3/4 53 3/4 71 1/8 53 3/4 Low 50 1/8 19 5/8 55 3/4 22 1/2 59 1/4 34 1/4 51 1/8 45 1/8 50 1/8 19 5/8 *The first quarter of 1994 and all the periods of 1993 have been restated to reflect the deconsolidation of the automotive business. The principal market on which the Company's Common Stock is traded is the New York Stock Exchange. The high and low sales prices of the Common Stock shown in the preceding table are prices as reported in the Composite Transaction Reporting System. The approximate number of stockholders totaled 2,076 and 2,331 at December 31, 1994 and 1993, respectively. No cash dividends were paid on the Company's Common Stock during 1994 or 1993. -41- /TABLE SUBSEQUENT EVENTS On February 3, 1995, the Company announced that it will make a tender offer to purchase for cash all of the outstanding shares of Club Car, Inc., a leading manufacturer of golf cars and light utility vehicles. The purchase price is expected to aggregate approximately $237 million,plus transaction costs. For the year ended September 30, 1994, Club Car reported sales of approximately $186 million, and at September 30, 1994, had tangible net worth of about $17 million. The Company expects to fund this acquisition with its available cash, through use of its revolving credit facility, and eventually through use of net proceeds from the sale of VME, which should amount to about $430 million after payment of taxes and costs of the transactions. The Company also announced on February 3, 1995, that its Board of Directors has authorized the repurchase of as many as 3 million shares of its common stock. It is expected that proceeds from the VME sale will be partially used to fund this repurchase program. -42- REPORT OF INDEPENDENT ACCOUNTANTS Price Waterhouse LLP Stockholders and Board of Directors Clark Equipment Company South Bend, Indiana In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and of cash flows present fairly, in all material respects, the financial position of Clark Equipment Company and its consolidated subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in the Notes to the Consolidated Financial Statements, effective January 1, 1992, the Company changed its method of accounting for income taxes and effective January 1, 1993, the Company's 50%-owned joint venture, VME Group, N.V., changed its methods of accounting for income taxes and postretirement health care and life insurance benefits. /S/ Price Waterhouse LLP Price Waterhouse LLP South Bend, Indiana March 6, 1995 -43- REPORT BY MANAGEMENT The preceding financial statements have been prepared by management in conformity with generally accepted accounting principles appropriate in the circumstances. In the preparation of this report, some estimates are necessary and they are made based on currently available information and judgment of current conditions and circumstances. Management is also responsible for all other information contained in this report. Management maintains and depends upon the Company's system of internal controls in meeting its responsibilities for reliable financial statements. This system is designed to provide reasonable assurance that assets are safeguarded and that transactions are properly recorded and executed in accordance with management's authorization. Judgments are required to assess and balance the relative cost and expected benefits of these controls. The financial statements have been audited by the independent accounting firm, Price Waterhouse LLP. Their role is to render an independent professional opinion on management's financial statements to the extent required by generally accepted auditing standards. In addition to the use of independent accountants, the Company also utilizes an independent professional staff of internal auditors who conduct operational and special audits. The Board of Directors elects an Audit Committee from among its members, no member of which is an employee of the Company. The Audit Committee is responsible to the Board for reviewing the accounting and auditing procedures and financial practices of the Company and for recommending appointment of the independent accountants. The Audit Committee meets periodically with management, professional internal auditors, and the independent accountants to review the work of each and satisfy itself that they are properly discharging their responsibilities. Both the independent accountants and the independent professional internal auditors have free access to the Committee, without the presence of management, to discuss their observations on internal controls and to review the quality of financial reporting. -44- FINANCIAL REVIEW The following are certain selected financial data of Clark Equipment Company and its consolidated subsidiaries for the five years ended December 31, 1994. (Dollars in thousands, except per share data.)
