-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A9zIP5jejkNtTUTzQNFv3BbaSdSP5+fKeramnRMbhlt8fSQZgO1L/r7ybE+Xl7JV tV6iV6mPsIn85XYP0a2mcA== 0000950131-98-002693.txt : 19980422 0000950131-98-002693.hdr.sgml : 19980422 ACCESSION NUMBER: 0000950131-98-002693 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19980421 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WABASH NATIONAL CORP /DE CENTRAL INDEX KEY: 0000879526 STANDARD INDUSTRIAL CLASSIFICATION: TRUCK TRAILERS [3715] IRS NUMBER: 521375208 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-48589 FILM NUMBER: 98598233 BUSINESS ADDRESS: STREET 1: 1000 SAGAMORE PKWY S STREET 2: P O BOX 6129 CITY: LAFAYETTE STATE: IN ZIP: 47905 BUSINESS PHONE: 7654481591 MAIL ADDRESS: STREET 1: 1000 SAGAMORE PARKWAY SOUTH STREET 2: P O BOX 6129 CITY: LAFAYETTE STATE: IN ZIP: 47905 S-3/A 1 AMD. #2 TO FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1998 REGISTRATION NO. 333-48589 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- AMENDMENT NO. 2 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- WABASH NATIONAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 52-1375208 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 1000 SAGAMORE PARKWAY SOUTH LAFAYETTE, INDIANA 47905 (765) 448-1591 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ---------------- DONALD J. EHRLICH WABASH NATIONAL CORPORATION 1000 SAGAMORE PARKWAY SOUTH LAFAYETTE, INDIANA 47905 (765) 448-1591 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES TO: MICHAEL J. SILVER ROBERT F. WALL AMY BOWERMAN FREED R. CABELL MORRIS, JR. HOGAN & HARTSON L.L.P. WINSTON & STRAWN 111 S. CALVERT STREET, SUITE 1600 35 WEST WACKER DRIVE BALTIMORE, MARYLAND 21202 CHICAGO, ILLINOIS 60601 (410) 659-2700 (312) 558-5600 ---------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: [_] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] ---------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- EXPLANATORY NOTE This Registration Statement contains two forms of prospectus: one to be used in connection with a United States offering of Common Stock (the "U.S. Prospectus") and one to be used in connection with a concurrent international offering of Common Stock (the "International Prospectus"). The U.S. Prospectus and the International Prospectus are identical except that they contain different front and back cover pages and different descriptions of the plan of distribution (contained under the caption "Underwriting" in each of the U.S. and International Prospectuses). The form of U.S. Prospectus is included herein and is followed by those pages to be used in the International Prospectus which differ from, or are in addition to, those in the U.S. Prospectus. Each of the pages for the International Prospectus included herein is labeled "Alternative Page for International Prospectus." ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED APRIL 21, 1998 PROSPECTUS 3,000,000 SHARES LOGO COMMON STOCK ----------- All of the 3,000,000 shares of Common Stock of Wabash National Corporation, a Delaware corporation ("Wabash" or the "Company"), offered hereby are being offered by the Company. Of the 3,000,000 shares of Common Stock offered, 2,400,000 shares are being offered inside the United States and Canada by the U.S. Underwriters (the "U.S. Offering") and 600,000 shares are being offered in a concurrent international offering outside the United States and Canada by the International Managers (the "International Offering" and together with the U.S. Offering, the "Offerings"). The price to the public and the aggregate underwriting discount per share will be identical for both offerings. See "Underwriting." The Common Stock is listed on the New York Stock Exchange under the symbol "WNC." On March 27, 1998, the last reported sale price of the Common Stock on the New York Stock Exchange was $29 7/16 per share. See "Price Range of Common Stock." SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY. ----------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - ------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC DISCOUNT(1) COMPANY(2) - ------------------------------------------------------------------------------------------- Per Share....................................... $ $ $ - ------------------------------------------------------------------------------------------- Total(3)........................................ $ $ $ - ------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) Before deduction of expenses, estimated at $330,000, which are payable by the Company. (3) The Company has granted the U.S. Underwriters and the International Managers options, exercisable within 30 days of the date hereof, to purchase up to an aggregate of 360,000 and 90,000, respectively, additional shares of Common Stock on the same terms set forth above, to cover over- allotments, if any. If the over-allotment options are exercised in full, the total Price to Public, Underwriting Discount and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." ----------- The shares of Common Stock are offered by the several Underwriters, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of certain legal matters by counsel for the Company and counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the Common Stock will be made against payment therefor in New York, New York on or about 1998. ----------- MERRILL LYNCH & CO. BT ALEX. BROWN ROBERT W. BAIRD & CO. INCORPORATED MORGAN KEEGAN & COMPANY, INC. ----------- The date of this Prospectus is , 1998 Photographs of the DuraPlate trailer and composite material manufacturing process, AutoRailer and RoadRailer. CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE STABILIZING THE PURCHASE OF SHARES OF COMMON STOCK TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED APRIL 21, 1998 PROSPECTUS 3,000,000 SHARES LOGO COMMON STOCK ----------- All of the 3,000,000 shares of Common Stock of Wabash National Corporation, a Delaware corporation ("Wabash" or the "Company"), offered hereby are being offered by the Company. Of the 3,000,000 shares of Common Stock of the Company offered, 600,000 shares are being offered initially outside the United States and Canada by the International Managers (the "International Offering") and 2,400,000 shares are being offered in a concurrent offering inside the United States and Canada by the U.S. Underwriters (the "U.S. Offering" and together with the International Offering, the "Offerings"). The price to the public and the aggregate underwriting discount per share will be identical for both offerings. See "Underwriting." The Common Stock is listed on the New York Stock Exchange under the symbol "WNC." On March 27, 1998, the last reported sale price of the Common Stock on the New York Stock Exchange was $29 7/16 per share. See "Price Range of Common Stock." SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK. ----------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - ----------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC DISCOUNT(1) COMPANY(2) - ----------------------------------------------------------------------------------------- Per Share........................ $ $ $ - ----------------------------------------------------------------------------------------- Total(3)......................... $ $ $ - ----------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) Before deducting expenses, estimated at $330,000, which are payable by the Company. (3) The Company has granted the International Managers and the U.S. Underwriters options, exercisable within 30 days of the date hereof, to purchase up to an aggregate of 90,000 and 360,000, respectively, additional shares of Common Stock on the same terms as set forth above, to cover over- allotments, if any. If the over-allotment options are exercised in full, the total Price to Public, Underwriting Discount, and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." ----------- The shares of Common Stock are being offered by the several underwriters, subject to prior sale, when, as and if issued to and accepted by them and subject to approval of certain legal matters by counsel to the Company and counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the Common Stock will be made against payment therefor in New York, New York on or about , 1998. ----------- MERRILL LYNCH INTERNATIONAL BT ALEX. BROWN INTERNATIONAL ROBERT W. BAIRD & CO. INCORPORATED MORGAN KEEGAN & COMPANY, INC. ----------- The date of this Prospectus is , 1998 [ALTERNATIVE PAGE FOR INTERNATIONAL PROSPECTUS] Photographs of the DuraPlate trailer and composite material manufacturing process, AutoRailer and RoadRailer. This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy the Common Stock in any jurisdiction in which such offer or solicitation is unlawful. There are restrictions on the offer and sale of the Common Stock in the United Kingdom. All applicable provisions of the Financial Services Act 1986 and the Public Offers of Securities Regulations 1995 with respect to anything done by any person in relation to the Common Stock, in, from or otherwise involving the United Kingdom must be complied with. See "Underwriting." In this Prospectus, references to "dollars," "U.S.$" and "$" are to United States dollars. CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE STABILIZING THE PURCHASE OF SHARES OF COMMON STOCK TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto appearing elsewhere in, or incorporated by reference into, this Prospectus. Unless indicated otherwise, the information contained herein assumes no exercise of the Underwriters' over- allotment options. THE COMPANY Founded in 1985 by several members of current senior management, the Company is the largest United States designer and manufacturer of truck trailers. Through a wholly-owned subsidiary, the Company also provides leasing and financing programs to its customers. The Company established its retail branch network and aftermarket parts and service capacity through its 1997 acquisition (the "Fruehauf Acquisition") of certain assets of Fruehauf Trailer Corporation ("Fruehauf"), including the well-recognized Fruehauf brand name. This network also sells used trailers to the retail trade. The Company believes that its success has been the result of its long- standing relationships with its customer partners, innovative product development, broad product line, large distribution and service network and corporate culture. The Company markets its products under the Wabash National and Fruehauf brand names and parts and services under the Pro-Par, Wabash National and Fruehauf brand names. The Company estimates that over 20% of the nation's trailers in service are either Fruehauf or Wabash trailers and that approximately 22% of all new trailers shipped in the United States in 1997 were produced by the Company. At December 31, 1997, the Company's backlog was $832 million, including over $200 million for the new DuraPlate trailers, the Company's innovative and proprietary composite plate trailer. The Company has achieved a 24% compound annual growth rate in revenues since 1993. In fiscal 1997, the Company generated net sales of $846.1 million. The Company attributes much of its past growth to the emergence of the full truckload sector of the transportation industry. Total transportation activity in the United States in 1996 was estimated to be in excess of $460 billion. In 1985, the year in which the Company was founded, the trucking industry accounted for approximately 75% of transportation activity and has since grown its market share to approximately 79% (rail transport has the second largest share of transportation activity with an approximate 8% market share). Prior to federal deregulation of the trucking industry in 1982, trucking activity was divided among common carriers, package carriers and private fleets. Private fleets represented the largest portion of inter-city truck freight with well over 50% of the activity. Following deregulation, a new segment of full truckload carriers emerged that were primarily non-union and focused on long haul transportation. The Company believes that the growth of this segment was due not only to increased trucking activity but also to increased customer preference for the lower-cost, higher quality service of full truckload carriers over common carriers, as well as private fleets and railroads. Since inception, the Company has focused its strategy primarily on the full truckload segment which concentrates on more efficient equipment designs. Today, the Company believes it is the leading supplier to the full truckload segment. While the private fleet market share has declined since deregulation, it continues to be the transportation industry's largest single segment with slightly over 50% of inter-city transport and is widely dispersed. This segment has historically represented less than 10% of the Company's business and was generally underpenetrated by the Company until the acquisition of the retail distribution network of Fruehauf in 1997. The acquisition of Fruehauf's 31 branches gave the Company the largest factory-owned distribution network for purposes of servicing and supplying the private fleet segment. The Company expects to expand its distribution network and capitalize on the well- recognized Fruehauf brand name to gain greater access to this largest single segment of the transportation industry. 3 GROWTH STRATEGY The Company's strategy for continued growth is to expand on its position as a leading manufacturer of transportation equipment and includes the following key elements: GROW CUSTOMER PARTNERSHIPS. Unique in the trailer industry, the Company maintains supply relationships, primarily single source, with many of the largest and fastest growing transportation companies in the country. The Company's list of customer partners includes Schneider National, Inc., Swift Transportation Co. Inc., Werner Enterprises, Inc., Dart Transit Company, Heartland Express, Inc., U.S. Xpress Enterprises, Inc., Knight Transportation, Inc., Central Transport International, Federal Express Corporation and Triple Crown Services Company. In addition to serving as a single source of supply, the Company offers priority scheduling and cost-based pricing for its customer partners. The Company's engineering, manufacturing, and marketing departments work closely with customer partners to assess their needs and to develop cost- effective engineering and manufacturing solutions. This collaborative process serves as a resource for the development of new technologies and results in many highly innovative products incorporating unique design features such as DuraPlate trailers, RoadRailer trailers and AutoRailer trailers. As the Company's customer partners continue to grow, the Company will benefit from their increased equipment and service requirements. CONTINUE PROPRIETARY PRODUCT DEVELOPMENT. The Company's long-standing customer partnerships have facilitated the Company's proprietary product innovations. All of these developments are designed to enhance the productivity and efficiency of the Company's partners and thereby positively impact the Company's results. Among the most significant innovations are: Plate trailers. In 1985, the Company pioneered the aluminum plate trailer, which became the standard of most of the fastest growing full truckload carriers. In late 1995, the Company introduced the DuraPlate trailer, a highly innovative composite plate trailer. The DuraPlate composite material is a high density vinyl core with an inner and outer steel skin, offering greater durability and strength than the aluminum plate trailer. The Company began manufacturing the composite material at its own facility in Lafayette, Indiana in late 1997 and produced approximately 7,000 composite plate trailers in 1997. The Company believes the proprietary DuraPlate trailer will be its largest selling product in 1998 and represents a significant advancement in truck trailer technology. RoadRailer trailers. In 1987, the Company began manufacturing RoadRailer trailers and in 1991 acquired the ownership rights to this technology. RoadRailer trailers use a patented bimodal technology consisting of a truck trailer and detachable rail "bogie" (consisting of suspension, frame and a set of rail wheels) permitting a trailer to run both over the highway and directly on railroad lines. By offering the bimodal technology in a number of variations, including the AutoRailer trailer, the Company believes it can increase its penetration of the intermodal market and enlarge its pool of potential customer partners. The Company believes that RoadRailer trailers provide the opportunity for the Company to enhance its reputation for technological leadership in the transportation industry. Refrigerated trailers. The Company introduced refrigerated trailers into its product line in 1990. Refrigerated trailers are used primarily by private fleets in the transportation of perishable food products. The Company's innovative process for building these trailers involves injecting insulating foam in the sidewalls and roof in a single process prior to assembly, which improves both the insulation capabilities and the durability of the trailers. The Company also offers its proprietary SolarGuard roof system, which reduces fuel cost by providing protection against harmful radiation. During 1995, the Company opened a new dedicated refrigerated trailer manufacturing facility in Lafayette, Indiana. Other innovations. In 1995, the Company introduced the AllRailer railcar, the Company's first prototype lightweight, totally enclosed, high-speed railcar. The AllRailer railcar design allows shippers to transport vehicles by rail in a fully-enclosed environment, protected from both airborne contamination and vandalism. Currently under development are proprietary anti-lock braking systems, composite doors, composite flooring and various electronic features all of which are designed to enhance product efficiencies and to further establish the Company as a technological leader in the transportation industry. 4 EXPAND RETAIL DISTRIBUTION NETWORK. The Company intends to strengthen its retail distribution network by expanding operations acquired from Fruehauf in 1997 through acquiring or building new branches. This retail distribution network operates under the name Fruehauf Trailer Services, Inc., a wholly-owned subsidiary of the Company. Coupled with its existing parts distribution business, the Company ended 1997 with over $90 million in aftermarket parts and service revenues compared to $28 million in 1996. The Company believes that an enhanced retail network will provide a strong platform for further penetration of the private fleet market as well as increasing higher margin aftermarket parts and maintenance service operations. An expanded retail network will enhance profits through cost reduction and increased efficiencies including those associated with used truck trailer trade-ins and sales. The Company makes financing opportunities available at the branch level through Wabash National Finance Company to support new and used trailer sales. GROW INTERNATIONAL MARKETS. The Company intends to continue to emphasize product innovations that position the Company to expand globally. The Company's proprietary RoadRailer technology meets all European requirements for bimodal equipment and has been approved for operation by BritishRail, Deutsche Bahn, SNCF and other European railways. It is uniquely designed to permit operation at speeds that are compatible with passenger trains that predominate in European rail systems. The Company recently acquired a minority interest in a European RoadRailer operating company in which RoadRailer equipment is exclusively used to transport goods between Italy and Germany over the rails. The Company's RoadRailer technology also has features that appeal to East and South Asian carriers. The Company is expanding its international sales into India, Thailand and South America. In addition, the Company has formed an affiliation with trailer manufacturer Bernard Krone Fabrzeugwerke GmbH of Wertle, Germany for the marketing of dry vans and refrigerated trailers throughout Europe. EXPAND CORPORATE CULTURE. The Company intends to continue to foster a corporate culture which emphasizes flexible, low-cost manufacturing through extensive employee involvement in all aspects of the business. All employees participate in extensive classroom training covering all aspects of the Company's business, including team building and problem solving, statistical process control, economics and finance. The Company employs a compensation program which rewards a majority of all hourly employees through the distribution of a percentage of the Company's after-tax profits. Wabash's safety program has been developed with employee participation and has been cited for nine consecutive years by the Truck Trailer Manufacturing Association for achieving the best safety record among large plants in the industry. The Company believes that its corporate culture has produced a highly trained and motivated workforce that understands the Company's business strategy and that is keenly interested in and rewarded by the success of the Company. As of December 31, 1997, approximately 11% of the Company's employees, all of whom work at facilities acquired in the Fruehauf acquisition, are represented by labor unions. Wabash was incorporated in Delaware in 1991 and is the successor by merger to a Maryland corporation organized in 1985. As used herein, the terms "Company" and "Wabash" mean Wabash National Corporation and its wholly-owned subsidiaries including Fruehauf Trailer Services, Inc. and Wabash National Finance Corporation ("Wabash Finance"). The principal executive offices of the Company are located at 1000 Sagamore Parkway South, Lafayette, Indiana 47905, telephone (765) 448-1591. RECENT DEVELOPMENTS TRADE RECEIVABLES SECURITIZATION. In March 1998, the Company replaced its existing $40 million receivable sale and servicing agreement with a new non- recourse trade receivable securitization facility with NBD Bank, N.A. The Company expects that the amount of the new facility will vary between $75 to $90 million depending on the amount of the underlying receivables. The Company applied the net proceeds of a sale of receivables under the facility to repay approximately $83 million of outstanding indebtedness under its unsecured revolving line of credit with NBD Bank, N.A. The Company expects that this securitization and repayment of debt will facilitate the Company's future access to capital. 5 INTERIM RESULTS OF OPERATIONS. On April 20, 1998, the Company announced that net sales for the quarter ended March 31, 1998 were $293.6 million, a 117% increase over net sales of $135.1 million for the same period last year. Net income for the quarter ended March 31, 1998 was $7.4 million, or $.36 per share, compared to net income of $0.9 million, or $.05 per share, for the same period last year. The increase in net sales and net income were attributed largely to increased production of composite plate trailers and growth in the Company's retail business. THE OFFERINGS The offering of 2,400,000 shares of Common Stock initially being offered in the United States and Canada (the "U.S. Offering") and the concurrent offering of 600,000 shares of Common Stock initially being offered outside the United States and Canada (the "International Offering") are collectively referred to herein as the "Offerings." The closing of the International Offering is conditioned upon the closing of the U.S. Offering and vice versa. See "Underwriting." Common Stock offered by the Company.................... 3,000,000 shares Common Stock to be outstanding after the Offerings(1).. 22,956,294 shares New York Stock Exchange Symbol......................... "WNC" Use of Proceeds........................................ To expand retail distribution network, fund certain capital improvements, repay debt and for general corporate purposes. See "Use of Proceeds."
- -------- (1) Excludes 1,750,000 shares of Common Stock reserved for issuance under the Company's 1992 Non-Qualified Stock Option Plan, under which options to purchase 854,480 shares of Common Stock at a weighted average exercise price of $25.05 per share were outstanding on March 27, 1998 and 823,392 shares of Common Stock issuable upon conversion of Series B 6% Cumulative Convertible Exchangeable Preferred Stock. Wabash National(R), AutoRailer(R), Fruehauf(R), Pro-Par(R), ReeferRailer(R) and RoadRailer(R) are registered trademarks of the Company and AllRailer, DuraPlate, SolarGuard, PupRailer and ChassisRailer are trademarks of the Company. All other trademarks and trade names referred to herein are the property of their respective owners. 6 SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31, ----------------------------------------------------------- 1997 1996 1995 1994 1993 ---------- ---------- ---------- ---------- ----------- INCOME STATEMENT DATA: Net sales............. $ 846,082 $ 631,492 $ 734,299 $ 561,797 $ 360,030 Cost of sales......... 778,620 602,629 677,503 511,821 325,123 ---------- ---------- ---------- ---------- ---------- Gross profit........ 67,462 28,863 56,796 49,976 34,907 Selling, general and administrative expenses............. 26,307 13,359 11,111 8,723 7,465 ---------- ---------- ---------- ---------- ---------- Income from operations......... 41,155 15,504 45,685 41,253 27,442 Interest expense...... (16,100) (10,257) (6,251) (2,684) (1,388) Other, net............ 735 788 875 1,019 (184) ---------- ---------- ---------- ---------- ---------- Income before income taxes.............. 25,790 6,035 40,309 39,588 25,870 Provision for income taxes................ 10,576 2,397 14,902 15,663 10,315 ---------- ---------- ---------- ---------- ---------- Net income.......... $ 15,214 $ 3,638 $ 25,407 $ 23,925 $ 15,555 ========== ========== ========== ========== ========== Basic earnings per common share........... $ 0.74 $ 0.19 $ 1.34 $ 1.32 $ 0.90 Diluted earnings per common share........... $ 0.74 $ 0.19 $ 1.33 $ 1.30 $ 0.90 Cash dividends declared per common share....... $ 0.13 $ 0.12 $ 0.105 $ 0.085 $ 0.07 OTHER OPERATING DATA: EBITDA(1)............. $ 57,778 $ 30,793 $ 57,189 $ 48,639 $ 32,337 EBIT(1)............... $ 41,155 $ 15,504 $ 45,685 $ 41,253 $ 27,442 Depreciation and amortization......... $ 16,623 $ 15,289 $ 11,504 $ 7,386 $ 4,895 Capital expenditures.. $ 20,168 $ 11,211 $ 37,898 $ 26,279 $ 5,017 Trailer production.... 48,346 36,517 42,424 35,679 22,060 U.S. trailer market share................ 22% 19% 15% 15% 12% Backlog (at period end)................. $ 832,000 $ 462,000 $ 858,000 $1,029,000 $ 456,000 Number of employees (at period end)(2)... 5,093 2,975 3,706 3,407 2,209 DECEMBER 31, 1997 ----------------------- AS ACTUAL ADJUSTED(3) ---------- ----------- BALANCE SHEET DATA: Working capital........................................ $ 280,212 $ 291,737 Total lease portfolio.................................. 103,222 103,222 Total assets........................................... 629,870 640,305 Long-term debt, net of current maturities(4)........... 231,880 159,485 Stockholders' equity................................... 226,516 310,436
- -------- (1) "EBITDA" is defined as net income (loss) before interest expense, taxes, depreciation and amortization, discontinued operations, non-recurring charges, extraordinary item and accounting change. "EBIT" is defined as net income (loss) before interest expense and taxes. EBITDA and EBIT are not measures of performance under GAAP. While neither EBITDA nor EBIT should be considered in isolation or as substitutes for net income, cash flows from operating activities and other income or cash flow statement data prepared in accordance with GAAP, or as a measure of profitability or liquidity, management understands that EBITDA and EBIT are customarily used as criteria in evaluating the financial strength of companies. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of other measures of performance determined in accordance with GAAP. (2) Includes 773, 54, 252, 444 and 143 temporary employees for 1997, 1996, 1995, 1994 and 1993, respectively. (3) Adjusted to reflect the application of the net proceeds from the March 1998 trade receivables securitization, the sale by the Company of 3,000,000 shares of Common Stock from these Offerings and the application of the net proceeds (assuming an offering price of $29.4375 per share). (4) Long-term debt, net of current maturities, includes $54.9 million in 1997 incurred by Wabash Finance in connection with its lease and finance operations. 7 RISK FACTORS In addition to the other information contained or incorporated by reference in this Prospectus, prospective investors should consider carefully the following risk factors in evaluating an investment in the Common Stock. Intense Competition. The truck trailer manufacturing industry is highly competitive. The Company competes with other truck trailer manufacturers of varying sizes, some of which may have greater financial resources than the Company. Barriers to entry in the truck trailer manufacturing industry are low and, therefore, it is possible that additional competitors could enter the market at any time. Certain participants in the industry in which the Company competes may have manufacturing over-capacity and high leverage, and the industry has experienced a number of bankruptcies and financial stresses, all of which have resulted in significant pricing pressures. The inability of the Company to compete effectively with existing or potential competitors would have a material adverse effect on the Company's business, financial condition and results of operations. Industry Cyclicality. The truck trailer manufacturing industry historically has been and is expected to continue to be cyclical and affected by overall economic conditions. Sales of new truck trailers have been subject to cyclical variations based on a six to eight year replacement cycle. Poor economic conditions can adversely affect demand for new trailers and in the past have led to an overall aging of trailer fleets beyond this typical replacement cycle. If such economic conditions were to recur, the Company's business could be adversely affected. Acceptance of New Technology and Products. The Company has recently introduced new products including the DuraPlate composite plate trailer, constructed from a high density vinyl core with a steel skin, and prototypes including the AllRailer railcar, a fully enclosed high-speed railcar. There can be no assurance that these or other new products or technologies will achieve sustained market acceptance. There can also be no assurance that new technologies or products introduced by competitors will not render the Company's products obsolete or uncompetitive. Dependence on Key Management. The success of the Company's business is and will continue to be highly dependent upon its President, Donald J. Ehrlich, and other members of senior management. The Company does not have employment agreements with any of such persons. The loss of any of their services could have a material adverse effect upon the Company's business, financial condition and results of operations. Reliance on Certain Customers and Corporate Partnerships. The Company has corporate partnering relationships with a number of customers whereby the Company supplies the requirements of these customers. To a significant extent, the Company's success is dependent upon the continued strength of their relationships and the growth of its corporate partners. Further, the Company often is unable to predict the level of demand for its products from these partners, or their timing of orders. The loss of a significant customer or unexpected delays in product purchases could have a material adverse effect on the Company's business, financial condition and results of operations. Shortages of Raw Materials. The Company currently relies on a limited number of suppliers for certain key components in the manufacturing of truck trailers. The loss of its suppliers or the inability of the suppliers to meet the Company's price, quality, quantity and delivery requirements could have a material adverse effect on the Company's business, financial condition and results of operations. Export Sales and New Markets. The Company derives a growing portion of its sales from international sales and the export of the Company's products to new markets. International operations are subject to inherent risks, including fluctuations in exchange rates, credit risks, local political and economic conditions, unexpected changes in regulatory requirements, tariffs and other trade barriers, longer accounts receivable payment cycles and potentially adverse tax consequences. These factors could have a material adverse effect on the Company's business, financial condition and results of operations. Government Regulation. The length, height, width, maximum weight capacity and other specifications of truck trailers are regulated by individual states. The Federal Government also regulates certain safety features 8 incorporated in the design of truck trailers. Changes or anticipation of changes in these regulations can have a material impact on the Company's customers, may defer customer purchasing decisions, may result in reengineering and may affect the financial results of the Company. In addition, the Company is subject to various environmental laws and regulations dealing with the transportation, storage, presence, use, disposal and handling of hazardous materials, discharge of stormwater and underground fuel storage tanks and may be subject to liability associated with operations of prior owners of acquired property. If the Company were found to be in violation of applicable laws or regulations, it could have a material adverse effect on the Company's business, financial condition and results of operations. Acquisition of Fruehauf and Potential Future Acquisitions. In April 1997, the Company acquired a significant portion of the assets associated with the trailer manufacturing and parts distribution business of Fruehauf and is in the process of completing the integration of those assets into the Company's business. These assets included two manufacturing plants, a parts distribution center and 31 branch locations. The Company has limited experience in managing the acquired business, and the Fruehauf operations were operating in bankruptcy at the time of the acquisition. No assurance can be given that this acquisition will ultimately prove successful to Wabash. The Company expects to make additional acquisitions of technology, businesses and product lines in the future. The Company's ability to expand successfully through acquisitions depends on many factors, including the successful identification and acquisition of products, technologies or businesses and management's ability to effectively integrate and operate the acquired products, technologies or businesses. The Company may compete for acquisition opportunities with other companies that have significantly greater financial and management resources. There can be no assurance that the Company will be successful in acquiring or integrating any such products, technologies or businesses. Shares Eligible for Future Sale. Fruehauf beneficially owns 1,023,392 shares of Common Stock (including 823,392 shares of Common Stock issuable upon conversion of the Series B 6% Cumulative Convertible Exchangeable Preferred Stock it owns), representing approximately 4.9% of the total number of shares of Common Stock outstanding. Fruehauf has agreed, subject to bankruptcy court approval and the execution of certain agreements with the Company no later than May 11, 1998, not to sell or otherwise dispose of the shares of Common Stock it beneficially owns other than pursuant to a plan of reorganization and only to persons who have agreed to be bound by the terms of the lock-up agreement, for a period beginning on the effective date of this Registration Statement (the "Effective Date") and expiring 90 days from the Effective Date. In exchange for this lock-up agreement, the Company has agreed to cause a registration statement covering the resale of such shares by the distributees to become effective no later than the 90th day following the Effective Date to permit the resale of such shares by the distributees immediately upon the expiration of the 90 day lock-up period. Year 2000 Compliance. The Company uses a significant number of computer software programs and operating systems in its internal operations, including applications used in financial business systems, manufacturing processes and various administrative functions. The Company has also recently acquired branch office information systems in the Fruehauf Acquisition that use other software. To the extent that these systems contain software that is unable to appropriately interpret the upcoming calendar year "2000," some level of modification or even possibly replacement of such software or applications will be necessary. The Company is in the process of identifying the software applications that are not Year 2000 compliant and believes the system acquired in the Fruehauf Acquisition is not so compliant. As a result, beginning in 1998 the Company will install new application systems within this distribution network which will be Year 2000 compliant. Notwithstanding the Company's efforts in this regard, there can be no assurance that the Company will be able to address the Year 2000 issues in a timely manner. While the Company believes that the costs it will incur in order to become Year 2000 compliant will not be material, there can be no assurance that the Company will not encounter unexpected difficulties or expenses relating to the Year 2000 compliance issue. Disclosure Regarding Forward-Looking Statements. This Prospectus, including documents incorporated herein by reference, contains forward-looking statements. Additional written or oral forward-looking statements may be made by the Company from time to time in filings with the Securities and Exchange Commission or otherwise. The words "believe," "expect," "anticipate," and "project" and similar expressions identify forward-looking statements, which speak only as of the date the statement is made. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and 9 Section 21E of the Securities Exchange Act of 1934, as amended. Such statements may include, but are not limited to, information regarding revenues, income or loss, capital expenditures, acquisitions, number of retail branch openings, plans for future operations, financing needs or plans, the impact of inflation and plans relating to services of the Company, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward- looking statements. Statements in this Prospectus, including those set forth in "The Company" and "Risk Factors," and in "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations", describe factors, among others, that could contribute to or cause such differences. USE OF PROCEEDS The net proceeds to the Company from these Offerings, assuming an offering price of $29 7/16 per share, after deducting underwriting discounts and estimated expenses of the Offerings, are approximately $83.9 million ($96.6 million if the Underwriters' over-allotment options are exercised in full). The Company intends to use approximately $60 million of the net proceeds of the Offerings to expand its retail branch network over the next 18 months and approximately $20 million to fund certain capital improvements related to the Company's manufacturing facilities. The balance of the net proceeds will be used for general corporate purposes. Initially, the Company intends to use approximately $24 million of the net proceeds of the Offerings to repay the balance of the borrowings outstanding under its unsecured revolving line of credit with NBD Bank, N.A. The line of credit matures on September 30, 2002 and bears variable interest based on the London interbank rate ("LIBOR") plus 25 to 55 basis points, as defined, or a prime rate of interest, as defined (at December 31, 1997 the interest rate was 6.1%). Borrowings under the line of credit were primarily used to expand Wabash Finance's lease and finance operations and to establish working capital at the Company's retail branches. The Company expects to borrow from this facility in the future. PRICE RANGE OF COMMON STOCK The Common Stock is traded on the New York Stock Exchange under the symbol "WNC." The following table sets forth, for the period indicated, the high and low sale prices per share as reported on the New York Stock Exchange Composite Tape and the dividends declared per common share.
DIVIDENDS DECLARED PER HIGH LOW COMMON SHARE ------- ------- ------------ 1996 First Quarter................................ $24 7/8 $17 5/8 $0.03 Second Quarter............................... $22 7/8 $17 1/8 $0.03 Third Quarter................................ $19 $14 1/8 $0.03 Fourth Quarter............................... $21 1/2 $15 3/8 $0.03 1997 First Quarter................................ $18 5/8 $15 5/8 $0.03 Second Quarter............................... $30 $17 3/8 $0.03 Third Quarter................................ $30 3/8 $23 1/2 $0.035 Fourth Quarter............................... $35 5/8 $25 5/8 $0.035 1998 First Quarter (through March 27, 1998)....... $31 1/8 $24 1/4 $0.035
The reported last sale price of the Common Stock on the New York Stock Exchange on March 27, 1998 was $29 7/16 per share. As of March 27, 1998, the number of record holders of Common Stock was 1,078. 10 DIVIDEND POLICY The Company has paid regular quarterly cash dividends since 1992. The current policy of the Company's Board of Directors is to consider the declaration of dividends on a quarterly basis. Future distributions will be declared and paid at the discretion of the Board of Directors and will depend upon cash generated by operating activities, the Company's financial condition, capital requirements and such other factors as the Board of Directors deems relevant. Certain of the Company's indebtedness places restrictions on the ability of the Company to pay dividends. Therefore, there can be no assurance as to the payment of any future dividends. CAPITALIZATION The following table sets forth the capitalization of the Company as of December 31, 1997 (i) on an actual basis and (ii) as adjusted to reflect the effect of the application of the net proceeds from the March 1998 trade receivable securitization, and the sale by the Company of 3,000,000 shares of the Common Stock in these Offerings and the application of the estimated net proceeds (assuming an offering price of $29.4375 per share). This table should be read in conjunction with the Company's financial statements and notes thereto appearing elsewhere in this Prospectus.
DECEMBER 31, 1997 --------------------- ACTUAL AS ADJUSTED -------- ----------- (IN THOUSANDS) Long-term debt, net of current maturities ........... $231,880 $159,485 Stockholders' equity: Preferred Stock, $.01 par value; 25,000,000 shares authorized: Series A Junior Participating Preferred Stock, $.01 par value; 300,000 shares authorized; no shares issued and outstanding................... -- -- Series B 6% Cumulative Convertible Exchangeable Preferred Stock, $.01 par value; 352,000 shares authorized actual and as adjusted; 352,000 shares issued and outstanding actual and as adjusted........................................ 4 4 Common Stock, $.01 par value; 75,000,000 shares authorized; 19,954,874 shares issued and outstanding actual; 22,954,874 shares issued and outstanding as adjusted(1)........................ 200 230 Additional paid-in capital......................... 135,611 219,501 Retained earnings.................................. 91,980 91,980 Treasury stock at cost, 59,600 common shares....... (1,279) (1,279) -------- -------- Total stockholders' equity....................... 226,516 310,436 -------- -------- Total capitalization............................. $458,396 $469,921 ======== ========
- -------- (1) Excludes 1,750,000 shares of Common Stock reserved for issuance under the Company's 1992 Non-Qualified Stock Option Plan, under which options to purchase 855,900 shares of Common Stock at a weighted average exercise price of $25.05 were outstanding on December 31, 1997. 11 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The following selected consolidated financial and operating data sets forth certain financial and operating data for the Company. The financial data should be read in conjunction with the consolidated financial statements and notes thereto, incorporated by reference in this registration statement. The following information should be read in conjunction with the consolidated financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operation" included elsewhere or incorporated by reference in this registration statement.
YEARS ENDED DECEMBER 31, ---------------------------------------------------------- 1997 1996 1995 1994 1993 ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA) INCOME STATEMENT DATA: Net sales............. $ 846,082 $ 631,492 $ 734,299 $ 561,797 $ 360,030 Cost of sales......... 778,620 602,629 677,503 511,821 325,123 ---------- ---------- ---------- ---------- ---------- Gross profit........ 67,462 28,863 56,796 49,976 34,907 Selling, general and administrative expenses............. 26,307 13,359 11,111 8,723 7,465 ---------- ---------- ---------- ---------- ---------- Income from operations......... 41,155 15,504 45,685 41,253 27,442 Interest expense...... (16,100) (10,257) (6,251) (2,684) (1,388) Other, net............ 735 788 875 1,019 (184) ---------- ---------- ---------- ---------- ---------- Income before income taxes.............. 25,790 6,035 40,309 39,588 25,870 Provision for income taxes................ 10,576 2,397 14,902 15,663 10,315 ---------- ---------- ---------- ---------- ---------- Net income.......... $ 15,214 $ 3,638 $ 25,407 $ 23,925 $ 15,555 ========== ========== ========== ========== ========== Basic earnings per common share........... $ 0.74 $ 0.19 $ 1.34 $ 1.32 $ 0.90 Diluted earnings per common share........... $ 0.74 $ 0.19 $ 1.33 $ 1.30 $ 0.90 Cash dividends declared per common share....... $ 0.13 $ 0.12 $ 0.105 $ 0.085 $ 0.07 OTHER OPERATING DATA: EBITDA(1)............. $ 57,778 $ 30,793 $ 57,189 $ 48,639 $ 32,337 EBIT(1)............... $ 41,155 $ 15,504 $ 45,685 $ 41,253 $ 27,442 Depreciation and amortization......... $ 16,623 $ 15,289 $ 11,504 $ 7,386 $ 4,895 Capital expenditures.. $ 20,168 $ 11,211 $ 37,898 $ 26,279 $ 5,017 Trailer production.... 48,346 36,517 42,424 35,679 22,060 U.S. trailer market share................ 22% 19% 15% 15% 12% Backlog (at period end)................. $ 831,000 $ 462,000 $ 858,000 $1,029,000 $ 456,000 Number of employees (at period end)(2)... 5,093 2,975 3,706 3,407 2,209 DECEMBER 31, ---------------------------------------------------------- 1997 1996 1995 1994 1993 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS) BALANCE SHEET DATA: Working capital....... $ 280,212 $ 148,712 $ 113,198 $ 90,802 $ 56,407 Total lease portfolio............ 103,222 113,811 76,464 53,479 37,647 Total assets.......... 629,870 440,071 384,134 300,679 179,801 Long-term debt, net of current maturities(3)........ 231,880 151,307 73,726 24,857 24,422 Stockholders' equity.. 226,516 178,368 177,631 154,181 87,464
- -------- (1) "EBITDA" is defined as net income (loss) before interest expense, taxes, depreciation and amortization, discontinued operations, non-recurring charges, extraordinary item and accounting change. "EBIT" is defined as net income (loss) before interest expense and taxes. EBITDA and EBIT are not measures of performance under GAAP. While neither EBITDA nor EBIT should considered in isolation or as substitutes for net income, cash flows from operating activities and other income or cash flow statement data prepared in accordance with GAAP, or as a measure of profitability or liquidity, management understands that EBITDA and EBIT are customarily used as criteria in evaluating the financial strength of companies. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of other measures of performance determined in accordance with GAAP. (2) Includes 773, 54, 252, 444 and 143 temporary employees for 1997, 1996, 1995, 1994 and 1993, respectively. (3) Long-term debt, net of current maturities, includes $54.9 million, $80.9 million, $31.0 million, $23.8 million and $23.1 million in 1997, 1996 1995, 1994 and 1993 respectively, incurred by Wabash Finance in connection with its lease and finance operations. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the Company's historical results of operations and of its liquidity and capital resources should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere herein. OVERVIEW During 1997, the Company achieved net sales of $846.1 million, which were 34% higher than 1996 net sales of $631.5 million. Net income for 1997 rose to $15.2 million, or $0.74 per share, as compared to $3.6 million, or $0.19 per share, in 1996. The increase in net sales is primarily attributable to the Fruehauf Acquisition, the completion of the Company's composite material manufacturing facility in Lafayette, Indiana and an estimated 13% increase in U.S. truck trailer demand. On April 16, 1997, the Company acquired substantially all of the remaining assets of Fruehauf, a manufacturer and marketer of truck trailers and related parts. The Fruehauf Acquisition included assets consisting of the Fruehauf and Pro-Par names, certain patents and trademarks, retail branches in 31 major metropolitan markets, an aftermarket parts distribution business, a specialty trailer manufacturing plant and a van manufacturing plant. The Fruehauf Acquisition was accounted for as a purchase and accordingly, Fruehauf's results are included in the consolidated financial statements since the date of the acquisition. The Fruehauf Acquisition was strategic for Wabash as it combined the largest fleet producer in the U.S. truck trailer industry with the largest U.S. retail distribution network, thereby providing important synergies in the areas of aftermarket parts and service as well as an expansive used trailer distribution network. In the third quarter of 1997, the Company completed the construction of its new composite material manufacturing facility in Lafayette, Indiana and began producing composite plate material for the Company's proprietary DuraPlate trailer introduced in late 1995. Previously, the Company was severely limited on the supply of the composite material from one supplier who was not able to increase its capacity. The Company's newly constructed composite material manufacturing facility will allow the Company to meet its long-term material requirements and to continue to enhance the design and manufacturability of the DuraPlate trailer. In 1997, the U.S. truck trailer industry experienced one of the best years in the industry's history with over 220,000 units shipped, an increase of approximately 13% over 1996 and a decrease of approximately 21% compared to 1995, the best year in the industry's history. The Company estimates that its market share in the U.S. trailer industry was approximately 22% in 1997. The Company's total new trailer shipments increased 32% over 1996 and increased by 14% over 1995. The demand for the Company's products continues to be strong as the Company began 1998 with approximately $832 million in backlog, a majority of which is expected to be delivered in 1998. Finally, although not a significant contributor to the Company's 1997 results of operations, the Company continues to pursue opportunities in international markets, primarily through the Company's proprietary RoadRailer technology. In November, 1997, the Company acquired a minority interest in a European RoadRailer operating company in which exclusively RoadRailer equipment is used to transport goods between Italy and Germany over the rails. In addition, the Company formed an affiliation with trailer manufacturer Bernard Krone Fabrzeugwerke GmbH of Wertle, Germany for the marketing of dry vans and refrigerated trailers throughout Europe. The Company believes these opportunities provide the foundation for future growth internationally. 13 The following table sets forth certain operating data as a percentage of net sales for the periods indicated:
YEARS ENDED DECEMBER 31, ---------------------------- 1997 1996 1995 -------- -------- -------- Net sales...................................... 100.0% 100.0% 100.0% Cost of sales.................................. 92.0 95.4 92.3 -------- -------- -------- Gross profit................................. 8.0 4.6 7.7 General and administrative expenses............ 2.1 1.4 1.0 Selling expenses............................... 1.0 0.7 0.5 -------- -------- -------- Income from operations....................... 4.9 2.5 6.2 Interest expense............................... (1.9) (1.6) (0.8) Other, net..................................... -- 0.1 0.1 -------- -------- -------- Income before income taxes................... 3.0 1.0 5.5 Provision for income taxes..................... 1.2 0.4 2.0 -------- -------- -------- Net income................................. 1.8% 0.6% 3.5% ======== ======== ========
RESULTS OF OPERATIONS Net Sales The Company achieved record sales of $846.1 million in 1997 and increased its U. S. market share to an estimated 22%. Net sales and market share compared to 1996 and 1995 are as follows:
YEARS ENDED DECEMBER 31, -------------------------------- 1997 1996 1995 --------- --------- --------- (DOLLAR AMOUNTS IN THOUSANDS) Net sales................................ $ 846,082 $ 631,492 $ 734,299 Percentage increase (decrease) in net sales from prior period................. 34.0% (14.0)% 30.7% Estimated % share of new trailer market in U.S.................................. 22.0% 19.0% 14.9%
The increase in net sales from 1996 to 1997 of $214.6 million was attributable to increases in all facets of the Company's business: new trailer sales increased $129.0 million, used trailer sales increased $14.4 million, aftermarket parts and service increased $63.9 million and Wabash Finance lease revenues increased $7.7 million. The increase in new trailer sales from 1996 to 1997 of $129.0 million was attributable to a 30% increase in the number of units sold, reflecting the impact of the newly acquired retail branches, an estimated 13% increase in U.S. truck trailer demand and continued strong demand for the Company's products. Increased production of the DuraPlate trailer, the Company's proprietary composite plate trailer, also favorably impacted net sales in 1997, particularly in the fourth quarter. Historically, the aluminum plate trailer had accounted for over half of the Company's revenues and even a greater percentage of its earnings. While not proprietary, the Company has enjoyed a sizable market share within this segment. As the success of the aluminum plate trailer grew, the Company experienced increased competition within its main product line and as a result, decreased margins. To address this, the Company developed and introduced in late 1995 the DuraPlate trailer which is proprietary in design. The Company's plate trailer production, including both aluminum and DuraPlate plate trailers, increased 10% in the twelve months ended December 31, 1997 compared to the same period in 1996, and over 26% in the fourth quarter of 1997 compared to the same period in 1996. Prior to the fourth quarter of 1997, the Company was severely limited in the amount of composite plate material made available to it from its one supplier who was unable to add additional capacity. As a result, during the first nine months of 1997, the Company's product mix was heavily weighted toward lower priced and lower margin commodity trailers. In August, 1997, the Company completed the construction of its own composite material manufacturing facility in Lafayette, Indiana and in the fourth quarter began using material from this production line for the assembly of new DuraPlate trailers. The Company believes this new facility will provide sufficient capacity for the Company's foreseeable composite material requirements and expected continued increases in demand for this product. 14 The increase in aftermarket parts and service sales of $63.9 million from 1996 to 1997, as well as the increase in used trailer sales of $14.4 million, is primarily the result of the addition of the retail branch distribution network. The Fruehauf Acquisition, which combined the largest fleet manufacturer with the largest retail distribution network in the U.S., provided immediate benefits by creating critical synergies in the areas of aftermarket parts and service and used trailer sales, particularly the ability to market used trailer trade-ins taken by the Company against new trailer fleet orders. The Company recently announced its retail branch expansion plan, and the Company expects to increase the number of Company-owned retail branches to approximately 50 within the next two years. The Company believes the synergies between the fleet and retail business provides significant competitive advantages in the U.S. truck trailer industry and the opportunity for continued sales growth. The $7.7 million increase in leasing and finance revenues during 1997 was primarily due to a full year of lease revenues on a large number of trailers added to Wabash Finance's portfolio in late 1996. The overall number of trailers leased and financed to customers remained relatively constant with 1996 levels. The decrease in sales of 14% from 1995 to 1996 was the result of a 31% decrease in industry new trailer shipments combined with the limited supply of composite material for the Company's newly introduced DuraPlate trailer. As a result, the Company's production mix was heavily weighted toward lower priced and lower margin commodity trailers. The 30.7% increase in net sales from 1994 to 1995 was primarily attributed to a 20% increase in industry new trailer shipments and strong demand for the Company's products. Gross Profit The Company's gross profit as a percentage of net sales increased to 8.0% compared to 4.6% in 1996 and 7.7% in 1995. This increase in gross profit percentage reflects the impact of higher margin sales from the retail branches acquired in 1997 and the improvement in product mix resulting from the completion of the Company's composite material facility in the third quarter of 1997. As expected, the gross margins recognized through the retail branches during 1997 on sales of new and used trailers and aftermarket parts and service were significantly better than the gross margins historically achieved by the Company on new trailer fleet business and contributed to the overall increase in the consolidated gross margin. In addition, the completion of the Company's composite material facility in August, 1997, allowed the Company to increase its production of the proprietary DuraPlate trailer during the fourth quarter, thereby improving the product mix at the Company's manufacturing facilities. Gross margin as a percentage of sales in the fourth quarter of 1997 was approximately 8.8% of net sales, compared to 4.6% of net sales in the fourth quarter of 1996. Based on current known trends, the Company expects further improvement in gross margin as product mix continues to shift toward proprietary products like the DuraPlate trailer and as a larger percentage of the Company's sales are generated from retail branches.
YEARS ENDED DECEMBER 31, ------------------------------- 1997 1996 1995 --------- --------- --------- (DOLLAR AMOUNTS IN THOUSANDS) Gross profit............ $ 67,462 $ 28,863 $ 56,796 Gross profit as a percentage of net sales.................. 8.0% 4.6% 7.7%
Income from Operations Income from operations (income before interest, taxes, and other items) was 4.9%, 2.5% and 6.2% of net sales in 1997, 1996 and 1995, respectively. The increase in income from operations in 1997 was impacted primarily by the increase in gross profit margins previously discussed offset by increased selling, general and administrative expenses. The increase in selling, general and administrative expenses primarily reflects higher levels of expense associated with the retail branches acquired. Selling, general and administrative expenses were 3.1%, 2.1% and 1.5% of net sales in 1997, 1996 and 1995.