1994 1993* 1992* 1991* 1990* NET SALES $ 946,599 $ 692,022 $ 658,535 $ 589,186 $ 673,198 OPERATING COSTS AND EXPENSES: Cost of goods sold 747,492 557,138 544,294 524,740 555,247 Selling, general and administrative expenses 107,668 102,699 87,905 88,249 89,931 855,160 659,837 632,199 612,989 645,178 Operating income (loss) 91,439 32,185 26,336 (23,803) 28,020 Other income, net. 20,671 15,016 14,934 12,196 15,721 Interest expense (19,966) (21,426) (23,481) (23,841) (18,880) Pre-tax income (loss) from continuing operations 92,144 25,775 17,789 (35,448) 24,861 Provision (credit) for income taxes 29,329 4,196 5,773 (4,988) 12,166 Income (loss) from continuing operations 62,815 21,579 12,016 (30,460) 12,695 Discontinued operations: Income (loss) from discontinued operations 66,236 20,290 (46,577) (62,878) 36,767 Gain on sales 32,884 - 8,519 - - Income (loss) from discontinued operations 99,120 20,290 (38,058) (62,878) 36,767 Income (loss) before extraordinary credit and effect of changes in accounting principles 161,935 41,869 (26,042) (93,338) 49,462 Income tax benefit from loss carryforward - - - 718 10,837 Effect of accounting changes: Postretirement benefits - - - (244,900) - Income taxes - 6,150 92,000 - - NET INCOME (LOSS) $ 161,935 $ 48,019 $ 65,958 $(337,520) $ 60,299 INCOME (LOSS) PER SHARE: From continuing operations $ 3.61 $ 1.24 $ .69 $ (1.76) $ .74 From discontinued operations 5.69 1.17 (2.19) (3.64) 2.13 Extraordinary credit - - - .04 .63 From effect of accounting changes - .35 5.31 (14.16) - Net income (loss) $ 9.30 $ 2.76 $ 3.81 $ (19.52) $ 3.50 Cash dividends per share - - - - - Average number of shares used to compute net income per share 17,412,484 17,421,013 17,333,516 17,292,945 17,237,448 Total assets $1,193,899 $1,003,274 $958,691 $1,119,950 $1,100,274 Long-term debt 193,294 204,770 186,629 216,949 129,562 *Restated to reflect the deconsolidation of previously owned businesses, and to reflect the equity in net results of VME Group N.V. as a discontinued operation. -45-
EX-22 21 EXHIBIT (22) SUBSIDIARIES OF CLARK EQUIPMENT COMPANY (CLARK) Except as otherwise indicated below, the following corporations are wholly owned subsidiaries of Clark. Jurisdiction of Name (1) Incorporation Automotive Products Company Delaware Blaw-Knox Construction Equipment Corporation Delaware Clark Equity Company Delaware Clark Industries Company Delaware Blaw-Knox Company (3) England Club Car, Inc. Delaware Club Car International, Inc. Guam Club Car Limited New Zealand Clark Business Services Corporation Michigan Celfor Insurance Co., Ltd. Bermuda Clark Distribution Services Inc. Michigan CDS Midwest, Inc. Michigan Clark Equipment Belgium N.V. Belgium Clark Equipment of Canada Ltd. Canada Clark Foreign Sales Corporation Barbados Clark-Hurth Components S.p.A. Italy Clark-Hurth Components S.A.R.L. (2) France Clark-Hurth Components Marketing Company Delaware Clark-Hurth Components Vertriebs GmbH West Germany Melroe Equipment Limited Canada Melroe Parts Trading GmbH West Germany (1) Where the name of a subsidiary is indented, it is wholly owned by its immediate parent listed at the margin above it, unless otherwise indicated. (2) 95% owned by Clark-Hurth Components S.p.A. and 5% owned by Clark Business Services Corporation. (3) 99% owned by Clark Industries Company and 1% owned by Clark Equity Company. EX-23 22 EXHIBIT (23)(a) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 33-60062) and on Form S-8 (Nos. 33-56611, 33-56609, 33-56607, 