YEARS ENDED DECEMBER 31, ------------------------------- 1997 1996 1995 --------- --------- --------- (DOLLAR AMOUNTS IN THOUSANDS) Income from operations.................... $ 41,155 $ 15,504 $ 45,685 Income from operations as a percentage of net sales................................ 4.9% 2.5% 6.2%
15 Other Income (Expense) Interest expense totaled $16.1 million, $10.3 million and $6.3 million for the years ended December 31, 1997, 1996 and 1995, respectively. The increase in interest expense primarily reflects new term and bank line of credit debt associated with increased working capital requirements due to the establishment of inventory at the Fruehauf retail branches acquired in the second quarter, higher working capital due to increased production at the Company's manufacturing facilities and growth in Wabash Finance's lease and finance operations. Other, net is primarily comprised of a variety of immaterial, non-operating expense items. Income Taxes The provision for federal and state income taxes represented 41.0%, 39.7% and 37.0% of pre-tax income for 1997, 1996 and 1995, respectively. During 1995, the Company recognized a state income tax credit related to property improvements on a new facility acquired during 1994. This credit caused the effective tax rate to be 2.4% points lower than the statutory rates in 1995. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents as of December 31, 1997 increased $9.1 million to $14.6 million as compared to $5.5 million at December 31, 1996. The increase in cash was the result of net cash used in operating and investing activities of $69.4 million offset by cash provided from financing activities of $78.5 million. Net cash used in operating and investing activities of $69.4 million is the result of increased working capital due to the start-up and growth in the retail branches acquired in the second quarter of 1997, increased production levels at the Company's manufacturing facilities, capital expenditures related to the construction of the Company's composite material facility and continued growth in Wabash Finance's leasing and finance operations. The increase in working capital during 1997 was due to the Company's investment of approximately $23 million to establish working capital at the retail branches acquired in April, 1997 and higher inventory and receivables, offset somewhat by increased accounts payable, resulting from increased production at the Company's manufacturing facilities. The Company intends to embark on a retail branch expansion plan beginning in 1998 which is expected to increase the number of company-owned retail branches from 31 branches to approximately 50 over the next two years and as a result, further working capital investments will be required to meet this expansion plan. The Company anticipates improvements in working capital at its manufacturing facilities in 1998 to partially offset the working capital needs within the retail branches. Capital expenditures during 1997 totaled approximately $20 million and related principally to the construction of the Company's composite material facility which was completed in the third quarter of 1997. In addition, investments in Wabash Finance's leasing operations of approximately $76.7 million were made during 1997 as Wabash Finance continued to expand its leasing operations. Offsetting this investing activity were several transactions during the third and fourth quarters of 1997 totaling approximately $80 million. These transactions were comprised of $58 million in sale and leaseback transactions occurring in September, 1997 involving a portion of Wabash Finance's operating lease portfolio and a December, 1997 sale and leaseback transaction involving $10 million of the Company's manufacturing equipment. The final transaction in December, 1997 of approximately $13 million involved the sale, with recourse, by Wabash Finance of certain of its finance contracts to a financial institution. The Fruehauf Acquisition in April, 1997 was financed through the issuance of $17.8 million in Common Stock, $17.6 million in Series B Cumulative Convertible Exchangeable Preferred Stock and the remaining $15.1 million in cash. The initial cash requirement for the Fruehauf Acquisition was funded through the use of the Company's revolving credit facility and was recovered within the first 90 days following the acquisition through the positive cash flow generated from the sale of working capital. In connection with the investments discussed above, the Company's debt increased to $231.9 million at December 31, 1997 compared to $151.3 million at December 31, 1996. Of the $231.9 million of consolidated debt outstanding at December 31, 1997, Wabash Finance had $54.9 million in outstanding borrowings as a result of its leasing and financing activities compared to $80.9 million at December 31, 1996. On September 30, 1997, the Company replaced its revolving credit facility with an unsecured revolving bank line of credit permitting the 16 Company to borrow up to $125 million. Under this facility, the Company has the right to borrow until September 30, 2002. Interest payable on such borrowings is variable based upon LIBOR plus 25 to 55 basis points or a prime rate of interest. The Company pays a quarterly commitment fee on the unused portion of this facility of 8.5 to 17.5 basis points per annum. The Company had available credit under this facility of $59 million at December 31, 1997. In connection with one of the Company's European RoadRailer sales transactions, the Company is contingently liable for up to four years as a guarantor of certain commitments of two separate entities via standby letters of credit in the amount of $7.6 million and a separate letter of guarantee in the amount of $4 million. During 1997, the Company continued to utilize a receivables sale and servicing agreement established in June, 1995, which enables the Company to sell up to $40 million of receivables without recourse. In March 1998, the Company replaced its existing $40 million receivable sale and servicing agreement with a new non-recourse trade receivable securitization facility with NBD Bank, N.A. The Company expects that amount of the new facility will vary between $75 to $90 million depending on the amount of the underlying receivables. The Company applied the net proceeds of a sale of receivables under the facility to repay approximately $83 million of outstanding indebtedness under its unsecured revolving line of credit with NBD Bank, N.A. The Company expects that this securitization and repayment of debt will facilitate the Company's future access to capital. On April 27, 1995, the Company announced that the Board of Directors authorized a Common Stock repurchase plan of up to $30 million in the aggregate. The Company may purchase its common stock in the open market or in block transactions from time to time as it deems appropriate. No purchases have been made to date under the common stock repurchase plan. Other sources of funds for capital expenditures, continued expansion of businesses including the retail branch expansion program, dividends, principal repayments on debt, stock repurchase and working capital requirements are expected to be cash from operations, additional borrowings under the credit facilities and term borrowings and equity offerings. The Company believes these funding sources and the proceeds from the Offerings will be adequate for its anticipated requirements. The Company has assessed and continues to assess the impact of the "Year 2000" issue on its reporting systems and operations. The Year 2000 Issue exists because many computer systems and applications currently use two-digit date fields to designate a year. As the century date occurs, date sensitive systems will recognize the year 2000 as 1900 or not at all. This inability to recognize or properly treat the year 2000 may cause our systems to process critical financial and operational information incorrectly. One of the more significant Year 2000 issues faced by the Company are the systems in place within the Company's retail distribution network, which are not Year 2000 compliant. As a result, beginning in 1998 the Company will install new application systems within this distribution network which will be Year 2000 compliant. The Company does not expect the costs associated with becoming Year 2000 compliant to be material. INFLATION The Company has been generally able to offset the impact of rising costs through productivity improvements as well as selective price increases. As a result, inflation is not expected to have a significant impact on the Company's business. NEW ACCOUNTING PRONOUNCEMENTS The FASB issued SFAS No.128, Earnings Per Share, which is effective at year- end 1997. This statement establishes standards for computing and presenting earnings per share ("EPS") and supersedes APB Opinion No.15, Earnings Per Share. The Company adopted this new standard in computing EPS for the twelve months ended December 31, 1997. The adoption of this statement did not have a material effect on the Company's reported EPS. In addition, in June 1997 the FASB issued SFAS No. 130, "Reporting Comprehensive Income." This Statement is effective for fiscal periods beginning after December 15, 1997 with early adoption permitted. The Company is evaluating the effect this Statement will have on its financial reporting and disclosures; however, the Statement will have no effect on the Company's results of operations, financial position, capital resources or liquidity. 17 BUSINESS Founded in 1985 by several members of current senior management, the Company is the largest United States designer and manufacturer of truck trailers. Through a wholly-owned subsidiary, the Company also provides leasing and financing programs to its customers. The Company established its retail branch network and aftermarket parts and service capacity through its 1997 acquisition of certain assets of Fruehauf, including the well-recognized Fruehauf brand name. This network also sells used trailers to the retail trade. The Company believes that its success has been the result of its long- standing relationships with its customer partners, innovative product development, broad product line, large distribution and service network and corporate culture. The Company markets its products under the Wabash National and Fruehauf brand names and parts and services under the Pro-Par, Wabash National and Fruehauf brand names. The Company estimates that over 20% of the nation's trailers in service are either Fruehauf or Wabash trailers and that approximately 22% of all new trailers shipped in the United States in 1997 were produced by the Company. At December 31, 1997, the Company's backlog was $832 million, including over $200 million for the new DuraPlate trailers, the Company's innovative and proprietary composite plate trailer. The Company has achieved a 24% compound annual growth rate in revenues since 1993. In fiscal 1997, the Company generated net sales of $846.1 million. The Company attributes much of its past growth to the emergence of the full truckload sector of the transportation industry. Total transportation activity in the United States in 1996 was estimated to be in excess of $460 billion. In 1985, the year in which the Company was founded, the trucking industry accounted for approximately 75% of transportation activity and has since grown its market share to approximately 79% (rail transport has the second largest share of transportation activity with an approximate 8% market share). Prior to federal deregulation of the trucking industry in 1982, trucking activity was divided among common carriers, package carriers and private fleets. Private fleets represented the largest portion of inter-city truck freight with well over 50% of the activity. Following deregulation, a new segment of full truckload carriers emerged that were primarily non-union and focused on long haul transportation. The Company believes that the growth of this segment was due not only to increased trucking activity but also to increased customer preference for the lower-cost, higher quality service of full truckload carriers over common carriers, as well as private fleets and railroads. Since inception, the Company has focused its strategy primarily on the full truckload segment which concentrates on more efficient equipment designs. Today, the Company believes it is the leading supplier to the full truckload segment. While the private fleet market share has declined since deregulation, it continues to be the transportation industry's largest single segment with slightly over 50% of inter-city transport and is widely dispersed. This segment has historically represented less than 10% of the Company's business and was generally underpenetrated by the Company until the acquisition of the retail distribution network of Fruehauf in 1997. The acquisition of Fruehauf's 31 branches gave the Company the largest factory-owned distribution network for purposes of servicing and supplying the private fleet segment. The Company expects to expand its distribution network and capitalize on the well- recognized Fruehauf brand name to gain greater access to this largest single segment of the transportation industry. GROWTH STRATEGY The Company's strategy for continued growth is to expand on its position as a leading manufacturer of transportation equipment and includes the following key elements: GROW CUSTOMER PARTNERSHIPS. Unique in the trailer industry, the Company maintains supply relationships, primarily single source, with many of the largest and fastest growing transportation companies in the country. The Company's list of customer partners includes Schneider National, Inc., Swift Transportation Co. Inc., Werner Enterprises, Inc., Dart Transit Company, Heartland Express, Inc., U.S. Xpress Enterprises, Inc., Knight Transportation, Inc., Central Transport International, Federal Express Corporation and Triple Crown 18 Services Company. In addition to serving as a single source of supply, the Company offers priority scheduling and cost-based pricing for its customer partners. The Company's engineering, manufacturing, and marketing departments work closely with customer partners to assess their needs and to develop cost- effective engineering and manufacturing solutions. This collaborative process serves as a resource for the development of new technologies and results in many highly innovative products incorporating unique design features such as DuraPlate trailers, RoadRailer trailers and AutoRailer trailers. As the Company's customer partners continue to grow, the Company will benefit from their increased equipment and service requirements. CONTINUE PROPRIETARY PRODUCT DEVELOPMENT. The Company's long-standing customer partnerships have facilitated the Company's proprietary product innovations. All of these developments are designed to enhance the productivity and efficiency of the Company's partners and thereby positively impact the Company's results. Among the most significant innovations are: Plate trailers. In 1985, the Company pioneered the aluminum plate trailer, which became the standard of most of the fastest growing full truckload carriers. In late 1995, the Company introduced the DuraPlate trailer, a highly innovative composite plate trailer. The DuraPlate composite material is a high density vinyl core with an inner and outer steel skin, offering greater durability and strength than the aluminum plate trailer. The Company began manufacturing the composite material at its own facility in Lafayette, Indiana in late 1997 and produced approximately 7,000 composite plate trailers in 1997. The Company believes the proprietary DuraPlate trailer will be its largest selling product in 1998 and represents a significant advancement in truck trailer technology. RoadRailer trailers. In 1987, the Company began manufacturing RoadRailer trailers and in 1991 acquired the ownership rights to this technology. RoadRailer trailers use a patented bimodal technology consisting of a truck trailer and detachable rail bogie permitting a trailer to run both over the highway and directly on railroad lines. By offering the bimodal technology in a number of variations, including the AutoRailer trailer, the Company believes it can increase its penetration of the intermodal market and enlarge its pool of potential customer partners. The Company believes that RoadRailer trailers provide the opportunity for the Company to enhance its reputation for technological leadership in the transportation industry. Refrigerated trailers. The Company introduced refrigerated trailers into its product line in 1990. Refrigerated trailers are used primarily by private fleets in the transportation of perishable food products. The Company's innovative process for building these trailers involves injecting insulating foam in the sidewalls and roof in a single process prior to assembly, which improves both the insulation capabilities and the durability of the trailers. The Company also offers its proprietary SolarGuard roof system, which reduces fuel cost by providing protection against harmful radiation. During 1995, the Company opened a new dedicated refrigerated trailer manufacturing facility in Lafayette, Indiana. Other innovations. In 1995, the Company introduced the AllRailer railcar, the Company's first prototype lightweight, totally enclosed, high-speed railcar. The AllRailer railcar design allows shippers to transport vehicles by rail in a fully-enclosed environment, protected from both airborne contamination and vandalism. Currently under development are proprietary anti- lock braking systems, composite doors, composite flooring and various electronic features all of which are designed to enhance product efficiencies and to further establish the Company as a technological leader in the transportation industry. EXPAND RETAIL DISTRIBUTION NETWORK. The Company intends to strengthen its retail distribution network by expanding operations acquired from Fruehauf in 1997 through acquiring or building new branches. This retail distribution network operates under the name Fruehauf Trailer Services, Inc., a wholly- owned subsidiary of the Company. Coupled with its existing parts distribution business, the Company ended 1997 with over $90 million in aftermarket parts and service revenues compared to $28 million in 1996. The Company believes that an enhanced retail network will provide a strong platform for further penetration of the private fleet market as well as increasing higher margin aftermarket parts and maintenance service operations. An expanded retail network will enhance profits through cost reduction and increased efficiencies including those associated with used truck 19 trailer trade-ins and sales. The Company makes financing opportunities available at the branch level through Wabash National Finance Company to support new and used trailer sales. GROW INTERNATIONAL MARKETS. The Company intends to continue to emphasize product innovations that position the Company to expand globally. The Company's proprietary RoadRailer technology meets all European requirements for bimodal equipment and has been approved for operation by BritishRail, Deutsche Bahn, SNCF and other European railways. It is uniquely designed to permit operation at speeds that are compatible with passenger trains that predominate in European rail systems. The Company recently acquired a minority interest in a European RoadRailer operating company in which RoadRailer equipment is exclusively used to transport goods between Italy and Germany over the rails. The Company's RoadRailer technology also has features that appeal to East and South Asian carriers. The Company is expanding its international sales into India, Thailand and South America. In addition, the Company has formed an affiliation with trailer manufacturer Bernard Krone Fabrzeugwerke GmbH of Wertle, Germany for the marketing of dry vans and refrigerated trailers throughout Europe. EXPAND CORPORATE CULTURE. The Company intends to continue to foster a corporate culture which emphasizes flexible, low-cost manufacturing through extensive employee involvement in all aspects of the business. All employees participate in extensive classroom training covering all aspects of the Company's business, including team building and problem solving, statistical process control, economics and finance. The Company employs a compensation program which rewards a majority of all hourly employees through the distribution of a percentage of the Company's after-tax profits. Wabash's safety program has been developed with employee participation and has been cited for nine consecutive years by the Truck Trailer Manufacturing Association for achieving the best safety record among large plants in the industry. The Company believes that its corporate culture has produced a highly trained and motivated workforce that understands the Company's business strategy and that is keenly interested in and rewarded by the success of the Company. As of December 31, 1997, approximately 11% of the Company's employees, all of whom work at facilities acquired in the Fruehauf acquisition, are represented by labor unions. 20 INDUSTRY BACKGROUND The United States market for truck trailers and related products has historically been cyclical and has been affected by overall economic conditions in the transportation industry as well by regulatory changes. Management believes that customers historically have replaced trailers in cycles that run from approximately six to eight years. Both state and federal regulation of the size, safety features and configuration of truck trailers have led to increased demand for trailers meeting new regulatory requirements from time to time. A large percentage of the new trailer market has historically been served by the ten largest truck trailer manufacturers, including the Company. Price, flexibility in design and engineering, product quality and durability, warranty, dealer service and parts availability are competitive factors in the markets served. The following table sets forth certain historical domestic trailer shipments data for the Company, its ten largest competitors in 1997 and for the United States trailer industry as a whole:
1997 1996 1995 1994 1993 1992 ------- ------- ------- ------- ------- ------- Wabash(1)....................... 48,346 36,517 42,424 35,679 22,060 19,253 Great Dane...................... 37,237 25,730 36,514 29,756 23,900 21,717 Utility......................... 23,084 19,731 25,068 19,501 13,768 10,022 Trailmobile..................... 18,239 11,094 21,239 16,671 14,500 11,908 Stoughton....................... 11,700 8,300 14,770 13,000 13,500 10,011 Strick.......................... 10,488 8,141 18,427 15,599 12,800 10,500 Dorsey.......................... 7,939 8,595 12,276 12,010 10,190 7,496 Lufkin.......................... 5,785 3,646 6,141 4,650 3,476 2,651 Fontaine........................ 5,063 4,613 5,465 4,530 3,700 3,087 Transcraft...................... 4,509 3,161 3,571 3,591 2,507 1,632 ------- ------- ------- ------- ------- ------- Total Industry................ 224,033 197,519 284,268 236,016 188,319 165,268 ======= ======= ======= ======= ======= =======
- -------- (1) Includes shipments of 1,467 units by Fruehauf in 1997 prior to the Fruehauf Acquisition. Source: Southern Motor Cargo Magazine(C) 1998. A complete report for the top 30 manufacturers may be obtained from Southern Motor Cargo, P.O. Box 40169, Memphis, TN 38174. CUSTOMERS The Company's customer base includes many of the nation's largest truckload common carriers, domestic and international intermodal carriers including railroads, leasing companies, less-than-truckload ("LTL") common carriers, private fleet carriers, and package carriers. The Company is currently the sole supplier to approximately 12 customers. Sales to customers for which the Company believes it is the sole supplier accounted for approximately 28.9% of the Company's new trailer sales in 1997. In addition, during 1997, export sales accounted for 1.2% of net sales. No customer represented more than 10% of the Company's net sales in 1997. Schneider National, Inc. accounted for approximately 13% of net sales during both 1996 and 1995. Swift Transportation Co., Inc. accounted for approximately 15% of net sales in 1996. No other customer represented more than 10% of net sales in 1996 and 1995. The Company's net sales in the aggregate to its five largest customers were 21%, 39% and 33% of its sales in 1997, 1996 and 1995, respectively. The Company's customers include the following: Truckload Carriers: Schneider National, Inc.; Werner Enterprises, Inc.; Swift Transportation Co., Inc.; Dart Transit Company; Heartland Express, Inc.; Crete Carrier Corporation; Knight Transportation, Inc.; U.S. Xpress Enterprises, Inc.; Frozen Food Express Industries, Inc.; Leasing Companies: Transport International Pool; Penske Truck Leasing; Trailer Leasing Company; National Semi Trailer Corp.; Leaseway Purchasing Corp.; 21 Private Fleets: Safeway, Inc.; Chrysler Corporation; The Kroger Company; Stone Container Corporation; Foster Farms, Inc.; Less-Than-Truckload Carriers: Roadway Express, Inc.; Old Dominion Freight Line, Inc.; Caliber Systems Inc.; USF Holland Inc.; Central Transport International; Package Carriers: Federal Express Corporation; United Parcel Service of America, Inc.; Domestic Intermodal Carriers: Triple Crown Services Company; National Rail Passenger Corp. (Amtrak); Burlington Northern Santa Fe Corporation; and International Intermodal Carriers: Bayerische Trailerzug Gesellschaft GmbH; Compagnie Nouvelle de Conteneurs. Truckload common carriers include large national lines as well as regional carriers. The large national truckload carriers, who continue to gain market share at the expense both of regional carriers and private fleets, typically purchase trailers in large quantities with highly individualized specifications. Trailers purchased by truckload common carriers represented 42.2%, 58.3% and 63.9% of the Company's new trailer sales in 1997, 1996 and 1995, respectively. Leasing companies include large national companies as well as regional and local companies. New trailer sales to leasing companies represented 16.7%, 8.0% and 10.4% of new trailer sales in 1997, 1996 and 1995, respectively. Private fleet carriers represent the largest segment of the truck trailer industry in terms of total units, but are dominated by small fleets of 1 to 100 trailers. Among the larger private fleets, such as those of the large retail chain stores, automotive manufacturers and paper products, truck trailers are often ordered with customized features designed to transport specialized commodities or goods. New trailer sales to private fleets represented 6.7%, 9.4% and 10.0% of new trailer sales in 1997, 1996 and 1995, respectively. LTL carriers have experienced consolidation in recent years, and the industry is increasingly dominated by a few large national and several regional carriers. Since the Highway Reauthorization Act of 1983 mandated that all states permit the use of 28 foot double trailers, there has been a conversion of nearly all LTL carriers to doubles operations. Order sizes for LTL carriers tend to be in high volume and with standard specifications. New trailer sales to LTL carriers accounted for 14.1%, 14.9% and 6.8% of new trailer sales in 1997, 1996 and 1995, respectively. In the United States, the package carrier industry is dominated by Federal Express Corporation, United Parcel Service of America, Inc. and Roadway Package System, Inc. Federal Express Corporation and United Parcel Service of America, Inc. have developed rigid specifications for their highly specialized trailers and have historically purchased trailers from a small number of suppliers, including Wabash. New trailer sales to these customers represented 1.0%, 2.7% and 6.3% of new trailer sales in 1997, 1996 and 1995, respectively. Customers for the Company's proprietary RoadRailer products included U.S. and foreign intermodal carriers such as Triple Crown Services Company, Amtrak, Swift Transportation Co., Inc., Allied Systems Ltd., Bayerische Trailerzug Gesellschaft GmbH and Compagnie Nouvelle de Conteneurs. New trailer sales of RoadRailer products to these customers represented 4.5%, 6.6% and 2.6% of new trailer sales in 1997, 1996 and 1995, respectively. The Company believes that the RoadRailer technology has enabled it to develop an international presence. Anticipated sources of future revenue in the RoadRailer business also includes license fees from the license of RoadRailer technology to overseas manufacturers. Retail sales of new trailers to independent operators through the Company's factory-owned distribution network provides the Company with access to smaller unit volume sales which typically generate higher gross margins. Retail sales of new trailers represented 8.0% of total new trailer sales in 1997. 22 The balance of new trailer sales in 1997, 1996 and 1995 were made to dealers and household moving carriers. PRODUCTS AND SERVICES Since the Company's inception in 1985, the Company has expanded its product offerings from a single product into a broad line of transportation equipment and related products and services. As a result of its long-term relationships with its customers, the Company has been able to work closely with its customers to create competitive advantages through development and production of productivity-enhancing transportation equipment. The Company's current product lines include: Transportation Equipment . Plate trailers. The aluminum plate trailer was introduced into the Company's product line in 1985. Since these trailers utilize thicker and more durable sidewalls than standard sheet and post or FRP construction and avoid the use of interior liners, the life of the trailer is extended and maintenance costs are significantly reduced. In addition, the post used in constructing the sidewalls of the plate trailer is much thinner and therefore provides greater interior volume than a standard sheet and post trailer. Plate trailers are used primarily by truckload carriers. The Company believes that it is the largest producer of plate trailers in the United States. In late 1995, the Company introduced its proprietary composite plate trailer. Features of the new composite plate trailer include greater durability and strength than the aluminum plate trailer. The composite material is a high density vinyl core with an inner and outer steel skin. The Company began manufacturing the composite material at its own facility in Lafayette in late 1997 and has produced approximately 7,000 composite plate trailers in 1997. The Company believes the composite plate trailer will be its largest selling product in 1998 and represents a significant advance in truck trailer technology. . RoadRailer trailers. In 1987, the Company began manufacturing RoadRailer trailers. RoadRailer trailers use a patented bimodal technology consisting of a truck trailer and detachable rail bogie permitting a trailer to run both over the highway and directly on railroad lines. The Company believes that the RoadRailer system can be operated more efficiently than alternative intermodal systems such as "piggyback" or "stack" railcars which require terminal operators to transfer vehicles or containers to railcars. In 1991, the Company acquired the exclusive rights to market and exploit RoadRailer technology. By offering the bimodal technology in a number of variations, the Company believes it can increase its penetration of the intermodal market and enlarge its pool of potential customers. Current RoadRailer models are the ReeferRailer trailer, the ChassisRailer trailer, the PupRailer trailer, the AutoRailer trailer and the 19.5 RoadRailer trailer. Management believes that RoadRailer trailers provide the opportunity for the Company to enhance its reputation for technological leadership in the transportation industry. . Refrigerated trailers. Refrigerated trailers were introduced into the product line in 1990. The Company's innovative process for building these trailers involves injecting insulating foam in the sidewalls and roof in a single process prior to assembly, which improves both the insulation capabilities and the durability of the trailers. The Company also offers its proprietary SolarGuard roof system, which reduces fuel cost by providing protection against harmful radiation. These trailers are used primarily by private fleets in the transportation of perishable food products. During 1995, the Company opened a dedicated new refrigerated trailer manufacturing facility in Lafayette, Indiana. . Lightweight railcars. In 1995, the Company introduced the AllRailer railcar, the Company's first prototype lightweight, totally enclosed, high-speed railcar. The AllRailer railcar design allows shippers to transport vehicles by rail in a fully-enclosed environment, protected from both airborne contamination and vandalism. The AllRailer railcar has the flexibility to be converted for use in either 23 a bi-level or tri-level configuration by positioning the upper floors to handle automobiles or vehicles such as pick-up trucks, vans and sport/utility vehicles. This feature should result in greater railcar utilization and a reduction in repositioning empty railcars. AllRailer railcars feature a heavy duty version of the RoadRailer slack-free coupler, which reduces up to 99.8 percent of the forces transmitted to vehicles as a result of train slack action. Additional AllRailer railcar features include a wide interior, door edge protection and flat floors with built-in bridge plates between cars, all designed to provide damage-free vehicle loading and unloading. . Aluminum vans and doubles. Aluminum vans and doubles, also known as sheet and post trailers, were introduced into the product line in 1986 and are the standard trailer product purchased by customers in most segments of the trucking industry. . FRP vans and doubles. The Company's initial product was fiberglass reinforced plywood ("FRP") trailers which have been purchased primarily by LTL carriers utilizing doubles or triples. Motor carriers utilizing standard double or triple trailers frequently reach the maximum legal weight limits before they fill the capacity of the trailers. Since FRP trailers are lighter in weight than these double trailers, they enable LTL carriers to attain higher productivity than could be achieved using other types of double trailers. The Company believes that it is the largest producer of FRP trailers in the United States. . Other. The Company's other transportation equipment include container chassis, flatbed trailers, rollerbed trailers, soft-sided trailers, dumps and converter dollies. Aftermarket Parts and Service The Company produces replacement parts and accessories and provides maintenance service both for its own and competitors' trailers and related equipment. The aftermarket parts business is typically less cyclical than trailer sales and typically yields higher gross profit margins. The Company markets its aftermarket parts and services through its Wabash National Parts Division and through its wholly-owned subsidiary, Fruehauf Trailer Services, Inc. Management expects that the manufacture and sale of aftermarket parts and maintenance service will be a growing part of its product mix as the number and age of its units in service increases and as it increases the number of retail branches. Sales of these products and services represented 10.9%, 4.5% and 3.0% of net sales during 1997, 1996 and 1995, respectively. Leasing and Finance Through 1991, the Company leased trailers to customers on a very limited basis, primarily involving used trailers taken in trade from other customers. In late 1991, the Company began to build its in-house capability to provide leasing programs to its customers through its wholly-owned subsidiary, Wabash Finance. At December 31, 1997, Wabash Finance had approximately $44.0 million in equipment leased to others, net and $59.2 million invested in finance contracts. These leasing assets have been financed through term debt. Leasing revenues, including revenues from the sale of leased trailers, of Wabash Finance represented 3.2%, 9.2% and 3.6% of net sales during 1997, 1996 and 1995, respectively. Used Trailers The Company also sells used trailers, which the Company acquires primarily through trade-ins from its customers. The Company generally sells its used trailers both directly through Wabash Finance, or at retail through its retail branch distribution system. Depending upon the customer's desire, the Company may recondition a used trailer or "stretch" the trailer to convert a 48-foot unit into a 53-foot unit. Used trailer sales promote new sales by permitting trade-in allowances and have represented a stable source of revenue for the Company. The sale of used trailers represented 5.2%, 4.6% and 2.5% of net sales during 1997, 1996 and 1995, respectively. 24 MARKETING AND DISTRIBUTION The Company markets and distributes its products directly through its factory-owned distribution network and through independent dealerships. Certain types of customers purchase directly from the factory. The factory direct accounts include the larger truckload, LTL, package and household moving carriers and certain private fleets and leasing companies, and are high volume purchasers. In the past, the Company has focused its resources on the factory direct market, where customers are generally aware of the Company's management and its reputation in the trailer manufacturing industry. The larger LTL and private fleets, as well as the national fleets which increasingly dominate the truckload segment, buy factory direct with a great deal of customization. These larger carriers generally will purchase the largest trailer allowable by law in the areas they intend to operate, with maximum interior space. These carriers are the largest customers of the plate trailers manufactured by the Company. The Company's factory direct sales are based on specific customer orders. As a result of the Fruehauf Acquisition, the Company's large retail branch network affords the Company the ability to generate retail sales of trailers to smaller independent operators. In addition, this branch system enables the Company to provide maintenance and other services to customers on a nationwide basis and to remarket large quantities of trade-ins which are common with large new trailer sales to fleet customers. In addition to the 31 retail branches, the Company also sells its products through a nationwide network of 92 full-line and over 150 parts-only independent dealerships which generally serve the trucking and transport industry. The dealers primarily serve intermediate and smaller sized carriers and private fleets in the geographic region where the dealer is located and on occasion may sell to large fleets. The dealers may also perform service work for many of their customers. The Company also provides leasing and finance programs to its customers through Wabash Finance. RAW MATERIALS The Company utilizes a variety of raw materials and components including steel, aluminum, lumber, tires and suspensions which it purchases from a limited number of suppliers. Significant price fluctuations or shortages in raw materials or finished components may adversely affect the Company's results of operations. Beginning in 1998, the raw material which will be used in the greatest quantity will be composite plate material used on the Company's proprietary DuraPlate trailer. The composite material is comprised of an inner and outer lining made of high strength steel surrounding a vinyl core. Both of these components are in ready supply. In August 1997, the Company completed construction of its own composite material facility located in Lafayette, Indiana where the Company produces the composite plate material from the steel and vinyl components. The Company believes the addition of this new facility will provide adequate capacity to meet its composite material requirements. The central Midwest location of the Company's plant gives Wabash a competitive advantage in the transportation cost of inbound raw materials as well as the cost of delivery of finished product. Customers often use trailers coming off the assembly line to deliver freight outbound from the Midwest. BACKLOG The Company's backlog of orders was approximately $832 million, $462 million and $858 million at December 31, 1997, 1996 and 1995, respectively. The Company believes that its backlog of orders is firm and expects to fill a majority of its existing orders by the end of 1998. PATENTS, LICENSES AND TRADEMARKS The Company holds or has applied for approximately 70 patents in the United States on various components and techniques utilized in its manufacture of truck trailers, including several patents relating to RoadRailer technology. In addition, the Company holds or has applied for 78 patents in 13 foreign countries and the European patent community. These patents expire over the course of the next 17 years. 25 RESEARCH AND DEVELOPMENT The Company emphasizes design and product innovation and has increased its expenditures for research and development in recent years. The Company has a reputation in the industry for its innovation in product design and low cost manufacturing. The Company's policy is to expense all research and development costs as incurred. Research and development costs were $2.1 million, $1.2 million and $1.6 million in 1997, 1996 and 1995, respectively. Research and development efforts include the development of proprietary, highly automated manufacturing equipment and tooling, much of which was developed by the employees who operate the equipment. The Company promotes a culture that encourages innovation by all employees, particularly those working on the factory floor. ENVIRONMENTAL MATTERS The Company's operations are subject to various federal, state and local environmental laws and regulations related to air and water quality, underground storage tanks and waste handling and disposal. The substances and compounds generated and handled in the Company's operations that fall within these laws and regulations result from the Company's painting, insulating, undercoating and branch service operations. As a result, the Company incurs ongoing costs to comply with environmental laws and regulations as well as recognizes liabilities for treatment and remediation costs associated with known environmental issues. EMPLOYEES As of December 31, 1997, the Company had 5,093 employees (including 773 temporary employees). Approximately 11% of the Company's employees, all of whom work at facilities acquired in the Fruehauf Acquisition, are represented by labor unions. Since the Fruehauf Acquisition, the Company has not entered into any new collective bargaining agreements. The Company places a heavy emphasis on employees relations through educational programs and quality control teams. The Company believes its employee relations are good. 26 MANAGEMENT The following are the directors, executive officers and key employees of the Company:
NAME AGE POSITION ---- --- -------- Donald J. Ehrlich............. 60 President, Chief Executive Officer and Chairman of the Board(1) Dean A. Cervenka.............. 40 Vice President--Sales Richard E. Dessimoz........... 50 Vice President and Chief Executive Officer of Wabash National Finance Corporation and Director Charles R. Ehrlich............ 53 Vice President--Manufacturing Rodney P. Ehrlich............. 51 Vice President--Engineering Charles E. Fish............... 44 Vice President--Human Relations Lawrence J. Gross............. 43 Vice President--Marketing Mark R. Holden................ 38 Vice President--Chief Financial Officer and Director(1) Connie L. Koleszar............ 39 Director of Investor Relations Wilfred E. Lewallen........... 53 Vice President--Industrial Engineering Derek L. Nagle................ 47 President--Fruehauf Trailer Services, Inc. Stanley E. Sutton............. 48 Vice President--Purchasing John T. Hackett............... 65 Director(1)(2)(3) E. Hunter Harrison............ 53 Director(2) Ludvik F. Koci................ 61 Director(3)
- -------- (1) Member of the Executive Committee of the Board of Directors. (2) Member of the Audit Committee of the Board of Directors. (3) Member of the Compensation Committee of the Board of Directors. Donald J. Ehrlich. Mr. Donald J. Ehrlich has been President, Chief Executive Officer and Director of the Company since its founding. In May, 1995, Mr. Ehrlich was elected Chairman of the Board. He also serves as a director of Danaher Corporation. Dean A. Cervenka. Mr. Cervenka has been Vice President--Sales since January, 1997. Previously, Mr. Cervenka had been a Regional Sales Director for the Company. Prior to his employment by the Company in April, 1996, he was employed by Caterpillar, Inc. in various engineering and marketing positions. Richard E. Dessimoz. Mr. Dessimoz has been Vice President and Chief Executive Officer of Wabash National Finance Corporation since its inception in December, 1991 and a Director of the Corporation since December, 1995. Prior to his employment by the Company, he was employed since 1989 by Premier Equipment Leasing Company as Chief Executive Officer and co-owner, and he was employed from 1985 to 1989 by Evans Transportation Company (a major lessor of railcars and truck trailers) as Chief Operating Officer. Charles R. Ehrlich. Mr. Charles Ehrlich has been Vice President-- Manufacturing of the Company and has been in charge of the Company's manufacturing operations since the Company's founding. Rodney P. Ehrlich. Mr. Rodney Ehrlich has been Vice President--Engineering of the Company and has been in charge of the Company's engineering operations since the Company's founding. Charles E. Fish. Mr. Fish is Vice President--Human Relations of the Company and has been in charge of the Company's human relations operations since the Company's founding. 27 Lawrence J. Gross. Mr. Gross has been Vice President--Marketing of the Company since December, 1994. Previously he had been President of the Company's RoadRailer division since joining the Company in July, 1991. Prior to his employment by the Company, he was employed since 1985 by Chamberlain of Connecticut, Inc., a licensor of bimodal technology, as Vice President-- Marketing until 1990 and as President until he began his employment with the Company. Mark R. Holden. Mr. Holden has been Vice President--Chief Financial Officer and Director of the Company since May, 1995. Previously, Mr. Holden had been Vice President--Controller of the Company. Prior to his employment by the Company in December, 1992, he was employed by Arthur Andersen LLP since 1981. Connie L. Koleszar. Ms. Koleszar has been Director of Investor Relations since the Company's initial public offering in 1991 and has been employed by the Company in various administrative capacities since its founding. Wilfred E. Lewallen. Mr. Lewallen is Vice President--Industrial Engineering of the Company and has been in charge of the Company's industrial engineering operations since the Company's founding. Derek L. Nagle. Mr. Nagle has been President of Fruehauf Trailer Services, Inc. since the Company's acquisition of certain Fruehauf assets in April, 1997. Prior to his employment by the Company, he was employed since 1970 at Fruehauf Trailer Corporation, as Senior Vice President of North American Sales & Distribution from 1993 through 1995, as Executive Vice President of North American Operations until 1996. In September, 1996, he was appointed President of Fruehauf following the resignation of the previous CEO and CFO of Fruehauf. Fruehauf filed under Chapter 11 of the Federal Bankruptcy Code in October, 1996. Stanley E. Sutton. Mr. Sutton has been Vice President--Purchasing of the Company since joining the Company in May, 1992. Prior to his employment by the Company, he was employed since 1973 by Pines Trailer Limited Partnership as Vice President--Manufacturing Operations. John T. Hackett. Mr. Hackett is Managing General Partner of CID Equity Partners, L.P., a private investment partnership. Mr. Hackett was Vice President--Finance and Administration of Indiana University from 1988 to 1991 and Executive Vice President, Chief Financial Officer and director of Cummins Engine Company from 1964 to 1988. Mr. Hackett is also a director of Irwin Financial Corporation, Meridian Mutual Insurance Corporation and Ball Corporation. E. Hunter Harrison. Mr. Harrison was named Executive Vice President and Chief Operating Officer of Canadian National Railway Co. in March 1998. Prior to that, Mr. Harrison was President and Chief Executive Officer of Illinois Central Railroad in Chicago, Illinois since February 1993. He previously served as Senior Vice President of Operations since July 1992. Mr. Harrison also serves on the Board Of Directors of Belt Railway Co. in Chicago, Illinois; Terminal Railway in St. Louis, Missouri; TTX Co. in Chicago, Illinois; and the Association of American Railroads. Ludvik F. Koci. Mr. Koci is Vice Chairman of Detroit Diesel Corporation in Detroit, Michigan. He previously served as President and prior to that as Executive Vice President of Detroit Diesel since its organization in 1987. Mr. Koci also serves on the Executive Committee of the GMI President's Council, Board of Directors of Detroit Diesel Corporation and the Trucking Research Institute. All directors are elected for a term of one year at each annual meeting. Officers are elected for a term of one year and serve at the discretion of the Board of Directors. Donald J. Ehrlich, President, Chief Executive Officer and Chairman, and Charles R. Ehrlich and Rodney P. Ehrlich, executive officers of the Company, are brothers. Dean A. Cervenka and Connie L. Koleszar, executive officers of the Company, are brother and sister. 28 PRINCIPAL STOCKHOLDERS The following table sets forth certain information as of March 27, 1998 with respect to the beneficial ownership of the Corporation's Common Stock by each person who is known to own beneficially more than 5% of the outstanding shares of Common Stock, each person currently serving as a director, the Chief Executive Officer, each of the other four most highly compensated executive officers in 1997, and all directors and executive officers as a group:
SHARES OF COMMON STOCK BENEFICIALLY OWNED BEFORE THE OFFERINGS(1) -------------------------------- DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS NUMBER PERCENTAGE - ---------------------------------------------- -------------- -------------- The Crabbe Huson Group, Inc................... 2,288,500(2) 11.5% 121 SW Morrison Suite 1400 Portland, OR 97204 J.P. Morgan & Co., Incorporated .............. 1,341,300 6.7% 60 Wall Street New York, NY 10260 State of Wisconsin Investment Board........... 1,025,000 5.1% P. O. Box 7842 Madison, WI 53707 Donald J. Ehrlich............................. 454,352(3) 2.3% Richard E. Dessimoz........................... 27,840(4) * Rodney P. Ehrlich............................. 36,890(5) * Lawrence J. Gross............................. 27,390(4) * Mark R. Holden................................ 18,240(5) * John T. Hackett............................... 13,300(6) * E. Hunter Harrison............................ 12,000(6) * Ludvik F. Koci................................ 13,000(6) * All executive officers and directors as a group (14 persons)........................... 702,582 3.5%
- -------- * Less than one percent. (1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of Common Stock subject to options or warrants currently exercisable or exercisable within 60 days of February 28, 1998 are deemed outstanding for purposes of computing the percentage ownership of the person holding such option but are not deemed outstanding for purposes of computing the percentage ownership of any other person. Except where indicated otherwise, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them. (2) The Crabbe Huson Group, Inc. shares voting and investment power with approximately 42 of its clients and disclaims beneficial ownership of all of the shares. (3) Includes currently exercisable options to purchase 140,640 shares of Common Stock. (4) Includes currently exercisable options to purchase 24,840 shares of Common Stock. (5) Includes currently exercisable options to purchase 18,240 shares of Common Stock. (6) Includes currently exercisable options to purchase 12,000 shares of Common Stock. 29 UNDERWRITING Subject to the terms and conditions set forth in a purchase agreement (the "U.S. Purchase Agreement"), among the Company and each of the underwriters named below (the "U.S. Underwriters"), and concurrently with the sale of 600,000 shares of Common Stock to the International Managers (as defined below), the Company has agreed to sell to each of the U.S. Underwriters, and each of the U.S. Underwriters severally has agreed to purchase from the Company the number of shares of Common Stock set forth opposite its name below.
U.S. UNDERWRITER NUMBER OF SHARES ---------------- ---------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated........................................... BT Alex. Brown Incorporated................................. Robert W. Baird & Co. Incorporated.......................... Morgan Keegan & Company, Inc................................ --------- Total.................................................. 2,400,000 =========
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), BT Alex. Brown Incorporated, Robert W. Baird & Co. Incorporated and Morgan Keegan & Company, Inc. are acting as representatives (the "U.S. Representatives") for the U.S. Underwriters. The Company has also entered into a purchase agreement (the "International Purchase Agreement" and, together with the U.S. Purchase Agreement, the "Purchase Agreements") with certain underwriters outside the United States and Canada (collectively, the "International Managers," and together with the U.S. Underwriters, the "Underwriters"), for whom Merrill Lynch International, BT Alex. Brown International, division of Bankers Trust International PLC, Robert W. Baird & Co. Incorporated and Morgan Keegan & Company, Inc. are acting as representatives (the "International Representatives" and, together with the U.S. Representatives, the "Representatives"). Subject to the terms and conditions set forth in the International Purchase Agreement, and concurrently with the sale of 2,400,000 shares of Common Stock to the U.S. Underwriters pursuant to the U.S. Purchase Agreement, the Company has agreed to sell to the International Managers, and the International Managers have severally agreed to purchase from the Company an aggregate of 600,000 shares of Common Stock. The public offering price per share of Common Stock and the underwriting discount per share of Common Stock are identical under the U.S. Purchase Agreement and the International Purchase Agreement. In the U.S. Purchase Agreement and the International Purchase Agreement, the several U.S. Underwriters and the several International Managers, respectively, have agreed, subject to the terms and conditions set forth therein, to purchase all of the shares of the Common Stock being sold pursuant to each such agreement if any of the shares of Common Stock being sold pursuant to such agreement are purchased. Under certain circumstances 30 involving a default by an Underwriter, the commitments of non-defaulting U.S. Underwriters or International Managers (as the case may be) may be increased or the U.S. Purchase Agreement or the International Purchase Agreement (as the case may be) may be terminated. The sale of Common Stock to the U.S. Underwriters is conditioned upon the sale of Common Stock to the International Managers and vice versa. The U.S. Underwriters and the International Managers have entered into an intersyndicate agreement (the "Intersyndicate Agreement") providing for the coordination of their activities. The Underwriters are permitted to sell shares of Common Stock to each other for purposes of resale at the initial public offering price, less an amount not greater than the selling concession. Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and any dealer to whom they sell shares of Common Stock will not offer to sell or sell shares of Common Stock to persons who are non-U.S. or non-Canadian persons or to persons they believe intend to resell to persons who are non-U.S. or non- Canadian persons, and the International Managers and any dealer to whom they sell shares of Common Stock will not offer to sell or sell shares of Common Stock to U.S. persons or to Canadian persons or to persons they believe intend to resell to U.S. persons or Canadian persons, except in the case of transactions pursuant to the Intersyndicate Agreement. The U.S. Representatives have advised the Company that the U.S. Underwriters propose initially to offer the shares of Common Stock to the public at the offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession not in excess of $ per share. The U.S. Underwriters may allow, and such dealers may reallow, a discount not in excess of $ per share to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed. The Company has granted to the U.S. Underwriters an option, exercisable within 30 days after the date of this Prospectus, to purchase up to an aggregate of 360,000 additional shares of Common Stock at the public offering price set forth on the cover page of this Prospectus, less the underwriting discount. The U.S. Underwriters may exercise this option only to cover over- allotments, if any, made on the sale of Common Stock offered hereby. To the extent that the U.S. Underwriters exercise this option, each U.S. Underwriter will be obligated, subject to certain conditions, to purchase a number of additional shares of Common Stock proportionate to such U.S. Underwriters' initial amount reflected in the foregoing table. If purchased, the Underwriters will offer such additional shares of Common Stock on the same terms as those on which the shares are being offered. The Company, certain executive officers and Fruehauf have, subject to certain exceptions, agreed not to, directly or indirectly, offer, pledge, sell, contract to sell or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exchangeable or exercisable for Common Stock without the prior written consent of Merrill Lynch for a period of 90 days from the date of this Prospectus, except that the Company may, without such consent, issue shares of Common Stock upon the exercise or conversion of any outstanding options, rights, warrants or other convertible securities, or issue shares of Common Stock or grant options to purchase shares of Common Stock pursuant to the Company's existing employee benefits plans, director stock plan, or dividend reinvestment plan. Until the distribution of the Common Stock is completed, rules of the Securities and Exchange Commission may limit the ability of the Underwriters and certain selling group members to bid for and purchase the Common Stock. As an exception to these rules, the Representatives are permitted to engage in certain transactions that stabilize the price of the Common Stock. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the Common Stock. If the Underwriters create a short position in the Common Stock in connection with the offering, i.e., if they sell more shares of Common Stock than are set forth on the cover page of this Prospectus, the Representatives may reduce that short position by purchasing Common Stock in the open market. The Representatives may also elect to reduce any short position by exercising all or part of the over-allotment option described above. 31 The Representatives may also impose a penalty bid on certain Underwriters and selling group members. This means that if the Representatives purchase shares of Common Stock in the open market to reduce the Underwriters' short position or to stabilize the price of the Common Stock, they may reclaim the amount of the selling concession from the Underwriters and selling group members who sold those shares as part of the offering. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. The imposition of a penalty bid might also have an effect on the price of a security to the extent that it were to discourage resales of the security. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act or to contribute to payments initially the Underwriters may be required to make in respect thereof. Neither the Company nor any of the Underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Common Stock. In addition, neither the Company nor any of the Underwriters makes any representation that the Representatives will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. 32 LEGAL MATTERS Certain legal matters with respect to the shares of Common Stock offered hereby will be passed upon for the Company by Hogan & Hartson L.L.P., Baltimore, Maryland. Certain legal matters will be passed upon for the Underwriters by Winston & Strawn, Chicago, Illinois. EXPERTS The audited consolidated financial statements included in this Prospectus and included elsewhere in this registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included in reliance upon the authority of said firm as experts in giving said reports. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy and information statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices in New York (Seven World Trade Center, Suite 1300, New York, New York 10048) and Chicago (Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661). Copies of such material can also be obtained at prescribed rates from the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a World Wide Web site that contains reports, proxy statements and other information regarding registrants, including the Company, that file such information electronically with the Commission. The address of the Commission's Web site is http: www.sec.gov. The Company's Common Stock is listed on the New York Stock Exchange and reports and other information concerning the registrant can be inspected at such exchange. The Company has filed with the Commission a Registration Statement on Form S-3 (together with all amendments and exhibits thereto, the "Registration Statement") under the Securities Act of 1933, as amended with respect to the Common Stock. This Prospectus does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission pursuant to the Exchange Act are incorporated herein by reference and made a part hereof: the Company's Annual Report on Form 10-K for the year ended December 31, 1997, and the description of the Company's Common Stock, Series B 6% Cumulative Convertible Exchangeable Preferred Stock and Preferred Stock Purchase Rights set forth in the Company's Registration Statements on Form 8-A filed under the Exchange Act including all amendments and reports filed for the purpose of updating such descriptions. All documents filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering of the Common Stock shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which is incorporated by reference herein modifies or supersedes such earlier statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Copies of all documents incorporated by reference herein (other than exhibits to such documents which are not specifically incorporated by reference into such documents) will be provided without charge to each person who receives a copy of this Prospectus, upon request of such person, directed to Connie L. Koleszar, Wabash National Corporation, Investor Relations, 1000 Sagamore Parkway South, Lafayette, Indiana 47905 (telephone (765) 448-1591). 33 [Alternative Page for International Prospectus] UNDERWRITING Subject to the terms and conditions set forth in an international purchase agreement (the "International Purchase Agreement"), among the Company and each of the underwriters named below (the "International Managers"), and concurrently with the sale of 2,400,000 shares of Common Stock to the U.S. Underwriters (as defined below), the Company has agreed to sell to the International Managers, and each of the International Managers severally has agreed to purchase from the Company the number of shares of Common Stock set forth opposite its name below.
NUMBER OF INTERNATIONAL UNDERWRITER SHARES ------------------------- --------- Merrill Lynch International.......................................... BT Alex. Brown International, division of Bankers Trust International PLC................................................................. Robert W. Baird & Co. Incorporated................................... Morgan Keegan & Company, Inc......................................... ------- Total.......................................................... 600,000 =======
Merrill Lynch International, BT Alex. Brown International, division of Bankers Trust International PLC, Robert W. Baird & Co. Incorporated and Morgan Keegan & Company, Inc. are acting as representatives (the "International Representatives") of the International Managers. The Company has also entered into a purchase agreement (the "U.S. Purchase Agreement" and, together with the International Purchase Agreement, the "Purchase Agreements") with certain underwriters in the United States and Canada (collectively, the "U.S. Underwriters," and together with the International Managers, the "Underwriters"), for whom Merrill Lynch, Pierce Fenner & Smith Incorporated, BT Alex. Brown Incorporated, Robert W. Baird & Co. Incorporated and Morgan Keegan & Company, Inc. are acting as representatives (the "U.S. Representatives" and, together with the International Representatives, the "Representatives"). Subject to the terms and conditions set forth in the U.S. Purchase Agreement, and concurrently with the sale of 600,000 shares of Common Stock to the International Managers pursuant to the International Purchase Agreement, the Company has agreed to sell to the U.S. Underwriters, and the U.S. Underwriters have severally agreed to purchase from the Company an aggregate of 2,400,000 shares of Common Stock. The public offering price per share of Common Stock and the underwriting discount per share of Common Stock are identical under the International Purchase Agreement and the U.S. Purchase Agreement. In the International Purchase Agreement and the U.S. Purchase Agreement, the several International Managers and the several U.S. Underwriters, respectively, have agreed, subject to the terms and conditions set forth therein, to purchase all of the shares of the Common Stock being sold pursuant to each such agreement if any of the shares of Common Stock being sold pursuant to such agreement are purchased. Under certain circumstances involving a default by an Underwriter, the commitments of non-defaulting International Managers 30 [Alternative Page for International Prospectus] or the U.S. Underwriters (as the case may be) may be increased or the International Purchase Agreement or the U.S. Purchase Agreement (as the case may be) may be terminated. The sale of Common Stock to the International Managers is conditioned upon the sale of Common Stock to the U.S. Underwriters and vice versa. The International Underwriters and the U.S. Underwriters have entered into an intersyndicate agreement (the "Intersyndicate Agreement") providing for the coordination of their activities. The Underwriters are permitted to sell shares of Common Stock to each other for purposes of resale at the initial public offering price, less an amount not greater than the selling concession. Under the terms of the Intersyndicate Agreement, the International Underwriters and any dealer to whom they sell shares of Common Stock will not offer to sell or sell shares of Common Stock to persons who are United States or Canadian persons or to persons they believe intend to resell to persons who are United States or Canadian persons, and the U.S. Underwriters and any dealer to whom they sell shares of Common Stock will not offer to sell or sell shares of Common Stock to non-United States persons or to non-Canadian persons or to persons they believe intend to resell to non-United States persons or non-Canadian persons, except in the case of transactions pursuant to the Intersyndicate Agreement. The International Representatives have advised the Company that the International Managers propose initially to offer the shares of Common Stock to the public at the offering price set forth on the cover page of this Prospectus and to certain selected dealers at such price less a concession not in excess of $ per share. The International Managers may allow, and such dealers may reallow, a discount not in excess of $ per share to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed. Each International Manager has agreed that; (i) it has not offered or sold, and will not for a period of six months following consummation of the Offerings offer or sell, in the United Kingdom by means of any document, any shares of Common Stock offered hereby, other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances that do not constitute an offer to the public within the meaning of the Public Offers to Securities Regulations of 1995; (ii) it has complied with and will comply with all applicable provisions of the Financial Services Act of 1986 with respect to anything done by it in relation to the Common Stock in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on to any person in the United Kingdom any document received by it in connection with the issue of the Common Stock if that person is of a kind described in Article 11(3) of the Financial Services Act of 1986 (Investment Advertisements) (Exemptions) Order 1996, as amended, or is a person to whom the document may otherwise lawfully be issued or passed on. The Company has granted to the International Managers an option, exercisable within 30 days after the date of this Prospectus, to purchase up to an aggregate of 90,000 additional shares of Common Stock at the public offering price set forth on the cover page of this Prospectus, less the underwriting discount. The International Managers may exercise this option only to cover over-allotments, if any, made on the sale of Common Stock offered hereby. To the extent that the International Managers exercise this option, each International Manager will be obligated, subject to certain conditions, to purchase a number of additional shares of Common Stock proportionate to such International Manager's initial amount reflected in the foregoing table. If purchased, the Underwriters will offer such additional shares on the same terms as those on which the 600,000 shares are being offered. Purchasers of the shares of Common Stock offered hereby may be required to pay stamp taxes and other charges in accordance with the laws and practices of the country of purchase, in addition to the offering price set forth on the cover page hereof. The Company, certain executive officers and Fruehauf Trailer Corporation have, subject to certain exceptions, agreed not to, directly or indirectly, offer, pledge, sell, contract to sell or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exchangeable or exercisable for common Stock without the prior written consent of Merrill Lynch for a period of 90 days from the date of this Prospectus, 31 [Alternative Page for International Prospectus] except that the Company may, without such consent, issue shares of Common Stock upon the exercise or conversion of any outstanding options, rights, warrants or other convertible securities, or issue shares of Common Stock or grant options to purchase shares of Common Stock pursuant to the Company's existing employee benefits plans, director stock plan, or dividend reinvestment plan. In the International Purchase Agreement and the U.S. Purchase Agreement, the several International Managers and the several U.S. Underwriters, respectively, have agreed, subject to the terms and conditions set forth therein, to purchase all of the shares of Common Stock being sold pursuant to each such agreement if any of the shares of Common Stock being sold pursuant to such agreement are purchased. Under certain circumstances involving a default by an Underwriter, the commitments of non-defaulting International Underwriters or U.S. Underwriters (as the case may be) may be increased or the International Purchase Agreement or the U.S. Purchase Agreement (as the case may be) may be terminated. The sale of Common Stock to the International Managers is conditioned upon the sale of Common Stock to the U.S. Underwriters and vice versa. Until the distribution of the Common Stock is completed, rules of the Securities and Exchange Commission may limit the ability of the Underwriters and certain selling group members to bid for and purchase the Common Stock. As an exception to these rules, the Representatives are permitted to engage in certain transactions that stabilize the price of the Common Stock. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the Common Stock. If the Underwriters create a short position in the Common Stock in connection with the offering, i.e., if they sell more shares of Common Stock than are set forth on the cover page of this Prospectus, the Representatives may reduce that short position by purchasing Common Stock in the open market. The Representatives may also elect to reduce any short position by exercising all or part of the over-allotment option described above. The Representatives may also impose a penalty bid on certain Underwriters and selling group members. This means that if the Representatives purchase shares of Common Stock in the open market to reduce the Underwriters' short position or to stabilize the price of the Common Stock, they may reclaim the amount of the selling concession from the Underwriters and selling group members who sold those shares as part of the offering. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. The imposition of a penalty bid might also have an effect on the price of a security to the extent that it were to discourage resales of the security. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act or to contribute to payments initially the Underwriters may be required to make in respect thereof. Neither the Company nor any of the Underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Common Stock. In addition, neither the Company nor any of the Underwriters makes any representation that the Representatives will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. 