33-44275, 33-36188, 33-28226, 33-13081, 2-99369, 2-77136,2-67529, 2-61096, 2-53948, 2-39610, 2-24730, 2-17758 and 2-16146) of Clark Equipment Company of our report dated March 6, 1995 appearing in the 1994 Annual Report to Stockholders of Clark Equipment Company which is incorporated in this Annual Report on Form l0-K. We also consent to the incorporation by reference of our reports on the Consolidated Financial Statements and the Financial Statement Schedule of VME Group N.V., both of which are included in this Form 10-K. /s/ Price Waterhouse LLP Price Waterhouse LLP South Bend, Indiana March 28, 1995 EX-23 23 EXHIBIT (23)(b) CONSENT OF INDEPENDENT ACCOUNTANTS We consent to incorporation by reference in the Clark Equipment Company Registration Statements on Form S-3 No. 33-60062 and on Form S-8 (Nos. 33-28226, 33-13081, 2-99369, 2-77136, 2-67529, 2-61096, 2-53948, 2-39610, 2-24730, 2-17758, 2-16146, 33-36188, 33-44275, 33-56607, 33-56609 and 33-56611) of our report dated February 27, 1995 relating to the consolidated financial statements of VME Holding Sweden AB and subsidiaries and the related financial statement schedules as of December 31, 1994 and 1993, and for each of the years in the three-year period ended December 31, 1994, which report is included in the 1994 Annual Report on Form 10-K of Clark Equipment Company. Gothenburg, Sweden March 20, 1995 /s/ KPMG Bohlins AB KPMG Bohlins AB EX-27 24
5 EXHIBIT (27) This schedule contains summary financial information extracted from the financial statements of Clark Equipment Company for the year ended December 31,1994 and is qualified in its entirety by reference to such financial statements. 1,000 YEAR DEC-31-1994 DEC-31-1994 48,404 180,200 115,561 6,016 123,728 495,123 383,758 202,619 1,193,899 204,606 193,294 324,067 0 0 128,093 1,193,899 946,200 946,599 748,716 748,716 0 1,224 19,966 92,144 29,329 62,815 99,120 0 0 161,935 9.30 9.30
EX-99 25 EXHIBIT (99) CLARK EQUIPMENT COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (DOLLARS IN MILLIONS) Twelve Months 1994 Earnings Before Tax: Clark-From Continuing Consolidated Operations $ 92.1 Clark's 50% Share of VME (Net of Clark Goodwill Amortization and Other VME Related Expenses) 98.0 Total Pre-Tax Earnings (1) $ 190.1 Fixed Charges: Clark: Interest Expense $ 20.0 Interest Portion of Rent Expense 1.6 Clark's Share of VME: Interest Expense 9.0 Interest Portion of Rent Expense 3.4 Total Fixed Charges (2) $ 34.0 Earnings from Continuing Operations Before Taxes and Fixed Charges (1 Plus 2) $ 224.1 Ratio of Earnings to Fixed Charges 6.59 ======= NOTE: Earnings to Fixed Charges have been determined based on Continuing Operations and have been computed by dividing Earnings before Income Taxes and Fixed Charges by Fixed Charges. Earnings before Income Tax includes the pre-tax income from Clark's Consolidated Continuing Operations and Clark's 50% share of VME's pre-tax income, net of Clark Goodwill Amortization related to its VME investment, and other expenses directly related to VME. Fixed Charges include Interest Expense relating to Clark's Consolidated Continuing Operations and Clark's 50% share of VME's interest. Fixed Charges also includes one-third of Clark Rentals for Consolidated Continuing Operations and Clark's 50% share of one-third of the VME Rentals. The Company believes that one-third of such Rentals constitutes a representative interest factor. Capitalized Interest has been excluded from Fixed Charges as it is immaterial.