32 [Alternative Page for International Prospectus] UNITED STATES TAXATION OF FOREIGN SHAREHOLDERS The following is a general discussion of certain United States federal income and estate tax consequences of the ownership and disposition of Common Stock that may be relevant to Non-United States Holders of such Common Stock. For purposes of this discussion, a "Non-United States Holder" is any corporation, individual, partnership, estate or trust that is, as to the United States, a foreign corporation, a non-resident alien individual, a foreign partnership or a foreign estate or trust as such terms are defined in Section 7701 of the United States Internal Revenue Code of 1986, as amended (the "Code"). In general, a "Non-United States Holder" is any holder of Common Stock that is not (i) a citizen or resident alien individual of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any State thereof, (iii) an estate the income of which is subject to United States federal income taxation regardless of its source, or (iv) a trust with respect to which a court within the United States is able to exercise primary supervision over its administration, and one or more United States persons have the authority to control all of its substantial decisions. Resident alien individuals will be subject to United States federal income taxation with respect to the Common Stock in the same manner as if they were United States citizens. The following discussion does not deal with all aspects of United States federal income and estate taxation and does not consider specific facts and circumstances that may be relevant to a particular Non-United States Holder in light of such holder's personal investment or tax position. Furthermore, the discussion does not address tax consequences that may be relevant to certain Non-United States Holders subject to special treatment under the United States federal income tax laws, such as insurance companies, tax-exempt organizations, financial institutions or broker-dealers. The discussion does not discuss any aspects of non-United States or United States state and local tax consequences that may be relevant to Non-United States Holders. Finally, the discussion is based on the current provisions of the Code, the final, temporary and proposed Treasury Regulations promulgated thereunder, and administrative and judicial interpretations of the foregoing, all as in effect on the date of this Prospectus and all of which are subject to change, possibly with retroactive effect. PROSPECTIVE NON-UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE SPECIFIC UNITED STATES FEDERAL, STATE AND LOCAL AND NON-UNITED STATES INCOME, ESTATE AND OTHER TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF COMMON STOCK (INCLUDING SUCH HOLDER'S STATUS AS A NON-UNITED STATES HOLDER). DIVIDENDS Dividends paid by the Company to a Non-United States Holder will generally be subject to United States federal income tax withholding at the rate of 30 percent of the gross amount of the dividends, or at such lower rate as may be specified by an applicable United States income tax treaty. Under the United States Treasury Regulations currently in effect and published Revenue Rulings, dividends paid to an address in a foreign country generally are presumed to be paid to a resident of such country (unless the payor has actual knowledge to the contrary) for purposes of both applying the withholding tax and determining the applicability of a reduced treaty rate of withholding, if any. Under newly issued United States Treasury Regulations, which, pursuant to an Internal Revenue Service notice dated March 30, 1998 will become effective for payments made after December 31, 1999, however, a Non-United States Holder who wishes to claim the benefit of an applicable reduced treaty rate of withholding will be required to satisfy certain certification and other requirements, including the requirement generally to file a properly completed IRS Form W-8 with the Company, the paying agent or such other entity as may be required to withhold tax. The new Treasury Regulations also provide special rules for dividends paid to foreign intermediaries, United States or foreign wholly-owned entities that are disregarded as entities separate from their owners for United States federal income tax purposes, and flow-through entities or arrangements that are treated as fiscally transparent for United States federal income tax purposes or under the laws of an applicable income tax treaty jurisdiction or both. For example, in the case of Common Stock held by 33 [Alternative Page for International Prospectus] a foreign partnership, the certification requirement will be applied to the partners of the partnership, rather than the partnership itself, although the partnership will also be required to provide certain information, and a look- through rule is provided for tiered partnership structures. A Non-United States Holder eligible for a reduced rate of United States withholding tax pursuant to a tax treaty may obtain a refund of any excess amounts withheld from the payment of dividends on the Common Stock by filing an appropriate claim for refund with the United States Internal Revenue Service (the "IRS"). To the extent that a distribution with respect to the Common Stock represents a return of basis for United States federal income tax purposes, a Non-United States Holder may apply for a refund of any amounts withheld from the payment of dividends on the Common Stock with respect to such return of basis by filing an appropriate claim for refund with the IRS. Dividends received by a Non-United States Holder that are effectively connected with the conduct by the Non-United States Holder of a trade or business within the United States (or, if certain income tax treaties apply, that are attributable to a permanent establishment maintained by such Non- United States Holder in the United States) are exempt from United States federal income tax withholding, provided that such Non-United States Holder files with the Company, its paying agent or such other entity as may be required to withhold tax, a properly completed IRS Form 4224 (or, in the case of an applicable tax treaty, IRS Form 1001), or, after the newly issued United States Treasury Regulations become effective on January 1, 2000, a properly completed IRS Form W-8. In general, a Non-United States Holder will not be considered to be engaged in a trade or business within the United States solely as a result of ownership of Common Stock. If the dividends are effectively connected with a United States trade or business (or are attributable to a United States permanent establishment), the dividends will be subject to United States federal income tax (on a net income basis) at the same graduated rates applicable to United States persons. In the case of a Non-United States Holder that is a corporation, such effectively connected dividends may also be subject to the branch profits tax (which is generally imposed at a 30 percent rate (or a lower applicable treaty rate) on effectively connected earnings and profits deemed to be repatriated to a non- U.S. jurisdiction). DISPOSITION OF COMMON STOCK A Non-United States Holder generally will not be subject to United States federal income tax (and no tax generally will be withheld) on any gain realized upon the sale or other disposition of Common Stock unless (i) such gain is effectively connected with a United States trade or business of the Non-United States Holder (or, if certain income tax treaties apply, such gain is attributable to a permanent establishment maintained by such Non-United States Holder in the United States), (ii) the gain is not described in clause (i) above and the Non-United States Holder is a non-resident alien individual who holds the Common Stock as a capital asset and who is present in the United States for a period or periods aggregating 183 days or more during the calendar year (or taxable year if one has been established) in which such disposition occurs, and either (a) such individual's "tax home," within the meaning of Section 911(d)(3) of the Code, is in the United States or (b) the gain is attributable to an office or other fixed place of business in the United States, (iii) the Non-United States Holder is an individual who is a former citizen or long-term resident alien of the United States and who is subject to tax pursuant to the provisions of the United States federal income tax laws applicable to certain United States expatriates, or (iv) the Company is, or has been at any time during the five-year period preceding the disposition (or such shorter period during which such Non-United States Holder has owned such Common Stock), a "United States real property holding corporation" for United States federal income tax purposes and, so long as the Common Stock continues to be "regularly traded on an established securities market" for tax purposes, the Non-United States Holder disposing of the Common Stock directly or indirectly owned more than five percent in value of the Common Stock at any time during such five-year (or shorter) period. A corporation is generally a "United States real property holding corporation" if the fair market value of its United States real property interests equals or exceeds 50 percent of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business both within and outside the United States. The Company believes it is not currently, and does not expect that it will become, a United States real property holding corporation for United States federal income tax purposes. There can be no assurance, however, that the Company will not become, or be determined to be, such a corporation. 34 [Alternative Page for International Prospectus] outside the United States. The Company believes it is not currently, and does not expect that it will become, a United States real property holding corporation for United States federal income tax purposes. There can be no assurance, however, that the Company will not become, or be determined to be, such a corporation. Gain that is effectively connected with the conduct of a trade or business by a Non-United States Holder within the United States (or that is attributable to a United States permanent establishment maintained by such Non-United States Holder in the United States) will be subject to United States federal income tax (on a net income basis) at the same graduated rates applicable to United States persons, but will not be subject to withholding. In the case of a Non-United States Holder that is a corporation, such gain may also be subject to the branch profits tax. An individual Non-United States Holder that is described under clause (ii) above will be subject to a flat 30 percent tax on the gain derived from the sale, which gain may be offset by certain U.S.-source capital losses (notwithstanding the fact that such individual is not considered to be a resident of the United States for United States federal income tax purposes). BACKUP WITHHOLDING AND INFORMATION REPORTING The Company must report annually to the IRS and to each Non-United States Holder the amount of dividends paid, and the tax withheld, with respect to shares of Common Stock held by such holder. These information reporting requirements apply regardless of whether the withholding tax was reduced or eliminated by an applicable tax treaty. This information may also be made available (under the provisions of an applicable income tax treaty or other international agreement) to the tax authorities of the country in which the Non-United States Holder resides. United States federal income tax backup withholding (imposed at a rate of 31 percent on dividends paid to certain holders who fail to provide in the required manner certain identifying information, such as the holder's name, address and taxpayer identification number, or under certain other circumstances) generally does not apply to dividends that are subject to United States federal income tax withholding at the 30 percent statutory rate or at a reduced tax treaty rate, dividends that are effectively connected with a United States trade or business of the Non- United States Holder, or dividends paid to a Non-United States Holder at an address outside the United States or otherwise to a Non-United States Holder who is an "exempt recipient" (such as a corporation). Under the newly issued United States Treasury Regulations, certain Non-United States Holders who are not currently subject to backup withholding on dividend payments will have to certify as to their non-United States status to avoid backup withholding on dividends paid after December 31, 1999. If a Non-United States Holder sells or otherwise disposes of shares of Common Stock to or through a United States office of a broker, the broker is required to file an information return and is required to apply backup withholding at the rate of 31 percent unless the Non-United States Holder has provided the broker with a certification, under penalties of perjury, as to its non-United States status or has otherwise established its entitlement to an exemption from backup withholding. If payment of the proceeds from the sale or other disposition of Common Stock by a Non-United States Holder is made to or through an office of a broker outside the United States, the broker generally will not be required to apply backup withholding or to file information returns, except as provided below. Under the Treasury Regulations currently in effect, information reporting (but not backup withholding) is required with respect to the payment of proceeds from the sale or other disposition of Common Stock to or through a foreign office of a broker that is (a) a United States person, (b) a controlled foreign corporation for United States federal income tax purposes, or (c) a foreign person 50 percent or more of whose gross income for the three-year period ending with the close of the taxable year preceding the year of payment (or for the part of that period that the broker has been in existence) is effectively connected with the conduct of a trade or business in the United States, unless that broker has documentary evidence in its files that the payee is not a United States person (and the broker has no actual knowledge to the contrary) and certain other conditions are met, or the payee has otherwise established its entitlement to an exemption. The newly issued United States Treasury Regulations, which will become effective for payments made after December 31, 1999, expand the categories of brokers that will be required to comply with the information reporting requirements with respect to the payment of proceeds from the sale or other disposition of Common Stock effected at an office outside the United States. As a result, information reporting may apply to certain payments 35 [Alternative Page for International Prospectus] of proceeds from the sale or other disposition of Common Stock made after December 31, 1999 by or through foreign offices of brokers that were previously exempt. Under the new Treasury Regulations, however, backup withholding will not be required with respect to the payment of proceeds from the sale or other disposition of Common Stock effected at a foreign office of a broker unless the broker has actual knowledge that the payee is a United States person. Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules are generally allowable as a refund or credit against a Non-United States Holder's United States federal income tax liability, if any, provided that the required information is furnished to the IRS. As previously noted above, the procedures for United States federal income tax withholding on dividend payments and some of the associated backup withholding and information reporting rules are the subject of new United States Treasury Regulations, which were issued on October 6, 1997, and become effective for payments made after December 31, 1999, subject to certain transition rules. These new Treasury Regulations modify the procedures for establishing an exemption from or a reduced rate of withholding tax as described above, as well as the certification procedures and forms for purposes of backup withholding and information reporting, and also clarify and modify reliance standards. Prospective Non-United States Holders should consult their own tax advisors concerning these new Treasury Regulations and the effect of such Treasury Regulations on their ownership of Common Stock. ESTATE TAX Common Stock owned, or treated as owned, by an individual who is neither a citizen nor a resident (as specially defined for United States federal estate tax purposes) of the United States at the time of such individual's death, or Common Stock of which the individual made certain in lifetime transfers, will be included in such individual's gross estate for United States federal estate tax purposes and thus will be subject to United States federal estate tax, subject to certain credits, at graduated rates of up to 55 percent, unless an applicable estate tax treaty provides otherwise. 36 [Alternative Page for International Prospectus] LEGAL MATTERS Certain legal matters with respect to the shares of Common Stock offered hereby will be passed upon for the Company by Hogan & Hartson L.L.P., Baltimore, Maryland. Certain legal matters will be passed upon for the Underwriters by Winston & Strawn, Chicago, Illinois. EXPERTS The audited consolidated financial statements included in this Prospectus and included elsewhere in this registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included in reliance upon the authority of said firm as experts in giving said reports. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy and information statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices in New York (Seven World Trade Center, Suite 1300, New York, New York 10048) and Chicago (Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661). Copies of such material can also be obtained at prescribed rates from the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a World Wide Web site that contains reports, proxy statements and other information regarding registrants, including the Company, that file such information electronically with the Commission. The address of the Commission's Web site is http: www.sec.gov. The Company's Common Stock is listed on the New York Stock Exchange and reports and other information concerning the registrant can be inspected at such exchange. The Company has filed with the Commission a Registration Statement on Form S-3 (together with all amendments and exhibits thereto, the "Registration Statement") under the Securities Act of 1933, as amended with respect to the Common Stock. This Prospectus does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission pursuant to the Exchange Act are incorporated herein by reference and made a part hereof: the Company's Annual Report on Form 10-K for the year ended December 31, 1997, Form 8-K filed on April 14, 1998 and the description of the Company's Common Stock, Series B 6% Cumulative Convertible Exchangeable Preferred Stock and Preferred Stock Purchase Rights set forth in the Company's Registration Statements on Form 8-A filed under the Exchange Act including all amendments and reports filed for the purpose of updating such descriptions. All documents filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering of the Common Stock shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which is incorporated by reference herein modifies or supersedes such earlier statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Copies of all documents incorporated by reference herein (other than exhibits to such documents which are not specifically incorporated by reference into such documents) will be provided without charge to each person who receives a copy of this Prospectus, upon request of such person, directed to Connie L. Koleszar, Wabash National Corporation, Investor Relations, 1000 Sagamore Parkway South, Lafayette, Indiana 47905 (telephone (765) 448-1591). 37 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Public Accountants................................. F-2 Consolidated Balance Sheets as of December 31, 1997 and 1996............. F-3 Consolidated Statements of Income for the years ended December 31, 1997, 1996 and 1995........................................................... F-4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995........................................ F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995..................................................... F-6 Notes to Consolidated Financial Statements............................... F-7
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Wabash National Corporation: We have audited the accompanying consolidated balance sheets of Wabash National Corporation (a Delaware corporation) and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wabash National Corporation and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Arthur Andersen LLP Indianapolis, Indiana January 19, 1998 F-2 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
DECEMBER 31, ------------------ 1997 1996 -------- -------- ASSETS Current Assets: Cash and cash equivalents................................ $ 14,647 $ 5,514 Accounts receivable, net................................. 161,249 71,166 Current portion of finance contracts..................... 7,697 6,128 Inventories.............................................. 211,359 140,015 Prepaid expenses and other............................... 12,962 13,087 -------- -------- Total current assets................................... 407,914 235,910 -------- -------- Property, Plant and Equipment, net......................... 108,798 81,782 -------- -------- Equipment Leased to Others, net............................ 43,986 63,825 -------- -------- Finance Contracts, net of current portion.................. 51,539 43,858 -------- -------- Other Assets............................................... 17,633 14,696 -------- -------- $629,870 $440,071 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt..................... $ 4,148 $ 3,942 Accounts payable......................................... 94,083 69,155 Accrued liabilities...................................... 29,471 14,101 -------- -------- Total current liabilities.............................. 127,702 87,198 -------- -------- Long-Term Debt, net of current maturities.................. 231,880 151,307 -------- -------- Deferred Income Taxes...................................... 26,440 22,879 -------- -------- Other Noncurrent Liabilities and Contingencies............. 17,332 319 -------- -------- Stockholders' Equity: Preferred stock.......................................... 4 -- Common stock, 19,954,874 and 18,910,923 shares issued and outstanding, respectively............................... 200 189 Additional paid-in capital............................... 135,611 99,388 Retained earnings........................................ 91,980 80,070 Treasury stock at cost, 59,600 common shares............. (1,279) (1,279) -------- -------- Total stockholders' equity............................. 226,516 178,368 -------- -------- $629,870 $440,071 ======== ========
The accompanying notes are an integral part of these Consolidated Balance Sheets. F-3 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, ------------------------------------- 1997 1996 1995 ----------- ----------- ----------- Net Sales............................... $ 846,082 $ 631,492 $ 734,299 Cost of Sales........................... 778,620 602,629 677,503 ----------- ----------- ----------- Gross profit........................ 67,462 28,863 56,796 General and Administrative Expenses..... 17,806 8,857 7,245 Selling Expenses........................ 8,501 4,502 3,866 ----------- ----------- ----------- Income from operations.............. 41,155 15,504 45,685 Other Income (Expense): Interest expense...................... (16,100) (10,257) (6,251) Other, net............................ 735 788 875 ----------- ----------- ----------- Income before income taxes.......... 25,790 6,035 40,309 Provision for Income Taxes.............. 10,576 2,397 14,902 ----------- ----------- ----------- Net income.......................... $ 15,214 $ 3,638 $ 25,407 Preferred Stock Dividends............... 742 -- -- ----------- ----------- ----------- Net Income Available to Common Stockholders........................... $ 14,472 $ 3,638 $ 25,407 =========== =========== =========== Common Stock Data: Average number of shares of common stock outstanding.................. 19,586,000 18,912,000 18,948,000 Basic earnings per common share..... $ 0.74 $ 0.19 $ 1.34 =========== =========== =========== Diluted earnings per common share... $ 0.74 $ 0.19 $ 1.33 =========== =========== ===========
The accompanying notes are an integral part of these consolidated statements. F-4 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
PREFERRED STOCK COMMON STOCK ADDITIONAL ----------------- ------------------ PAID-IN RETAINED TREASURY SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL --------- ------- ---------- ------ ---------- -------- -------- -------- Balances, December 31, 1994................... -- $ -- 18,938,449 $189 $ 98,708 $ 55,284 $ -- $154,181 Net Income for the year.................. -- -- -- -- -- 25,407 -- 25,407 Cash dividends ($0.105 per share)............ -- -- -- -- -- (1,990) -- (1,990) Issuance of common stock under employee stock purchase plan... -- -- 3,379 -- 88 -- -- 88 Exercise of stock options............... -- -- 21,000 -- 450 -- -- 450 Purchase treasury stock................. -- -- (19,600) -- -- -- (505) (505) --------- ------ ---------- ---- -------- -------- ------- -------- Balances, December 31, 1995................... -- $ -- 18,943,228 $189 $ 99,246 $ 78,701 $ (505) $177,631 Net income for the year.................. -- -- -- -- -- 3,638 -- 3,638 Cash dividends ($0.12 per share)............ -- -- -- -- -- (2,269) -- (2,269) Issuance of common stock under employee stock purchase plan... -- -- 4,995 -- 92 -- -- 92 Exercise of stock options............... -- -- 2,700 -- 50 -- -- 50 Purchase treasury stock................. -- -- (40,000) -- -- -- (774) (774) --------- ------ ---------- ---- -------- -------- ------- -------- Balances, December 31, 1996................... -- $ -- 18,910,923 $189 $ 99,388 $ 80,070 $(1,279) $178,368 Net income for the year.................. -- -- -- -- -- 15,214 -- 15,214 Cash dividends ($0.13 per share)............ -- -- -- -- -- (2,562) -- (2,562) Preferred dividends.... -- -- -- -- -- (742) -- (742) Issuance of common stock under: employee stock purchase plan........ -- -- 3,551 -- 97 -- -- 97 employee stock bonus plan................. -- -- 11,300 -- 272 -- -- 272 Stock issued for acquisition: Common stock.......... -- -- 1,000,000 10 17,740 -- -- 17,750 Preferred stock....... 352,000 4 -- -- 17,596 -- -- 17,600 Exercise of stock options............... -- -- 29,100 1 518 -- -- 519 --------- ------ ---------- ---- -------- -------- ------- -------- Balances, December 31, 1997................... 352,000 $ 4 19,954,874 $200 $135,611 $ 91,980 $(1,279) $226,516 ========= ====== ========== ==== ======== ======== ======= ========
The accompanying notes are an integral part of these consolidated statements. F-5 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31, ------------------------------- 1997 1996 1995 --------- --------- --------- Cash Flows from Operating Activities: Net income.................................. $ 15,214 $ 3,638 $ 25,407 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization.............. 16,623 15,289 11,504 Bad debt provision......................... 693 186 616 Deferred income taxes...................... 5,463 2,317 4,541 Change in operating assets and liabilities, excluding effects of the acquisition-- Accounts receivable....................... (76,821) 6,183 (3,313) Inventories............................... (51,181) (7,919) (57,712) Prepaid expenses and other................ 2,293 (3,661) (4,370) Accounts payable.......................... 24,928 (19,335) 3,900 Accrued liabilities....................... 6,218 757 (1,667) Other assets.............................. 4,757 (3,421) (2,566) --------- --------- --------- Net cash used in operating activities... (51,813) (5,966) (23,660) --------- --------- --------- Cash Flows from Investing Activities: Capital expenditures........................ (20,168) (11,211) (37,898) Proceeds from sale and leaseback of property, plant, and equipment............. 10,052 -- -- Investment in equipment leased to others.... (38,137) (41,275) (19,076) Proceeds from sale of leased equipment and finance contracts.......................... 73,524 17,706 9,149 Investment in finance contracts............. (25,561) (24,940) (20, 512) Principal payments on finance contracts..... 5,403 4,844 3,279 Payments for RoadRailer technology.......... (1,464) (2,008) (275) Investment in unconsolidated affiliate...... (6,230) -- -- Payment for purchase of Fruehauf, net of cash acquired (Note 5)..................... (15,129) -- -- Other....................................... 121 172 (39) --------- --------- --------- Net cash used in investing activities... (17,589) (56,712) (65,372) --------- --------- --------- Cash Flows from Financing Activities: Principal payments on long-term debt........ (14,855) (24,365) (9,895) Proceeds from issuance of long-term debt.... 35,635 143,361 10,000 Borrowings under long-term revolver......... 418,599 398,100 311,420 Payments under long-term revolver........... (358,600) (448,100) (258,189) Proceeds from issuance of common stock, net of expenses................................ 888 142 538 Payment of cash dividends................... (2,431) (2,269) (1,895) Payment of preferred dividends.............. (701) -- -- Purchase of treasury stock.................. -- (774) (505) --------- --------- --------- Net cash provided by financing activities............................. 78,535 66,095 51,474 --------- --------- --------- Net Increase (Decrease) in Cash............... 9,133 3,417 (37,558) Cash and Cash Equivalents at the Beginning of the Period................................... 5,514 2,097 39,655 --------- --------- --------- Cash and Cash Equivalents at the End of the Period....................................... $ 14,647 $ 5,514 $ 2,097 ========= ========= =========
The accompanying notes are an integral part of these consolidated statements. F-6 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF THE BUSINESS Wabash National Corporation (the Company) designs, manufactures and markets standard and customized truck trailers under the Wabash National and Fruehauf trademarks. The Company is the leading manufacturer of composite trailers, aluminum plate trailers and bimodal vehicles through its RoadRailer products. The Company produces and sells aftermarket parts through its division, Wabash National Parts, and its wholly-owned subsidiary, Fruehauf Trailer Services, Inc. (FTSI). In addition to its aftermarket parts sales and service revenues, FTSI distributes new and used trailers. The Company's other wholly-owned subsidiaries include Wabash National Finance Corporation (the Finance Company) and Continental Transit Corporation (Continental). The Finance Company provides leasing and financing programs to its customers for new and used trailers. Continental provides transportation services for the Company. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of Consolidation The consolidated financial statements reflect the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Investments in unconsolidated affiliates in which the company exercises significant influence but not control are accounted for by the equity method and the Company's share of net income or loss of its affiliates is included in Other, net. b. Significant Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amount reported in its consolidated financial statements and accompanying notes. Actual results could differ from these estimates. c. Cash and Cash Equivalents Cash equivalents consist of highly liquid investments, which are readily convertible into cash and have maturities of three months or less. d. Allowance for Doubtful Accounts Accounts receivable as shown in the accompanying Consolidated Balance Sheets are net of allowance for doubtful accounts of $1,487,000, $1,686,000 and $1,363,000 at December 31, 1997, 1996 and 1995, respectively. e. Inventories Inventories are priced at the lower of first-in, first-out (FIFO) cost or market. Inventory costs include raw material, labor and overhead costs for manufactured inventories. Used trailers are carried at the lower of their estimated net realizable value or cost. Inventories consist of the following (in thousands):
DECEMBER 31, ----------------- 1997 1996 -------- -------- Raw materials and components.............................. $ 75,629 $ 66,819 Work in progress.......................................... 16,892 16,344 Finished goods............................................ 68,164 27,608 Aftermarket parts......................................... 25,386 5,826 Used trailers............................................. 25,288 23,418 -------- -------- $211,359 $140,015 ======== ========
F-7 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) f. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the depreciable assets. Estimated useful lives are 33 1/3 years for buildings and building improvements and range from 3 to 10 years for machinery and equipment. Maintenance and repairs are charged to expense as incurred. Property, plant and equipment consist of the following (in thousands):
DECEMBER 31, ------------------ 1997 1996 -------- -------- Land..................................................... $ 17,828 $ 5,154 Buildings and improvements............................... 55,864 37,656 Machinery and equipment.................................. 66,685 60,852 Construction in progress................................. -- 1,373 -------- -------- 140,377 105,035 Less--Accumulated depreciation........................... (31,579) (23,253) -------- -------- $108,798 $ 81,782 ======== ========
g. Fair Values of Financial Instruments Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures About Fair Value of Financial Instruments," requires disclosure of fair value information for certain financial instruments. The differences between the carrying amounts and the estimated fair values, using the methods and assumptions listed below, of the Company's financial instruments at December 31, 1997 and 1996 were immaterial. Cash and Cash Equivalents, Trade Receivables and Trade Payables. The carrying amounts reported in the Consolidated Balance Sheets approximate fair value. Long-Term Debt. The fair value of long-term debt, including current portion, is estimated based on quoted market prices for similar issues or on the current rates offered to the Company for debt of the same maturities. The interest rates on the Company's bank borrowings under its long-term revolving credit agreement are adjusted regularly to reflect current market rates. The carrying values of the Company's long-term borrowings also approximate fair value. Forward Contracts. The Company enters into foreign currency forward contracts (principally against the German deutschemark and the French franc) to hedge the net receivable/payable position arising from trade sales (including lease revenues) and purchases primarily with regard to the Company's European RoadRailer operations. Gains and losses related to qualifying hedges are deferred and included in the measurement of the related transaction, when the hedged transaction occurs. The Company does not hold or issue derivative financial instruments for speculative purposes. The fair values of foreign currency contracts (used for hedging purposes) are estimated by obtaining quotes from brokers. Foreign currency contracts to receive approximately $14.0 million and $8.7 million at December 31, 1997, and 1996, respectively, approximates fair market value at those dates. h. Revenue Recognition Revenues and costs are recognized as the related products and services are accepted by the customer except in the case of direct finance or operating leases. Revenues from direct finance leases are recognized over the term of the lease at a constant rate of return. Revenues from operating leases are recognized over the term of the lease on a straight-line basis in an amount equal to the invoiced rentals. F-8 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) i. Income Taxes The Company recognizes income taxes under the liability method of accounting for income taxes. The liability method measures the expected tax impact of future taxable income or deductions resulting from differences in the tax and financial reporting bases of assets and liabilities reflected in the Consolidated Balance Sheets. j. Research and Development Research and development expenses are charged to earnings as incurred, and approximated $2,090,000, $1,206,000 and $1,567,000 in 1997, 1996 and 1995, respectively. k. Reclassifications Certain items previously reported in specific consolidated financial statement captions have been reclassified to conform with the 1997 presentation. l. New Accounting Pronouncements The Company currently accounts for its employee stock option plans using APB Opinion No. 25, Accounting for Stock Issued to Employees, which results in no charge to earnings when issued at fair market value. In 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting (SFAS) No. 123, Accounting for Stock-Based Compensation, which considers the stock options as compensation expense to the Company based on their estimated fair value at date of grant. Under this new standard, the Company has the option of accounting for employee stock option plans as it currently does, or it may use the new method. The Company intends to continue to use the existing method, but has adopted the disclosure requirements of SFAS 123 within Note 7) Stockholders' Equity. In February 1997, the FASB issued SFAS No. 128 "Earnings Per Share." The new Standard simplifies the computation of earnings per share (EPS), and requires the presentation of two new amounts, basic and diluted earnings per share. During 1997, the Company adopted SFAS 128 and restated its computation of EPS for the periods 1997, 1996 and 1995. The conversion of the Series B Preferred Stock would have been anti-dilutive and, therefore, was not considered in the computation of diluted EPS. The adoption of this new Standard resulted in an immaterial difference in its computation of basic and dilutive EPS. In addition, in June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." This Statement is effective for fiscal periods beginning after December 15, 1997 with early adoption permitted. The Company is evaluating the effect this Statement will have on its financial reporting and disclosures; however, the Statement will have no effect on the Company's results of operations, financial position, capital resources or liquidity. m. Business and Credit Concentrations On November 4, 1997, the Company purchased a 25.1% equity interest in Europaische Trailerzug Beteiligungsgessellschaft mbH (ETZ). ETZ is the majority shareholder of Bayersriche Trailerzug Gesellschaft fur Bimodalen Guterverkehr mbH (BTZ), a European RoadRailer operation based in Munich, Germany. The Company paid approximately $6 million for its ownership interest in ETZ. All premium associated with this purchase is being amortized over a ten-year period. In addition, the Company recorded approximately $400,000 for its share of ETZ's losses since the date of the Company's investment and such losses are recorded in Other, net in the Consolidated Statements of Income. F-9 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) As of December 31, 1997, the Finance Company had approximately $20 million recorded as Equipment Leased to Others consisting of RoadRailer equipment specifically related to current or future operating lease arrangements with BTZ. In addition, as of December 31, 1997, the Company is contingently liable for up to four years as a guarantor of certain commitments to two separate entities related to 1996 RoadRailer equipment sales to BTZ. These commitments consist of standby letters of credit ($7.6 million) and a separate letter of guarantee ($4 million). The contract amount of these letters of credit approximate their fair value. 3. ACQUISITION On April 16, 1997, the Company acquired substantially all of the remaining assets of Fruehauf Trailer Corporation (Fruehauf), a manufacturer and marketer of truck trailers and related parts. The purchase included assets consisting of the Fruehauf and Pro Par(R) names, all patents and trademarks, retail outlets in 31 major metropolitan markets, the aftermarket parts distribution business based in Grove City, Ohio, a specialty trailer manufacturing plant in Huntsville, Tennessee and a van manufacturing plant in Ft. Madison, Iowa. For financial statement purposes the acquisition was accounted for as a purchase and accordingly, Fruehauf's results are included in the consolidated financial statements since the date of acquisition. The retail outlets operate under the name of Fruehauf Trailer Services, Inc., a wholly owned subsidiary of Wabash National Corporation. Aggregate consideration for this transaction was approximately $50.5 million consisting of $15.1 million in cash from credit facilities, $17.8 million in common stock and $17.6 million in preferred stock. The fair value of the assets acquired was approximately $63.5 million and approximately $13.0 million of liabilities were assumed in connection with this acquisition. The following table reflects unaudited pro forma combined results of operations of the Company and the acquired assets as if the acquisition had occurred January 1, 1997 and January 1, 1996.
YEARS ENDED DECEMBER 31, ------------------------ 1997 1996 ------------ ------------ (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Net sales........................................ $ 875.8 $ 820.5 Net income....................................... $ 14.7 $ (0.9) Net income per common share...................... $ 0.69 $ (0.10)
In management's opinion, the unaudited pro forma combined results of operations are not indicative of the actual results that would have occurred had the acquisition been consummated at the beginning of 1996 or at the beginning of 1997 or of future operations of the combined companies under the ownership and management of the Company. 4. LEASING AND FINANCE OPERATIONS The Finance Company provides leasing and financing programs to customers for new and used trailers. The Finance Company's lease revenues, excluding revenue from the sale of leased trailers of $5.7 million, $44.4 million and $13.5 million, were $21.4 million, $13.7 million and $12.6 million during 1997, 1996 and 1995, respectively. Income before income taxes was $1.0 million, $2.5 million and $4.3 million in 1997, 1996 and 1995, respectively. At December 31, 1997 and 1996, respectively, the Finance Company had $54.9 million and $80.9 million in long-term debt, comprised of $39.0 and $61.0 million in intercompany debt to the Company and $15.9 million and $19.9 million in debt due to third parties, of which $8.4 million and $0 was guaranteed by the Company. F-10 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Also at December 31, 1997 and 1996, respectively, the Finance Company had total assets of $107.1 million and $117.7 million, consisting primarily of Equipment Held for Lease of $44.0 million and $63.8 million and Finance Contacts, net of current portion, of $51.5 million and $43.9 million. a. Equipment Held for Lease The Finance Company has leased equipment to others under operating leases, whereby revenue is recognized as lease payments are due from the customers and the related costs are amortized over the equipment life. Equipment leased to others is depreciated over the estimated useful life of the equipment, not to exceed 11 years and no residual value, or in some cases, a depreciable life equal to the term of the lease and a residual value equal to the estimated market value at lease termination. Depreciation expense on equipment leased to others was $8,374,000, $6,093,000 and $4,175,000 during 1997, 1996 and 1995, respectively. Accumulated depreciation of equipment leased to others is $9,596,000 and $10,435,000 at December 31, 1997 and 1996, respectively. Future minimum lease payments to be received from these noncancellable operating leases at December 31, 1997 are as follows (in thousands):
AMOUNTS ------- 1998................................................................. $ 7,796 1999................................................................. 4,181 2000................................................................. 3,712 2001................................................................. 3,276 Thereafter........................................................... 7,776 ------- $26,741 =======
b. Finance Contracts The Finance Company also provides financing contracts for the sale of trailer equipment to certain of its customers. The financing is principally structured in the form of finance leases, typically for a five-year term. Finance contracts, as shown on the accompanying financial statements, represent the minimum lease payments receivable plus the estimated residual values less unearned interest. These estimated residual values and unearned interest totalled approximately $7,250,000 and $8,608,000, respectively, at December 31, 1997 and $7,545,000 and $10,212,000, respectively, at December 31, 1996. The future minimum lease payments to be received at December 31, 1997 are as follows (in thousands):
AMOUNTS ------- 1998................................................................. $ 7,329 1999................................................................. 7,077 2000................................................................. 6,366 2001................................................................. 5,304 Thereafter........................................................... 6,092 ------- $32,168 =======
Additionally, the Finance Company participates in the contracts and leases of a major finance company. This participation consists of the purchase of 20% of the initial value of these contracts and leases by the Finance Company along with some level of end of term residual value guarantee. The Finance Company's 20% share of this participation was $13,002,000 and $1,347,000 as of December 31, 1997 and 1996, respectively. End of term residual guarantees related to these participations totaled $5,676,000 and $0 as of December 31, 1997 and 1996, respectively. F-11 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) c. Other In certain situations, the Finance Company has sold equipment leased to others to independent financial institutions, simultaneously leased the equipment back, and guaranteed an end of term residual value to the financial institutions. These end of term residual guarantees totaled $19,815,000 and $10,621,000 as of December 31, 1997 and 1996, respectively. The income from the sale of this equipment has been deferred and is being recognized over the term of the financial arrangements. Rental payments made by the Finance Company under these type of transactions totaled $4,900,000, $700,000 and $1,400,000 during 1997, 1996 and 1995, respectively. The future minimum lease payments to be paid by the Finance Company under these lease transactions at December 31, 1997 are as follows (in thousands):
AMOUNTS ------- 1998................................................................. $ 7,817 1999................................................................. 7,817 2000................................................................. 7,817 2001................................................................. 7,817 Thereafter........................................................... 12,878 ------- $44,146 =======
The future minimum lease payments to be received by the Finance Company under these sublease arrangements, are $8.0 million in 1998, $4.4 million in 1999, 2000 and 2001, and $12.3 million thereafter. Additionally, during 1997 the Finance Company sold certain finance contracts in its portfolio with a full recourse provision. As a result of the recourse provision, the Finance Company has reflected an asset and an offsetting liability totaling $13,113,000 in the Company's Consolidated Balance Sheets as a Finance Contract and Other Non-Current Liabilities and Contingencies. Such amounts will be amortized over the life of the arrangement. 5. SUPPLEMENTAL CASH FLOW INFORMATION
DECEMBER 31, ------------------------ 1997 1996 1995 -------- ------ ------- (IN THOUSANDS) Cash paid during the period for: Interest, net of amounts capitalized................ $ 15,313 $8,825 $ 6,433 Income taxes........................................ 6,136 714 13,648 -------- ------ ------- Noncash investing and financing activities: Finance contracts converted to operating leases..... 2,230 3,201 1,519 Operating leases converted to finance contracts..... 2,783 2,567 -- Used trailers transferred from inventory to operations......................................... -- 2,198 -- Preferred stock issued for acquisition.............. 17,600 -- -- Common stock issued for acquisition................. 17,750 -- -- -------- ------ ------- Purchase of Fruehauf assets, net of cash acquired: Accounts receivable, net............................ 13,955 -- -- Inventory........................................... 20,163 -- -- Prepaid expenses and other.......................... 4,072 -- -- Property, plant and equipment....................... 25,269 -- -- Current liabilities................................. (8,980) -- -- Non-current liabilities............................. (4,000) -- -- Stock issued........................................ (35,350) -- -- -------- ------ ------- Net cash paid to acquire Fruehauf..................... $(15,129) -- -- ======== ====== =======
F-12 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 6. LONG-TERM DEBT Long-term debt consists of the following (in thousands):
DECEMBER 31, -------------------- 1997 1996 --------- --------- Revolving Bank Lines of Credit......................... $ 65,999 $ 6,000 Industrial Revenue Bonds............................... 385 735 Notes Payable.......................................... 19,644 23,514 Senior Notes........................................... 150,000 125,000 --------- --------- 236,028 155,249 Less-Current maturities.............................. (4,148) (3,942) ========= ========= $ 231,880 $ 151,307 ========= =========
A summary of the terms of the long-term debt agreements follows: Revolving Bank Lines of Credit. On September 30, 1997, the Company replaced its revolving credit facility. The new unsecured revolving bank line of credit permits the Company to borrow up to $125 million. Under this facility, the Company has the right to borrow until September 30, 2002, at which time the principal amount then outstanding will be due and payable. Interest payable on such borrowings is variable based upon the London interbank rate (LIBOR) plus 25 to 55 basis points, as defined, or a prime rate of interest, as defined. The Company pays a quarterly commitment fee on the unused portion of this facility at rates of 8.5 to 17.5 basis points per annum, as defined. As of December 31, 1997, total borrowings under this facility was $65,999,000 at an interest rate of 6.1%. In addition, standby letters of credit totaling $8,368,000 have been issued in connection with the Company's Worker's Compensation self-insurance program, its outstanding Industrial Revenue Bond and its foreign sales transactions. Industrial Revenue Bonds. These bonds bear interest at 7.5%. The final principal payment of $385,000 is due in December, 1998. The bonds are secured by land, buildings and equipment. The Company has a letter of credit of $385,000 at December 31, 1997 to secure the bonds. Notes Payable. Notes payable are term borrowings by the Finance Company maturing from 1998 through 2003 from certain commercial banks and commercial finance companies and are secured by equipment under lease and the underlying leases. Notes amounting to $19,644,000 are at fixed annual percentage interest rates ranging from 6.6% to 8.75%. Senior Notes. On January 31, 1996, the Company issued $50 million of unsecured notes due January 31, 2003. These Series A Senior Notes bear interest at 6.41% with interest payments due semi-annually on July 31 and January 31. On December 1, 1996, the Company completed the private placement of $100 million Senior Notes due 2001-2008 of which $75 million were issued in December 1996 and the remaining $25 million were issued in March, 1997. These unsecured Senior Notes Series B-H bear interest at rates ranging from 6.99% to 7.55%. Interest payments are due in March, September and December. As of December 31, 1997, $39 million of the Company's Senior Notes due 2008 were due from the Finance Company. The terms and conditions of the intercompany loan to the Finance Company are identical to the terms and conditions of the Senior Notes. Covenants. Under the various loan agreements, the Company and the Finance Company are required to meet certain covenants. These covenants require the Company to maintain certain levels of net worth as well as F-13 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) comply with certain limitations on indebtedness, investments and sales of assets. The Company and the Finance Company were in compliance with these covenants at December 31, 1997. Maturities of long-term debt at December 31, 1997, are as follows (in thousands):
AMOUNTS -------- 1998................................................................ $ 4,148 1999................................................................ 3,761 2000................................................................ 4,128 2001................................................................ 12,004 2002................................................................ 91,966 Thereafter.......................................................... 120,021 -------- $236,028 ========
7. STOCKHOLDERS' EQUITY a. Capital Stock
DECEMBER 31, ---------------------- 1997 1996 ---------------------- (DOLLARS IN THOUSANDS) Preferred Stock--$.01 par value, 25,000,000 shares authorized: Series A Junior Participating Preferred Stock-- $0.01 par value, 300,000 shares authorized, 0 shares outstanding............................... -- -- Series B 6% Cumulative Convertible Exchangeable... Preferred Stock, 352,000 and 0 shares authorized and outstanding at December 31, 1997 and December 31, 1996 ($17.6 million aggregate liquidation value)........................................... 4 -- ---------- ----------- Total Preferred Stock........................... $ 4 $ -- ========== =========== Common Stock--$.01 par value, 75,000,000 shares authorized, issued 19,954,874 and 18,910,923, respectively....................................... $ 200 $ 189 ========== ===========
The Company's Series B 6% Cumulative Convertible Exchangeable Preferred Stock is convertible at the discretion of the holder, at a rate of 2.3 shares of Common Stock per share of Preferred Stock. This conversion is subject to adjustment for dilutive issuances and changes in outstanding capitalization by reason of a stock split, stock dividend or stock combination. The Board of Directors has the authority to issue shares of unclassified preferred stock and to fix dividends, voting and conversion rights, redemption provisions, liquidation preferences and other rights and restrictions. b. 1992 Stock Option Plan During 1992, the Company adopted its 1992 Non-Qualified Stock Option Plan (the Plan) under which options may be granted to officers and other key employees of the Company and its subsidiaries. Under the terms of the Plan, up to an aggregate of 1,750,000 shares are reserved for issuance, subject to adjustment for stock dividends, recapitalizations and the like. Options granted under the Plan become exercisable in five annual installments and expire not more than ten years after the date of grant, except for non- employee Directors of the Company in which options are fully vested on date of grant and are exercisable six months thereafter. F-14 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company has elected to follow APB No. 25 in accounting for its stock options and, accordingly, no compensation cost has been recognized for stock options in the consolidated financial statements. Had compensation cost for these plans been determined consistent with SFAS No. 123, the Company's net income available to common would have been reduced to $13.8 million ($0.71 per share) in 1997, $3.2 million ($0.17 per share) in 1996 and $25.3 million ($1.34 per share) in 1995. Stock option activity during the periods indicated is as follows:
WEIGHTED- NUMBER OF AVERAGE OPTIONS SHARES EXERCISE PRICE ------- --------- -------------- Outstanding at December 31, 1994.................... 394,600 $21.64 ------- ------ Granted........................................... 171,100 33.38 Exercised......................................... (21,000) 22.19 Outstanding at December 31, 1995.................... 544,700 25.30 ------- ------ Granted........................................... 178,200 20.59 Exercised......................................... (2,700) 17.54 Cancelled......................................... (74,700) 32.29 Outstanding at December 31, 1996.................... 645,500 23.25 ------- ------ Granted........................................... 254,500 28.36 Exercised......................................... (29,100) 17.82 Cancelled......................................... (15,000) 17.58 Outstanding at December 31, 1997.................... 855,900 $25.05 ======= ======
The following table summarizes information about stock options outstanding at December 31, 1997:
WEIGHTED WEIGHTED WEIGHTED RANGE OF AVERAGE AVERAGE NUMBER AVERAGE EXERCISE NUMBER REMAINING EXERCISE EXERCISABLE EXERCISE PRICES OUTSTANDING LIFE PRICE AT 12/31/97 PRICE -------- ----------- --------- -------- ----------- -------- $17.50 to $22.49 386,900 7.3 yrs $18.95 240,348 $17.68 $22.50 to $33.49 469,000 8.8 yrs $30.09 104,656 $29.06
Using the Black-Scholes option valuation model, the estimated fair values of options granted during 1997, 1996 and 1995 were $14.67, $10.39, and $17.26 per share respectively. Principal assumptions used in applying the Black-Scholes model were as follows:
BLACK-SCHOLES MODEL ASSUMPTIONS 1997 1996 1995 ------------------------------- ----- ----- ----- Risk-free interest rate................................. 6.15% 6.40% 6.10% Expected volatility..................................... 40.13% 41.30% 41.10% Expected dividend yield................................. 0.40% 0.58% 0.36% Expected term........................................... 7 yrs 7 yrs 7 yrs
c. 1993 Employee Stock Purchase Plan During 1993, the Company adopted its 1993 Employee Stock Purchase Plan (the "Purchase Plan") which enables eligible employees of the Company to purchase shares of the Company's $.01 par value common stock. Eligible employees may contribute up to 15% of their eligible compensation toward the semi-annual purchase of common stock. The employees' purchase price is based on the fair market value of the common stock on the date of purchase. No compensation expense is recorded in connection with the Plan. During 1997, 3,551 shares F-15 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) were issued to employees at a weighted average price of $27 per share. At December 31, 1997, there were approximately 285,149 shares available for offering under this Plan. d. Stock Bonus Plan During 1997, the Company adopted its Stock Bonus Plan (the "Bonus Plan"). Under the terms of the Plan, common stock may be granted to employees under terms and conditions as determined by the Board of Directors. During 1997, 11,300 shares were issued to employees at a weighted average price of $24. At December 31, 1997 there were approximately 488,700 shares available for offering under this Bonus Plan. 8. STOCKHOLDERS' RIGHTS PLAN On November 7, 1995, the Board of Directors adopted a Stockholder Rights Plan (the "Rights Plan"). The Rights Plan is designed to deter coercive or unfair takeover tactics, to prevent a person or group from gaining control of the Company without offering fair value to all shareholders and to deter other abusive takeover tactics which are not in the best interest of stockholders. Under the terms of the Rights Plan, each share of common stock is accompanied by one right; each right entitles the stockholder to purchase from the Company, one one-thousandth of a newly issued share of Series A Preferred Stock at an exercise price of $120. The rights become exercisable ten days after a public announcement that an acquiring person or group (as defined in the Plan) has acquired 20% or more of the outstanding Common Stock of the Company (the Stock Acquisition Date) or ten days after the commencement of a tender offer which would result in a person owning 20% or more of such shares. The Company can redeem the rights for $.01 per right at any time until ten days following the Stock Acquisition Date (the 10-day period can be shortened or lengthened by the Company). The rights will expire in November, 2005, unless redeemed earlier by the Company. If, subsequent to the rights becoming exercisable, the Company is acquired in a merger or other business combination at any time when there is a 20% or more holder, the rights will then entitle a holder to buy shares of the Acquiring Company with a market value equal to twice the exercise price of each right. Alternatively, if a 20% holder acquires the Company by means of a merger in which the Company and its stock survives, or if any person acquires 20% or more of the Company"s Common Stock, each right not owned by a 20% or more shareholder, would become exercisable for Common Stock of the Company (or, in certain circumstances, other consideration) having a market value equal to twice the exercise price of the right. 9. EMPLOYEE 401(K) SAVINGS PLAN Substantially all of the Company"s employees are eligible to participate in the 401(k) Savings Plan which provides for Company matching under various formulas. The Company"s matching expense for the plan was $961,000, $994,000 and $750,000 for the years ended December 31, 1997, 1996, and 1995, respectively. 10. INCOME TAXES a. Provisions for Income Taxes The consolidated income tax provision for 1997, 1996 and 1995 consists of the following components (in thousands):
1997 1996 1995 ------- ------ ------- Current: Federal............................................ $ 3,862 $ (801) $ 9,382 State.............................................. 1,250 (201) 979 Deferred............................................. 5,464 3,399 4,541 ------- ------ ------- $10,576 $2,397 $14,902 ======= ====== =======
F-16 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company's effective income tax rates were 41.0%, 39.7% and 37.0% of pre- tax income for 1997, 1996 and 1995, respectively, and differed from the U.S. Federal Statutory rate of 35% due primarily to State taxes. In 1995, the Company recorded a $1.5 million state income tax credit as a result of property improvements eligible for income tax credit from the State of Indiana. b. Deferred Taxes Deferred income taxes are primarily due to temporary differences between financial and income tax reporting for the depreciation of property, plant and equipment and equipment under lease, the recognition of warranty expense, payments made in connection with the acquisition of the RoadRailer technology (and the amortization thereof) and the recognition of income from assets under finance leases. The long-term deferred tax liabilities were $26,440,000 and $22,879,000 and current prepaid income tax assets were $1,270,000 and $3,173,000 as of December 31, 1997 and 1996, respectively. The components of deferred tax assets and deferred tax liabilities and of December 31, 1997 and 1996, are as follows (in thousands of dollars):
1997 1996 ------- ------- Deferred tax assets: Rentals on Finance Leases................................ $12,137 $ 9,014 Other.................................................... 7,461 5,728 Deferred tax liabilities: Book-Tax Basis Differences--Property, Plant, and Equipment............................................... 32,581 24,410 Earned Finance Charges on Finance Leases................. 5,359 4,058 RoadRailer Acquisition Payments/Amortization............. 2,469 2,381 Other.................................................... 4,359 3,599 ------- ------- Net deferred tax liability................................. $25,170 $19,706 ======= =======
11. SIGNIFICANT CUSTOMERS For the year ended December 31, 1997, no customer represented more than 10% of the Company's net sales. In 1996, the two largest customers accounted for 15% and 13% of net sales, and in 1995 the largest customer accounted for 13% of net sales. No other customer represented more than 10% of the Company's net sales in 1996 and 1995. 12. COMMITMENTS AND CONTINGENCIES a. Litigation There are certain lawsuits and claims pending against the Company which arose in the normal course of business. In the opinion of management, none of these actions are expected to have a material adverse effect on the Company's financial position or results of operations. b. Environmental The Company generates and handles certain material, wastes and emissions in the normal course of operations that are subject to various and evolving Federal, state and local environmental laws and regulations. The Company assesses its environmental liabilities on an on-going basis by evaluating currently available facts, existing technology, presently enacted laws and regulations as well as experience in past treatment and F-17 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) remediation efforts. Based on these evaluations, the Company estimates a lower and upper range for the treatment and remediation efforts and recognizes a liability for such probable costs based on the information available at the time. The potential estimated exposure for such costs ranges from approximately $1 million to approximately $7 million. As of December 31, 1997, the Company has a reserve of approximately $4.5 million, recorded as Other Non-Current Liabilities and Contingencies, for the costs of environmental remediation projects to address soil and ground water contamination at certain of its facilities as well as the costs of removing underground storage tanks at its branch service locations. The possible recovery of insurance proceeds has not been considered in the Company's estimated contingent environmental costs. The Company has certain costs associated with the remediation of affected soils at its Lafayette manufacturing facility which resulted from the manufacturing activities of the facility's previous bankrupt owner, National Enterprises, Inc. These remediations efforts, which began in June 1991, are being conducted voluntarily pursuant to a Work Plan approved by the Indiana Department of Environmental Management. Although sufficient data have not been generated to conclude if the remediation efforts will achieve cleanup objectives imposed by the regulatory agencies, and what the ultimate costs will be, the costs to date have not been material. The Company does not anticipate significant costs to be incurred to satisfy ongoing soil remediation efforts related to this site. Future information and developments will require the Company to continually reassess the expected impact of these environmental matters. However, the Company has evaluated its total environmental exposure based on currently available data and believes that compliance with all applicable laws and regulations will not have a materially adverse effect on the financial position or operations of the Company. c. Royalty Payments Beginning in the first quarter of 1998 and extending through 2007, the Company is obligated to make quarterly royalty payments in accordance with a licensing agreement related to the development of the Company's composite plate material used on its proprietary DuraPlate trailer. The amount of the payments varies with the production volume of usable material, but requires minimum royalties of $500,000 annually through 2005. d. Operating Leases The Company leases office space, manufacturing, warehouse and service facilities and equipment under operating leases expiring through 2002. Future minimum lease payments required under operating leases as of December 31, 1997 were as follows (in thousands):
AMOUNTS ------- 1998................................................................. $4,230 1999................................................................. 3,406 2000................................................................. 2,807 2001................................................................. 2,445 2002................................................................. 67
Total rental expense under operating leases was $2,550,000, $1,336,000 and $1,121,000 for the years ended December 31, 1997, 1996 and 1995, respectively. F-18 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 13. QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE) 1997 Net sales................................ $135,087 $196,407 $246,403 $268,185 Gross profit............................. 8,033 14,710 21,167 23,552 Net income............................... 869 2,842 5,052 6,451 Basic Earnings per share................. $ 0.05 $ 0.13 $ 0.24 $ 0.31 Diluted Earnings per share............... $ 0.05 $ 0.13 $ 0.24 $ 0.31 1996 Net sales................................ $161,222 $140,606 $161,303 $168,361 Gross profit............................. 9,069 5,880 6,107 7,803 Net income............................... 2,204 102 95 1,237 Basic Earnings per share................. $ 0.12 $ 0.01 $ 0.01 $ 0.07 Diluted Earnings per share............... $ 0.12 $ 0.01 $ 0.01 $ 0.07
F-19 Photographs depicting: (i) Map of the United States showing Wabash business locations, retail branch locations and proposed retail branch locations; (ii) a retail branch location and (iii) a flatbed trailer. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DIRECTOR, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERINGS MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE- SENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFOR- MATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE U.S. UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OF- FERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UN- LAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PRO- SPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. --------------- TABLE OF CONTENTS
PAGE ---- Prospectus Summary....................................................... 3 Risk Factors............................................................. 8 Use of Proceeds.......................................................... 10 Price Range of Common Stock.............................................. 10 Dividend Policy.......................................................... 11 Capitalization........................................................... 11 Selected Financial and Operating Data.................................... 12 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 13 Business................................................................. 18 Management............................................................... 27 Principal Stockholders................................................... 29 Underwriting............................................................. 30 Legal Matters............................................................ 33 Experts.................................................................. 33 Available Information.................................................... 33 Incorporation of Certain Documents by Reference.......................... 33 Financial Statements..................................................... F-1
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 3,000,000 SHARES LOGO COMMON STOCK --------------- PROSPECTUS --------------- MERRILL LYNCH & CO. BT ALEX. BROWN ROBERT W. BAIRD & CO. INCORPORATED MORGAN KEEGAN & COMPANY, INC. , 1998 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COM- PANY OR THE INTERNATIONAL UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OF- FERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UN- LAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PRO- SPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. --------------- TABLE OF CONTENTS
PAGE ---- Prospectus Summary....................................................... 3 Risk Factors............................................................. 8 Use of Proceeds.......................................................... 10 Price Range of Common Stock.............................................. 10 Dividend Policy.......................................................... 11 Capitalization........................................................... 11 Selected Financial and Operating Data.................................... 12 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 13 Business................................................................. 18 Management............................................................... 27 Principal Stockholders................................................... 29 Underwriting............................................................. 30 United States Taxation of Foreign Shareholders........................... 33 Legal Matters............................................................ 37 Experts.................................................................. 37 Available Information.................................................... 37 Incorporation of Certain Documents by Reference.......................... 37 Financial Statements..................................................... F-1
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 3,000,000 SHARES LOGO COMMON STOCK --------------- PROSPECTUS --------------- MERRILL LYNCH INTERNATIONAL BT ALEX. BROWN INTERNATIONAL ROBERT W. BAIRD & CO. INCORPORATED MORGAN KEEGAN & COMPANY, INC. , 1998 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the fees and expenses in connection with the issuance and distribution of the securities being registered hereunder. Except for the SEC registration fee, all amounts are estimates. SEC registration fee............................................ $ 30,696 NASD filing fee................................................. 12,500 Accounting fees and expenses.................................... 50,000 Legal fees and expenses......................................... 50,000 Printing and engraving expenses................................. 75,000 Transfer agent's and registrar's fees and expenses.............. 11,804 Miscellaneous expenses, including Listing Fees.................. 100,000 -------- Total......................................................... $330,000 ========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation's board of directors to grant, indemnity to directors and officers under certain circumstances for liabilities incurred in connection with their activities in such capacities (including reimbursement for expenses incurred). Article TENTH of the Registrant's Certificate of Incorporation provides that the Registrant will indemnify its directors and officers to the fullest extent permitted by law and that directors shall not be liable for monetary damages to the Registrant or its stockholders for breach of fiduciary duty, except to the extent not permitted under Delaware General Corporation Law. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits:
EXHIBIT NUMBER DESCRIPTION ------- ----------- 1.01 Proposed form of U.S. Purchase Agreement* 1.02 Proposed form of International Purchase Agreement* 3.01 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.01, Registration Statement on Form S-1, SEC File No. 33- 42810) 3.02 By-laws of the Company (incorporated by reference to Exhibit 3.03 of the Company's Registration Statement on Form S-1, SEC File No. 33- 42810) 4.01 Specimen Stock Certificate (incorporated by reference to Exhibit 4.01 of the Company's Registration Statement on Form S-1, Sec File No. 33- 42810) 4.02 Rights Agreement dated December 4, 1995 (incorporated by reference to Exhibit 1 of the Company's Form 8-A filed with the Commission on December 7, 1995) 4.03 Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference to Form 8-A, filed with the Commission on December 7, 1995) 4.04 Certificate of Designation of Series B 6% Cumulative Convertible Exchangeable Preferred Stock (incorporated by reference to Exhibit 3.04 to the Company's Form 10-Q for the quarter ended March 31, 1997) 4.05 Specimen Certificate for Series B 6% Cumulative Convertible Exchangeable Preferred Stock (incorporated by reference to Exhibit 4.05 to the Company's Form 10-Q for the quarter ended March 31, 1997) 5.01 Opinion of Hogan & Hartson L.L.P. as to the legality of the securities being registered (previously filed) 23.01 Consent of Hogan & Hartson L.L.P. (contained in Exhibit 5.01) (previously filed) 23.02 Consent of Arthur Andersen LLP* 24.01 Power of Attorney (contained on signature page) (previously filed)
- -------- *filed herewith II-1 (b) Financial Statement Schedules. All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. ITEM 17. UNDERTAKINGS. (a) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (c) The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as a part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-2 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE COUNTY OF TIPPECANOE, STATE OF INDIANA ON APRIL 21, 1998. WABASH NATIONAL CORPORATION /s/ Donald J. Ehrlich By: _________________________________ Donald J. Ehrlich Chief Executive Officer, President and Chairman of the Board of Directors POWER OF ATTORNEY Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. /s/ Donald J. Ehrlich* Chief Executive - ----------------------------- Officer, President and Date: April 21, 1998 DONALD J. EHRLICH Chairman of the Board of Directors /s/ Mark R. Holden* Vice President--Chief - ----------------------------- Financial Officer and Date: April 21, 1998 MARK R. HOLDEN Director (Principal Financial Officer and Principal Accounting Officer) /s/ Richard E. Dessimoz* Vice President and - ----------------------------- Director Date: April 21, 1998 RICHARD E. DESSIMOZ /s/ John T. Hackett* Director - ----------------------------- Date: April 21, 1998 JOHN T. HACKETT /s/ E. Hunter Harrison* Director - ----------------------------- Date: April 21, 1998 E. HUNTER HARRISON /s/ Ludvik F. Koci* Director - ----------------------------- Date: April 21, 1998 LUDVIK F. KOCI Amy Bowerman Freed By: _________________________ Attorney-in-Fact II-3 EX-1.01 2 PROPOSED FORM OF U.S. PURCHASE AGREEMENT EXHIBIT 1.01 April 20, 1998 ================================================================================ WABASH NATIONAL CORPORATION (a Delaware corporation) 2,400,000 Shares of Common Stock U.S. PURCHASE AGREEMENT Dated: April [__], 1998 ================================================================================ W&S Draft of April 20, 1998 WABASH NATIONAL CORPORATION a Delaware corporation 2,400,000 Shares of Common Stock (Par Value $.01 Per Share) U.S. PURCHASE AGREEMENT ----------------------- April [ ], 1998 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated BT ALEX. BROWN INCORPORATED ROBERT W. BAIRD & CO. INCORPORATED MORGAN KEEGAN & COMPANY, INC. as U.S. Representatives of the several U.S. Underwriters c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Ladies and Gentlemen: Wabash National Corporation, a Delaware corporation (the "Company") confirms its agreements with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other U.S. Underwriters named in Schedule A hereto (collectively, the "U.S. Underwriters", which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Merrill Lynch, BT Alex. Brown Incorporated, Robert W. Baird & Co. Incorporated and Morgan Keegan & Company, Inc. are acting as representatives (in such capacity, the "U.S. Representatives"), with respect to (i) the sale by the Company and the purchase by the U.S. Underwriters, acting severally and not jointly, of the respective numbers of shares of Common Stock, par value $.01 per share, of the Company ("Common Stock") set forth in Schedule A hereto and (ii) the grant by the Company to the U.S. Underwriters, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of 360,000 additional shares of Common Stock to cover over-allotments, if any. The aforesaid 2,400,000 shares of Common Stock (the "Initial U.S. Securities") to be purchased by the U.S. Underwriters and all or any part of the 360,000 shares of Common Stock subject to the option described in Section 2(b) hereof (the "U.S. Option Securities") are hereinafter called, collectively, the "U.S. Securities". It is understood that the Company is concurrently entering into an agreement dated the date hereof (the "International Purchase Agreement") providing for the offering by the Company of an aggregate of 600,000 shares of Common Stock (the "Initial International Securities") through arrangements with Merrill Lynch International, BT Alex. Brown International, a division of Bankers Trust Co., Robert W. Baird & Co. Incorporated and Morgan Keegan & Company, Inc. (collectively, the "Lead Managers" or "International Managers") outside the United States and Canada and the grant by the Company to the International Managers, acting severally and not jointly, of an option to purchase all or any part of the International Managers' pro rata portion of up to 90,000 additional shares of Common Stock solely to cover overallotments, if any (the "International Option Securities" and, together with the U.S. Option Securities, the "Option Securities"). The Initial International Securities and the International Option Securities are hereinafter called the "International Securities". It is understood that the Company is not obligated to sell and the U.S. Underwriters are not obligated to purchase, any Initial U.S. Securities unless all of the Initial International Securities are contemporaneously purchased by the International Managers. The U.S. Underwriters and the International Managers are hereinafter collectively called the "Underwriters", the Initial U.S. Securities and the Initial International Securities are hereinafter collectively called the "Initial Securities", and the U.S. Securities, and the International Securities are hereinafter collectively called the "Securities". The Underwriters will concurrently enter into an Intersyndicate Agreement of even date herewith (the "Intersyndicate Agreement") providing for the coordination of certain transactions among the Underwriters under the direction of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (in such capacity, the "Global Coordinator"). The Company understands that the U.S. Underwriters propose to make a public offering of the U.S. Securities as soon as the U.S. Representatives deem advisable after this Agreement has been executed and delivered. The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No. 333-48589) covering the registration of the Securities under the Securities Act of 1933, as amended (the "1933 Act"), including the related preliminary prospectus or prospectuses. Promptly after execution and delivery of this Agreement, the Company will either (i) prepare and file a prospectus in accordance with the provisions of Rule 430A ("Rule 430A") of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). Two forms of prospectus are to be used in connection with the offering and sale of the 2 Securities: one relating to the U.S. Securities (the "Form of U.S. Prospectus") and one relating to the International Securities (the "Form of International Prospectus"). The Form of International Prospectus is identical to the Form of U.S. Prospectus, except for the front cover, inside front cover and back cover pages, the information under the caption "Underwriting" and the inclusion in the Form of International Prospectus of a section under the caption "Certain United States Tax Considerations for Non-United States Holders." The information included in any such prospectus or in any such Term Sheet, as the case may be, that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information." Each Form of U.S. Prospectus and Form of International Prospectus used before such registration statement became effective, and any prospectus that omitted, as applicable, the Rule 430A Information or the Rule 434 Information, that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a "preliminary prospectus." Such registration statement, including the exhibits thereto, schedules thereto, if any, and the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it became effective and including the Rule 430A Information and the Rule 434 Information, as applicable, is herein called the "Registration Statement." Any registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b) Registration Statement," and after such filing the term "Registration Statement" shall include the Rule 462(b) Registration Statement. The final Form of U.S. Prospectus and Form of International Prospectus, including the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the forms first furnished to the U.S. Underwriters for use in connection with the offering of the Securities are herein called the "U.S. Prospectus" and the "International Prospectus" respectively, and collectively, the "Prospectuses." If Rule 434 is relied on, the terms "U.S. Prospectus and International Prospectus" shall refer to the preliminary U.S. Prospectus dated March 30, 1998 and preliminary International Prospectus dated March 30, 1998 each together with the applicable Term Sheet and all references in this Agreement to the date of such Prospectus shall mean the date of the Term Sheet. For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the U.S. Prospectus, the International Prospectus or any Term Sheet or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Registration Statement, any preliminary prospectus (including the Form of U.S. Prospectus and Form of International Prospectus) or the Prospectuses (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is incorporated by reference in the Registration Statement, any preliminary prospectus (including the Form of U.S. Prospectus and Form of International Prospectus) or the Prospectuses, as the case may be; and all references in this Agreement to amendments or supplements to the Registration Statement, any preliminary prospectus or the Prospectuses shall be deemed to mean and include the filing of any document under the 3 Securities Exchange Act of 1934 (the "1934 Act") which is incorporated by reference in the Registration Statement, such preliminary prospectus or the Prospectuses, as the case may be. SECTION 1 Representations and Warranties. ------------------------------ (a) Representations and Warranties by the Company. The Company represents and warrants to each Underwriter as of the date hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees with each Underwriter, as follows: (i) Compliance with Registration Requirements. The Company has been ----------------------------------------- advised by the staff of the SEC that it meets the requirements for use of Form S-3 under the 1933 Act. Each of the Registration Statement and any Rule 462(b) Registration Statement has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. At the respective times the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendments thereto became effective and at the Closing Time (and, if any U.S. Option Securities are purchased, at the Date of Delivery), the Registration Statement, the Rule 462(b) Registration Statement and any amendments and supplements thereto complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Neither of the Prospectuses nor any amendments or supplements thereto, at the time the Prospectuses or any such amendments or supplements thereto were issued at the Closing Time (and, if any U.S. Option Securities are purchased, at the Date of Delivery), included or will include an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If Rule 434 is used, the Company will comply with the requirements of Rule 434. The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or the U.S. Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by any Underwriter through the U.S. Representatives expressly for use in the Registration Statement or the U.S. Prospectus. Each preliminary prospectus and the prospectuses filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so filed in all material respects with the 4 1933 Act Regulations and each preliminary prospectus and the Prospectuses delivered to the U.S. Underwriters for use in connection with this offering was identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (ii) Incorporated Documents. The documents incorporated or deemed ---------------------- to be incorporated by reference in the Registration Statement and the Prospectuses, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the "1934 Act Regulations") or the staff of the SEC has informed the Company that such requirements are waived, and, when read together with the other information in the Prospectuses, at the time the Registration Statement became effective, at the time the Prospectuses were issued and at the Closing Time (and, if any U.S. Option Securities are purchased, at the Date of Delivery), did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (iii) Independent Accountants. The accountants who certified the ----------------------- financial statements and supporting schedules included in the Registration Statement are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (iv) Financial Statements. The financial statements included in the -------------------- Registration Statement and the Prospectuses, together with the related schedules and notes, present fairly the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statement of operations, stockholders' equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; said financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included in the Registration Statement present fairly in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information included in the Prospectuses present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement. (v) No Material Adverse Change in Business. Since the respective -------------------------------------- dates as of which information is given in the Registration Statement and the Prospectuses, except as otherwise stated or incorporated by reference therein, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"), (B) there have been no transactions entered into by the Company or any of its 5 subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) except for regular quarterly dividends on the Common Stock and Series B Cumulative Convertible Exchangeable Preferred Stock in amounts per share that are consistent with past practice, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (vi) Good Standing of the Company. The Company has been duly ---------------------------- organized and is validly existing as a corporation in good standing under the laws of the State of Delaware and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and to enter into and perform its obligations under this Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect. (vii) Good Standing of Subsidiaries. Each "significant subsidiary" ----------------------------- of the Company (as such term is defined in Rule 1-02 of Regulation S-X) (each a "Subsidiary" and, collectively, the "Subsidiaries") has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; except as otherwise disclosed in the Registration Statement, all of the issued and outstanding capital stock of each such Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding shares of capital stock of any Subsidiary was issued in violation of the preemptive or similar rights of any securityholder of such Subsidiary. The only subsidiaries of the Company are (a) the subsidiaries listed on Schedule C hereto and (b) certain other subsidiaries which, considered in the aggregate as a single Subsidiary, do not constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X. (viii) Capitalization. The authorized, issued and outstanding -------------- capital stock of the Company is as set forth in the Prospectuses in the column entitled "Actual" under the caption "Capitalization" (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements or employee benefit plans referred to in the Prospectuses or pursuant to the exercise of convertible securities or options referred to in the Prospectuses). 6 The shares of issued and outstanding capital stock have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock was issued in violation of the preemptive or other similar rights of any securityholder of the Company. (ix) Authorization of Agreement. This Agreement and the -------------------------- International Purchase Agreement have been duly authorized, executed and delivered by the Company. (x) Authorization and Description of Securities. The Securities ------------------------------------------- to be purchased by the U.S. Underwriters and the International Managers from the Company have been duly authorized for issuance and sale to the U.S. Underwriters pursuant to this Agreement and the International Managers pursuant to the International Purchase Agreement, respectively, and, when issued and delivered by the Company pursuant to this Agreement and the International Purchase Agreement, respectively against payment of the consideration set forth herein and the International Purchase Agreement, respectively, will be validly issued and fully paid and non-assessable; the Common Stock conforms to all statements relating thereto contained in or incorporated by reference into the Prospectus and such description conforms to the rights set forth in the instruments defining the same; no holder of the Securities will be subject to personal liability by reason of being such a holder; and the issuance of the Securities is not subject to the preemptive or other similar rights of any securityholder of the Company. (xi) Absence of Defaults and Conflicts. Neither the Company nor --------------------------------- any of its subsidiaries is in violation of its charter or by-laws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any subsidiary is subject (collectively, "Agreements and Instruments") except for such defaults that would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement and the International Purchase Agreement and the consummation of the transactions contemplated in this Agreement, the International Purchase Agreement and in the Registration Statement (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described in the Prospectuses under the caption "Use of Proceeds") and compliance by the Company with its obligations under this Agreement and the International Purchase Agreement have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary pursuant to, the Agreements and Instruments (except for such conflicts, breaches or defaults or liens, 7 charges or encumbrances that would not result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any subsidiary or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any subsidiary or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition that gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any subsidiary. (xii) Absence of Labor Dispute. No labor dispute with the employees ------------------------ of the Company or any subsidiary exists or, to the knowledge of the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any subsidiary's principal suppliers, manufacturers, customers or contractors, which, in either case, may reasonably be expected to result in a Material Adverse Effect. (xiii) Absence of Proceedings. There is no action, suit, ---------------------- proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or affecting the Company or any subsidiary, which is required to be disclosed in the Registration Statement (other than as disclosed therein), or which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the properties or assets thereof or the consummation of the transactions contemplated in this Agreement and the International Purchase Agreement or the performance by the Company of its obligations hereunder or thereunder; the aggregate of all pending legal or governmental proceedings to which the Company or any subsidiary is a party or of which any of their respective property or assets is the subject which are not described in the Registration Statement, including ordinary routine litigation incidental to the business, could not reasonably be expected to result in a Material Adverse Effect. (xiv) Accuracy of Exhibits. There are no contracts or documents -------------------- that are required to be described in the Registration Statement, the Prospectuses or the documents incorporated by reference therein or to be filed as exhibits thereto which have not been so described and filed as required. 8 (xv) Possession of Intellectual Property. The Company and its ----------------------------------- subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Intellectual Property") necessary to carry on the business now operated by them, and neither the Company nor any of its subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances that would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect. (xvi) Absence of Further Requirements. No filing with, or ------------------------------- authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Company of its obligations hereunder, in connection with the offering, issuance or sale of the Securities under this Agreement and the International Purchase Agreements the consummation of the transactions contemplated by this Agreement and the International Purchase Agreement, except such as have been already obtained or as may be required under the 1933 Act or the 1933 Act Regulations or state securities laws. (xvii) Possession of Licenses and Permits. The Company and its ---------------------------------- subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. 9 (xviii) Title to Property. The Company and the Subsidiaries have ----------------- good and marketable title to all real property owned by the Company and the Subsidiaries and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (a) are described in the Prospectuses or (b) do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of the Subsidiaries; and all of the leases and subleases material to the business of the Company and the Subsidiaries, considered as one enterprise, and under which the Company or any of the Subsidiaries holds properties described in the Prospectuses, are in full force and effect, and neither the Company nor any Subsidiary has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any Subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such Subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease. (xix) Environmental Laws. Except as described in the Registration ------------------ Statement and except as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, "Environmental Laws"), (B) the Company and its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries and (D) there are no events or circumstances that might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company or any of its subsidiaries relating to Hazardous Materials or any Environmental Laws. (b) Officer's Certificates. Any certificate signed by any officer of the Company or any of its subsidiaries delivered to the Global Coordinator, the U.S. Representatives or to counsel for the 10 U.S. Underwriters shall be deemed a representation and warranty by the Company to each Underwriter as to the matters covered thereby. SECTION 2. Sale and Delivery to U.S. Underwriters; Closing. ----------------------------------------------- (a) Initial U.S. Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each U.S. Underwriter, severally and not jointly, and each U.S. Underwriter, severally and not jointly, agrees to purchase from the Company, at the price per share set forth in Schedule B, the number of Initial U.S. Securities set forth in Schedule A opposite the name of such U.S. Underwriter, plus any additional number of Initial U.S. Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof. (b) U.S. Option Securities. In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the U.S. Underwriters, severally and not jointly, to purchase up to an additional 360,000 shares of Common Stock at the price per share set forth in Schedule B, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial U.S. Securities but not payable on the U.S. Option Securities. The option hereby granted will expire 30 days after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments that may be made in connection with the offering and distribution of the Initial U.S. Securities upon notice by the Global Coordinator to the Company setting forth the number of U.S. Option Securities as to which the several U.S. Underwriters are then exercising the option and the time and date of payment and delivery for the U.S. Option Securities. Any such time and date of delivery for the U.S. Option Securities (a "Date of Delivery") shall be determined by the Global Coordinator, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined. If the option is exercised as to all or any portion of the U.S. Option Securities, each of the U.S. Underwriters, acting severally and not jointly, will purchase that proportion of the total number of U.S. Option Securities then being purchased which the number of Initial U.S. Securities set forth in Schedule A opposite the name of such Underwriter bears to the total number of Initial U.S. Securities, subject in each case to such adjustments as the Global Coordinator in its discretion shall make to eliminate any sales or purchases of fractional shares. (c) Payment. Payment of the purchase price for, and delivery of certificates for, the Initial Securities shall be made at the offices of Winston & Strawn, 35 W. Wacker Dr., Chicago, IL 60601, or at such other place as shall be agreed upon by the Global Coordinator and the Company, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten business days after such date as shall be agreed upon by the Global Coordinator and the Company (such time and date of payment and delivery being herein called "Closing Time"). 11 In addition, in the event that any or all of the U.S. Option Securities are purchased by the U.S. Underwriters, payment of the purchase price for, and delivery of certificates for, such U.S. Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Global Coordinator and the Company, on each Date of Delivery as specified in the notice from the Global Coordinator to the Company. Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company against delivery to the U.S. Representatives for the respective accounts of the U.S. Underwriters of certificates for the U.S. Securities to be purchased by them. It is understood that each U.S. Underwriter has authorized the U.S. Representatives, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial U.S. Securities and the U.S. Option Securities, if any, which it has agreed to purchase. Merrill Lynch, individually and not as representative of the U.S. Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial U.S. Securities or the U.S. Option Securities, if any, to be purchased by any U.S. Underwriter whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such U.S. Underwriter from its obligations hereunder. (d) Denominations; Registration. Certificates for the Initial U.S. Securities and the U.S. Option Securities, if any, shall be in such denominations and registered in such names as the U.S. Representatives may request in writing at least one full business day before the Closing Time or the relevant Date of Delivery, as the case may be. The certificates for the Initial U.S. Securities and the U.S. Option Securities, if any, will be made available for examination and packaging by the U.S. Representatives in The City of New York not later than 10:00 A.M. (Eastern time) on the business day prior to the Closing Time or the relevant Date of Delivery, as the case may be. SECTION 3. Covenants of the Company. The Company covenants with each ------------------------ U.S. Underwriter as follows: (a) Compliance with Securities Regulations and Commission Requests. The Company, subject to Section 3(b), will comply with the requirements of Rule 430A or Rule 434, as applicable, and will notify the Global Coordinator immediately, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective, or any supplement to the Prospectuses or any amended Prospectuses shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectuses or for additional information, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes. The Company will promptly effect the filings necessary pursuant to Rule 424(b) and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, 12 it will promptly file such prospectus. The Company will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (b) Filing of Amendments. The Company will give the Global Coordinator notice of its intention to file or prepare any amendment to the Registration Statement (including any filing under Rule 462(b)), any Term Sheet or any amendment, supplement or revision to either the prospectus included in the Registration Statement at the time it became effective or to the Prospectuses, whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the Global Coordinator with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the Global Coordinator or counsel for the U.S. Underwriters shall object. (c) Delivery of Registration Statements. The Company has furnished or will deliver to Merrill Lynch and counsel for Merrill Lynch, without charge, signed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated or deemed to be incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also deliver to the U.S. Representatives, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the U.S. Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the U.S. Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (d) Delivery of Prospectuses. The Company has delivered to each U.S. Underwriter, without charge, as many copies of each preliminary prospectus as such U.S. Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to each U.S. Underwriter, without charge, during the period when the U.S. Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of the U.S. Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The U.S. Prospectus and any amendments or supplements thereto furnished to the U.S. Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (e) Continued Compliance with Securities Laws. The Company will comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement, the International Purchase Agreement and in the Prospectuses. If at any time when a prospectus is required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the U.S. Underwriters or for the Company, to amend the Registration Statement or amend or supplement 13 any Prospectus in order that the Prospectuses will not include any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any such time to amend the Registration Statement or amend or supplement any Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and file with the Commission, subject to Section 3(b), such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectuses comply with such requirements, and the Company will furnish to the U.S. Underwriters such number of copies of such amendment or supplement as the U.S. Underwriters may reasonably request. (f) Blue Sky Qualifications. The Company will use its best efforts, in cooperation with the U.S. Underwriters, to qualify the U.S. Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Global Coordinator may designate and to maintain such qualifications in effect for a period of not less than one year from the later of the effective date of the Registration Statement and any Rule 462(b) Registration Statement; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. In each jurisdiction in which the Securities have been so qualified, the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for a period of not less than one year from the effective date of the Registration Statement and any Rule 462(b) Registration Statement. (g) Rule 158. The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to provide the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act. (h) Use of Proceeds. The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the Prospectuses under "Use of Proceeds". (i) Listing. The Company will use its best efforts to effect the listing of the Securities on the New York Stock Exchange. (j) Restriction on Sale of Securities. During a period of 90 days from the date of the Prospectuses, the Company will not, without the prior written consent of the Global Coordinator, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any share of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any 14 transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Securities to be sold hereunder or under the International Purchase Agreement, any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and referred to in the Prospectuses, (C) any shares of Common Stock issued or options to purchase Common Stock granted pursuant to existing employee benefit plans of the Company referred to in the Prospectuses, (D) any shares of Common Stock issued pursuant to any non-employee director stock plan or dividend reinvestment plan, (E) up to 440,000 shares of Common Stock issued in connection with any acquisition of complementary products, technologies or businesses, or (F) any registration statement that the Company is contractually obligated to file relating to the resale of up to 200,000 shares of Common Stock and 352,000 shares of Series B 6% Cumulative Convertible Exchangeable Preferred Stock of the Company distributed by Fruehauf to creditors pursuant to a plan of reorganization. (k) Reporting Requirements. The Company, during the period when the Prospectuses required to be delivered under the 1933 Act or the 1934 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations. SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay all ------------------- expenses incident to the performance of its obligations under this Agreement, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of this Agreement, any Agreement among Underwriters and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Securities, (iii) the preparation, issuance and delivery of the certificates for the Securities to the Underwriters, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Securities to the Underwriters and the transfer of the Securities between the U.S. Underwriters and the International Managers, (iv) the fees and disbursements of the Company's counsel, accountants and other advisors, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(f) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing and delivery to the Underwriters of copies of each preliminary prospectus, any Term Sheets and of the Prospectuses and any amendments or supplements thereto, (vii) the preparation, printing and delivery to the Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii) the fees and expenses of any transfer agent or registrar for the Securities, the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by the National Associate of Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Securities and (ix) the fees and expenses incurred in connection with the listing of the Securities on the New York Stock Exchange. 15 (b) Termination of Agreement. If this Agreement is terminated by the U.S. Representatives in accordance with the provisions of Section 5, Section 9(a)(i) or Section 11 hereof, the Company shall reimburse the U.S. Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the U.S. Underwriters. SECTION 5. Conditions of U.S. Underwriters' Obligations. The -------------------------------------------- obligations of the several U.S. Underwriters hereunder are subject to the accuracy of the representations and warranties of the Company contained in Section 1 hereof or in certificates of any officer of the Company or any subsidiary of the Company delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions: (a) Effectiveness of Registration Statement. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and at Closing Time no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the U.S. Underwriters. A prospectus containing the Rule 430A Information shall have been filed with the Commission in accordance with Rule 424(b) (or a post- effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434, a Term Sheet shall have been filed with the Commission in accordance with Rule 424(b). (b) Opinion of Counsel for Company. At Closing Time, the U.S. Representatives shall have received the favorable opinion, dated as of Closing Time, of Hogan & Hartson L.L.P., counsel for the Company, in form and substance satisfactory to counsel for the U.S. Underwriters, together with signed or reproduced copies of such letter for each of the other U.S. Underwriters to the effect set forth in Exhibit A hereto and to such further effect as counsel to the U.S. Underwriters may reasonably request. (c) Opinion of Counsel for U.S. Underwriters. At Closing Time, the U.S. Representatives shall have received the favorable opinion, dated as of Closing Time, of Winston & Strawn, counsel for the U.S. Underwriters, together with signed or reproduced copies of such letter for each of the other U.S. Underwriters with respect to the matters set forth in Exhibit B hereto. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the States of Illinois and New York, the federal law of the United States and the General Corporation Law of the State of Delaware, upon the opinions of counsel satisfactory to the U.S. Representatives. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and its subsidiaries and certificates of public officials. 16 (d) Officers' Certificate. At Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Prospectuses, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and the U.S. Representatives shall have received a certificate of the President of the Company and of the chief financial or chief accounting officer of the Company, dated as of Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties in Section 1(a) hereof are true and correct with the same force and effect as though expressly made at and as of Closing Time, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or are contemplated by the Commission. (e) Accountant's Comfort Letter. At the time of the execution of this Agreement, the U.S. Representatives shall have received from Arthur Andersen LLP a letter dated such date, in form and substance satisfactory to the U.S. Representatives, together with signed or reproduced copies of such letter for each of the other U.S. Underwriters containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectuses. (f) Bring-down Comfort Letter. At Closing Time, the U.S. Representatives shall have received from Arthur Andersen LLP a letter, dated as of Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than three business days prior to Closing Time. (g) Approval of Listing. At Closing Time, the Securities shall have been approved for listing on the New York Stock Exchange, subject only to official notice of issuance. (h) No Objection. The NASD has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements. (i) Lock-up Agreements. At the date of this Agreement, the U.S. Representatives shall have received an agreement substantially in the form of Exhibit C hereto or as otherwise agreed to by counsel for the U.S. Representatives signed by the persons listed on Schedule D hereto. 17 (j) Purchase of Initial International Securities. Contemporaneous with the purchase by the U.S. Underwriters of the Initial U.S. Securities under this Agreement, the International Managers shall have purchased the Initial International Securities under the International Purchase Agreement. (k) Conditions to Purchase of U.S. Option Securities. In the event that the U.S. Underwriters exercise their option provided in Section 2(b) hereof to purchase all or any portion of the U.S. Option Securities, the representations and warranties of the Company contained herein and the statements in any certificates furnished by the Company and any subsidiary of the Company hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the U.S. Representatives shall have received: (i) Officers' Certificate. A certificate, dated such Date of --------------------- Delivery, of the President of the Company and of the chief financial or chief accounting officer of the Company confirming that the certificate delivered at the Closing Time pursuant to Section 5(d) hereof remains true and correct as of such Date of Delivery. (ii) Opinion of Counsel for Company. The favorable opinion of ------------------------------ Hogan & Hartson L.L.P., counsel for the Company, in form and substance satisfactory to counsel for the U.S. Underwriters, dated such Date of Delivery, relating to the U.S. Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(b) hereof. (iii) Opinion of Counsel for U.S. Underwriters. The favorable ---------------------------------------- opinion of Winston & Strawn, counsel for the U.S. Underwriters, dated such Date of Delivery, relating to the U.S. Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(c) hereof. (iv) Bring-down Comfort Letter. A letter from Arthur Andersen LLP, ------------------------- in form and substance satisfactory to the U.S. Representatives and dated such Date of Delivery, substantially in the same form and substance as the letter furnished to the U.S. Representatives pursuant to Section 5(f) hereof, except that the "specified date" in the letter furnished pursuant to this paragraph shall be a date not more than five days prior to such Date of Delivery. (l) Additional Documents. At Closing Time and at each Date of Delivery counsel for the U.S. Underwriters shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and 18 sale of the Securities as herein contemplated shall be satisfactory in form and substance to the U.S. Representatives and counsel for the U.S. Underwriters. (m) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of U.S. Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several U.S. Underwriters to purchase the relevant U.S. Option Securities, may be terminated by the U.S. Representatives by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such termination and remain in full force and effect. SECTION 6. Indemnification. (a) Indemnification of U.S. Underwriters. (1) The Company agrees to indemnify and hold harmless each U.S. Underwriter and each person, if any, who controls any U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus or the Prospectuses (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; 19 provided, however, that this indemnity agreement shall not apply to any loss, - -------- ------- liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any U.S. Underwriter through the U.S. Representatives expressly for use in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary prospectus or the U.S. Prospectus (or any amendment or supplement thereto). (b) Indemnification of Company, Directors and Officers. Each U.S. Underwriter severally agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary U.S. Prospectus or the U.S. Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such U.S. Underwriter through the U.S. Representatives expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the U.S. Prospectus (or any amendment or supplement thereto). (c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include 20 a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. SECTION 7. Contribution. If the indemnification provided for in ------------ Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the U.S. Underwriters on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the U.S. Underwriters on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the U.S. Underwriters on the other hand in connection with the offering of the U.S. Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the U.S. Securities pursuant to this Agreement (before deducting expenses) received by the Company and the total underwriting discount received by the U.S. Underwriters, in each case as set forth on the cover of the U.S. Prospectus, or, if Rule 434 is used, the corresponding location on the Term Sheet bear to the aggregate initial public offering price of the U.S. Securities as set forth on such cover. The relative fault of the Company on the one hand and the U.S. Underwriters on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the U.S. Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the U.S. Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the U.S. 21 Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 7, no U.S. Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the U.S. Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such U.S. Underwriter has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person, if any, who controls a U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such U.S. Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The U.S. Underwriters' respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial U.S. Securities set forth opposite their respective names in Schedule A hereto and not joint. SECTION 8. Representations, Warranties and Agreements to Survive ----------------------------------------------------- Delivery. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company or any of its subsidiaries submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any U.S. Underwriter or controlling person, or by or on behalf of the Company or controlling person, and shall survive delivery of the Securities to the U.S. Underwriters. SECTION 9. Termination of Agreement. ------------------------ (a) Termination; General. The U.S. Representatives may terminate this Agreement, by notice to the Company, at any time at or prior to Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the U.S. Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred 22 any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the U.S. Representatives, impracticable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the New York Stock Exchange, or if trading generally on the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority, or (iv) if a banking moratorium has been declared by either Federal or New York authorities. (b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6, 7 and 8 shall survive such termination and remain in full force and effect. SECTION 10. Default by One or More of the U.S. Underwriters. If one or ----------------------------------------------- more of the U.S. Underwriters shall fail at Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the "Defaulted Securities"), the U.S. Representatives shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting U.S. Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the U.S. Representatives shall not have completed such arrangements within such 24-hour period, then: (a) if the number of Defaulted Securities does not exceed 10% of the number of U.S. Securities to be purchased on such date, each of the non- defaulting U.S. Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting U.S. Underwriters, or (b) if the number of Defaulted Securities exceeds 10% of the number of U.S. Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the U.S. Underwriters to purchase and of the Company to sell the U.S. Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of any non- defaulting Underwriter. No action taken pursuant to this Section shall relieve any defaulting U.S. Underwriter from liability in respect of its default. 23 In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the U.S. Underwriters to purchase and the Company to sell the relevant U.S. Option Securities, as the case may be, either the U.S. Representatives or the Company shall have the right to postpone Closing Time or the relevant Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration Statement or Prospectus or in any other documents or arrangements. As used herein, the term "U.S. Underwriter" includes any person substituted for a U.S. Underwriter under this Section 10. SECTION 11. Default by the Company. If the Company shall fail at ----------------------- Closing Time or at the Date of Delivery to sell the number of Securities that it is obligated to sell hereunder, then this Agreement shall terminate without any liability on the part of any non-defaulting party; provided, however, that the provisions of Sections 1, 4, 6, 7 and 8 shall remain in full force and effect. No action taken pursuant to this Section shall relieve the Company from liability, if any, in respect of such default. SECTION 12. Notices. All notices and other communications hereunder shall ------- be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the U.S. Underwriters shall be directed to the U.S. Representatives at North Tower, World Financial Center, New York, New York 10281-1201, attention of [ ]; notices to the Company shall be directed to it at 1000 Sagamore Parkway South, Lafayette, Indiana 47905, attention of Donald J. Ehrlich. SECTION 13. Parties. This Agreement shall each inure to the benefit of ------- and be binding upon the U.S. Underwriters, the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the U.S. Underwriters, the Company and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the U.S. Underwriters and the Company and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any U.S. Underwriters shall be deemed to be a successor by reason merely of such purchase. SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY ---------------------- AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. SECTION 15. Effect of Headings. The Article and Section headings herein ------------------ and the Table of Contents are for convenience only and shall not affect the construction hereof. 24 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the U.S. Underwriters and the Company in accordance with its terms. Very truly yours, WABASH NATIONAL CORPORATION By ------------------------- Title: CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED BY ALEX. BROWN INCORPORATED ROBERT W. BAIRD & CO. INCORPORATED MORGAN KEEGAN & COMPANY, INC. By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By -------------------------------- Authorized Signatory For itself and as U.S. Representatives of the other U.S. Underwriters named in Schedule A hereto. 25 SCHEDULE A Name of Underwriter Number of - ------------------- Initial Securities ---------- Merrill Lynch, Pierce, Fenner & Smith Incorporated BT Alex. Brown Incorporated Robert W. Baird & Co. Incorporated Morgan Keegan & Company, Inc. ---------- Total ............................................................. ========== Sch A - 1 1 SCHEDULE B WABASH NATIONAL CORPORATION 2,400,000 Shares of Common Stock (Par Value $0.01 Per Share) 1. The initial public offering price per share for the Securities, determined as provided in said Section 2, shall be $____. 2. The purchase price per share for the U.S. Securities to be paid by the several U.S. Underwriters shall be $[ ], being an amount equal to the initial public offering price set forth above less $[ ] per share; provided that the purchase price per share for any U.S. Option Securities purchased upon the exercise of the over-allotment option described in Section 2(b) shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial U.S. Securities but not payable on the U.S. Option Securities. Sch B - 1 1 SCHEDULE C List of subsidiaries Wabash National Finance Corporation Freuhauf Trailer Services, Inc. Sch C - 1 1 SCHEDULE D List of persons and entities subject to lock-up Fruehauf Trailer Corporation Donald J. Ehrlich Richard E. Dessimoz Mark R. Holden Sch D - 1 1 Exhibit A FORM OF OPINION OF COMPANY'S COUNSEL TO BE DELIVERED PURSUANT TO SECTION 5(b) (i) Each of the Company and each subsidiary listed on Schedule I hereto (each a "Subsidiary" and collectively the "Subsidiaries") was incorporated, and is validly existing and in good standing under the laws of the State of Delaware. (ii) The Company and each Subsidiary has corporate power and corporate authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and the Company has corporate power and corporate authority to enter into and perform its obligations under the U.S. Purchase Agreement and the International Purchase Agreement (collectively the "Purchase Agreements"). (iii) The Company and each Subsidiary is authorized to transact business as a foreign corporation under the laws of each State, and as of the respective dates of the certificates, specified in Schedule I hereto. (iv) The authorized, issued and outstanding capital stock of the Company, as of December 31, 1997, was set forth under the captions "Capitalization" in the Prospectuses. All shares of capital stock of the Company shown as issued and outstanding under said captions are duly authorized and, assuming the receipt of consideration therefor as provided in resolutions of the Company's Board of Directors, are validly issued, fully paid and non-assessable. None of the outstanding shares of Common Stock of the Company was issued in violation of any statutory preemptive right under the DGCL or to our knowledge, any contractual right of any security holder of the Company to subscribe for any shares of Common Stock. (v) When issued in accordance with the provisions of the Purchase Agreements and, based upon certificates of the officers of the Company as to receipt of consideration therefor, the shares of Common Stock issued pursuant to the terms of the Purchase Agreements (the "Securities") will be validly issued, fully paid and non-assessable. A - 1 (vi) No holder of outstanding common stock of the Company has any statutory preemptive right under DGCL or, to our knowledge, any contractual right to subscribe for any of the Securities. (vii) Each of the Purchase Agreements has been duly authorized, executed and delivered by or on behalf of the Company. (viii) The Registration Statement has been declared effective under the 1933 Act; any required filing of the Prospectuses pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); and, to our knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are threatened by the Commission. (ix) The Registration Statement and the Prospectuses as of their respective effective or issue dates (other than the financial statements and supporting schedules included therein or omitted therefrom, as to which we need express no opinion) complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. (x) The documents incorporated by reference into the Prospectuses (other than the financial statements and supporting schedules included therein or omitted therefrom, as to which we express no opinion), when they were filed with the Commission or became effective, as the case may be, complied as to form in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder. (xi) The form of certificate used to evidence the Securities complies in all material respects with any applicable requirements of DGCL, the charter and bylaws of the Company and the New York Stock Exchange, Inc. (xii) The information in the International Prospectus under the caption "Certain United States Taxation of Foreign Shareholders" to the extent that it constitutes matters of law has been reviewed by us and is correct in all material respects. (xiii) No consent, approval, authorization, order, registration or qualification of or with any Delaware or Federal court or governmental agency or body having jurisdiction over the Company or the Subsidiaries is required to be made or obtained by the Company for the issuance and sale of the Securities or the consummation by the Company of the transactions contemplated by the Purchase Agreements as of the date hereof, except such as have been obtained under the 1933 Act and the 1934 Act. (xiv) The issuance and sale of the Securities being delivered under the Purchase Agreements and the execution and delivery by the Company of the Purchase Agreements as of the date hereof and the consummation by the Company as of the date hereof of the transactions therein contemplated do not (i) conflict with or result in a breach or violation of any of the provisions of, or constitute a default under, any of the terms or provisions of any agreement filed as an exhibit to the Registration Statement or a document incorporated by reference therein, or (ii) violate the provisions of the charter or bylaws of the Company or the Subsidiaries or, any statute, order, rule or regulation known to us of any Delaware or Federal court or governmental agency or body having jurisdiction over the Company or the Subsidiaries. The foregoing opinion shall not be deemed to address any federal securities law matters specifically addressed elsewhere in this opinion letter. * * * * * Based solely upon an officer's certificate and our review of the firm's litigation docket, we hereby confirm that, to our knowledge, there are no legal or governmental proceedings pending or threatened, except as set forth in the Prospectuses, in which the Company or its Subsidiaries is a named party or of which any property of the Company or its Subsidiaries is the subject which, if determined adversely to the Company, could reasonably be expected individually or in the aggregate to have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries. During the course of the preparation of the Registration Statement, we participated in conferences with officers and other representatives of the Company, with representatives of the independent pubic accountants of the Company and with you and your representatives. While we have not undertaken to determine independently, and we do not assume any responsibility for, the accuracy, completeness, or fairness of the statements in the Registration Statement or the Prospectuses, we may state on the basis of these conferences and our activities as counsel to the Company in connection with the Registration Statement that no facts have come to our attention which cause us to believe that (i) the Registration Statement, at the time it became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectuses, as of the date hereof, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, (ii) there are any legal or governmental proceedings pending or threatened against the Company that are required to be disclosed in the Registration Statement or the Prospectuses, other than those disclosed therein, or (iii) there are any contracts or documents to which the Company is a party of a character required to be described in the Registration Statement or the Prospectuses or to be filed as exhibits to the Registration Statement that are not described or A - 3 referred to therein or so filed; provided that in making the foregoing -------- ---- statements (which shall not constitute an opinion), we are not expressing any views as to the financial statements and supporting schedules and other financial information and data included in or omitted from the Registration Statement or the Prospectuses. A - 4 SCHEDULE I Subsidiary Certificate Date Jurisdiction - ---------- ---------------- ------------ Fruehauf Trailer [ ] [ ] Services Corporation Wabash Finance Company Sch I - 1 Exhibit B FORM OF OPINION OF UNDERWRITERS COUNSEL TO BE DELIVERED PURSUANT TO SECTION 5(c) (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the state of Delaware. (ii) The Company has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and to enter into and perform its obligations under the U.S. Purchase Agreement and the International Purchase Agreement. (iii) The Securities to be purchased by the U.S. Underwriters and the International Managers from the Company have been duly authorized for issuance and sale to the U.S. Underwriters and International Managers pursuant to the U.S. Purchase Agreement and the International Purchase Agreement, respectively, and, when issued and delivered by the Company pursuant to the U.S. Purchase Agreement and the International Purchase Agreement respectively, against payment of the consideration set forth in the U.S. Purchase Agreement and the International Purchase Agreement, will be validly issued and fully paid and non- assessable and no holder of the Securities is or will be subject to personal liability by reason of being such a holder. (iv) The issuance and sale of the Securities by the Company is not subject to the preemptive or other similar rights of any securityholder of the Company arising by operation of law or under the charter or by-laws of the Company. B - 1 (v) Each Subsidiary has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; except as otherwise disclosed in the Registration Statement, all of the issued and outstanding capital stock of each Subsidiary has been duly authorized and validly issued, is fully paid and non- assessable and, to the best of our knowledge, is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding shares of capital stock of any Subsidiary was issued in violation of the preemptive or similar rights of any securityholder of such Subsidiary. (vi) The U.S. Purchase Agreement and the International Purchase Agreement have been duly authorized, executed and delivered by the Company. (vii) The Registration Statement, including any Rule 462(b) Registration Statement, has been declared effective under the 1933 Act; any required filing of the Prospectuses pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); and, to the best of our knowledge, no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or threatened by the Commission. (viii) The Registration Statement, including any Rule 462(b) Registration Statement, the Rule 430A Information and the Rule 434 Information, as applicable, the Prospectuses, excluding the documents incorporated by reference therein, and each amendment or supplement to the Registration Statement and the Prospectuses, excluding the documents incorporated by reference therein, as of their respective effective or issue dates (other than the financial statements and supporting schedules included therein or omitted therefrom, as to which we need express no opinion) complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. (ix) The form of certificate used to evidence the Common Stock complies in all material respects with all applicable statutory requirements, with any applicable requirements of the charter and by-laws of the Company and the requirements of the New York Stock Exchange. B - 2 2 Nothing has come to our attention that would lead us to believe that the Registration Statement or any amendment thereto, including the Rule 430A Information and Rule 434 Information (if applicable), (except for financial statements and schedules and other financial data included or incorporated by reference therein or omitted therefrom, as to which we need make no statement), at the time such Registration Statement or any such amendment became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectuses or any amendment or supplement thereto (except for financial statements and schedules and other financial data included or incorporated by reference therein or omitted therefrom, as to which we need make no statement), at the time the Prospectuses were issued, at the time any such amended or supplemented prospectus was issued or at the Closing Time, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. In rendering such opinion, such counsel may rely as to matters of fact (but not as to legal conclusions), to the extent they deem proper, on certificates of responsible officers of the Company and public officials. Such opinion shall not state that it is to be governed or qualified by, or that it is otherwise subject to, any treatise, written policy or other document relating to legal opinions, including, without limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991). B - 3 3 [FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER STOCKHOLDERS] _________, 1998 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated, BT ALEX. BROWN INCORPORATED ROBERT W. BAIRD & CO. INCORPORATED MORGAN KEEGAN & COMPANY, INC. as U.S. Representatives of the several U.S. Underwriters to be named in the U.S. Purchase Agreement c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Re: Proposed Public Offering by Wabash National Corporation Dear Sirs: The undersigned, a stockholder [and an officer and/or director] of Wabash National Corporation, a Delaware corporation (the "Company"), understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), BT Alex. Brown Incorporated, Robert W. Baird & Co. Incorporated and Morgan Keegan & Company, Inc. propose to enter into a U.S. Purchase Agreement (the "U.S. Purchase Agreement") with the Company providing for the public offering of shares (the "Securities") of the Company's common stock, par value $.01 per share (the "Common Stock"). In recognition of the benefit that such an offering will confer upon the undersigned as a stockholder [and an officer and/or director] of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with each underwriter to be named in the U.S. Purchase Agreement that, during a period of ___ days from the date of the U.S. Purchase Agreement, the undersigned will not, without the prior written consent of Merrill Lynch, directly or indirectly, A -5 (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any shares of the Company's Common Stock or any securities convertible into or exchangeable or exercisable for Common Stock, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition, or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise. Very truly yours, Signature:________________ Print Name:_______________ A - 6 EX-1.02 3 PROPOSED FORM OF INTERNATIONAL PURCHASE AGREEMENT EXHIBIT 1.01 April 20, 1998 ================================================================================ WABASH NATIONAL CORPORATION (a Delaware corporation) 600,000 Shares of Common Stock INTERNATIONAL PURCHASE AGREEMENT Dated: April [__], 1998 ================================================================================ April 20, 1998 WABASH NATIONAL CORPORATION a Delaware corporation 600,000 Shares of Common Stock (Par Value $.01 Per Share) INTERNATIONAL PURCHASE AGREEMENT -------------------------------- April [ ], 1998 MERRILL LYNCH INTERNATIONAL BT ALEX. BROWN INTERNATIONAL ROBERT W. BAIRD & CO. INCORPORATED MORGAN KEEGAN & COMPANY, INC. as Lead Managers c/o Merrill Lynch International Ropemaker Place 25 Ropemaker Street London EC2Y 9LY England Ladies and Gentlemen: Wabash National Corporation, a Delaware corporation (the "Company") confirms its agreements with Merrill Lynch International ("Merrill Lynch") and each of BT Alex. Brown International, Robert W. Baird & Co. Incorporated and Morgan Keegan & Company, Inc. (collectively, the "Lead Managers" or "International Managers", which terms shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), with respect to (i) the sale by the Company and the purchase by the International Managers, acting severally and not jointly, of the respective numbers of shares of Common Stock, par value $.01 per share, of the Company ("Common Stock") set forth in Schedule A hereto and (ii) the grant by the Company to the International Managers, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of 90,000 additional shares of Common Stock to cover over-allotments, if any. The aforesaid 600,000 shares of Common Stock (the "Initial International Securities") to be purchased by the International Managers and all or any part of the 90,000 shares of Common Stock subject to the option described in Section 2(b) hereof (the "International Option Securities") are hereinafter called, collectively, the "International Securities". It is understood that the Company is concurrently entering into an agreement dated the date hereof (the "U.S. Purchase Agreement") providing for the offering by the Company of an aggregate of 2,400,000 shares of Common Stock (the "Initial U.S. Securities") through arrangements with certain underwriters in the United States and Canada (the "U.S. Underwriters") for which Merrill Lynch, Pierce, Fenner & Smith Incorporated, BT Alex. Brown Incorporated, Robert W. Baird & Co. Incorporated and Morgan Keegan & Company, Inc. are acting as representatives (the "U.S. Representatives") and the grant by the Company to the U.S. Underwriters, acting severally and not jointly, of an option to purchase all or any part of the U.S. Underwriters' pro rata portion of up to 360,000 additional shares of Common Stock solely to cover overallotments, if any (the "U.S. Option Securities" and, together with the International Option Securities, the "Option Securities"). The Initial U.S. Securities and the U.S. Option Securities are hereinafter called the "U.S. Securities". It is understood that the Company is not obligated to sell and the International Managers are not obligated to purchase, any Initial International Securities unless all of the Initial U.S. Securities are contemporaneously purchased by the U.S. Underwriters. The International Managers and the U.S. Underwriters are hereinafter collectively called the "Underwriters", the Initial International Securities and the Initial U.S. Securities are hereinafter collectively called the "Initial Securities", and the U.S. Securities and the International Securities are hereinafter collectively called the "Securities". The Underwriters will concurrently enter into an Intersyndicate Agreement of even date herewith (the "Intersyndicate Agreement") providing for the coordination of certain transactions among the Underwriters under the direction of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (in such capacity, the "Global Coordinator"). The Company understands that the International Managers propose to make a public offering of the International Securities as soon as the Lead Managers deem advisable after this Agreement has been executed and delivered. The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No. 333-48589) covering the registration of the Securities under the Securities Act of 1933, as amended (the "1933 Act"), including the related preliminary prospectus or prospectuses. Promptly after execution and delivery of this Agreement, the Company will either (i) prepare and file a prospectus in accordance with the provisions of Rule 430A ("Rule 430A") of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). Two forms of prospectus are to be used in connection with the offering and sale of the Securities: one relating to the International Securities (the "Form of U.S. Prospectus") and one relating to the International Securities (the "Form of International Prospectus"). The Form of International Prospectus is identical to the Form of U.S. Prospectus, except for the front cover, inside 2 front cover and back cover pages, the information under the caption "Underwriting" and the inclusion in the Form of International Prospectus of a section under the caption "Certain United States Tax Considerations for Non- United States Holders." The information included in any such prospectus or in any such Term Sheet, as the case may be, that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information." Each Form of U.S. Prospectus and Form of International Prospectus used before such registration statement became effective, and any prospectus that omitted, as applicable, the Rule 430A Information or the Rule 434 Information, that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a "preliminary prospectus." Such registration statement, including the exhibits thereto, schedules thereto, if any, and the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it became effective and including the Rule 430A Information and the Rule 434 Information, as applicable, is herein called the "Registration Statement." Any registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b) Registration Statement," and after such filing the term "Registration Statement" shall include the Rule 462(b) Registration Statement. The final Form of U.S. Prospectus and Form of International Prospectus, including the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the forms first furnished to the International Managers for use in connection with the offering of the Securities are herein called the "U.S. Prospectus" and the "International Prospectus" respectively, and collectively, the "Prospectuses." If Rule 434 is relied on, the terms "U.S. Prospectus and International Prospectus" shall refer to the preliminary U.S. Prospectus dated March 30, 1998 and preliminary International Prospectus dated March 30, 1998 each together with the applicable Term Sheet and all references in this Agreement to the date of such Prospectus shall mean the date of the Term Sheet. For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the U.S. Prospectus, the International Prospectus or any Term Sheet or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Registration Statement, any preliminary prospectus (including the Form of U.S. Prospectus and Form of International Prospectus) or the Prospectuses (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is incorporated by reference in the Registration Statement, any preliminary prospectus (including the Form of U.S. Prospectus and Form of International Prospectus) or the Prospectuses, as the case may be; and all references in this Agreement to amendments or supplements to the Registration Statement, any preliminary prospectus or the Prospectuses shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934 (the "1934 Act") which is incorporated by reference in the Registration Statement, such preliminary prospectus or the Prospectuses, as the case may be. 3 SECTION 1 Representations and Warranties. ------------------------------ (a) Representations and Warranties by the Company. The Company represents and warrants to each Underwriter as of the date hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees with each Underwriter, as follows: (i) Compliance with Registration Requirements. The Company has been ----------------------------------------- advised by the staff of the SEC that it meets the requirements for use of Form S-3 under the 1933 Act. Each of the Registration Statement and any Rule 462(b) Registration Statement has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. At the respective times the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendments thereto became effective and at the Closing Time (and, if any International Option Securities are purchased, at the Date of Delivery), the Registration Statement, the Rule 462(b) Registration Statement and any amendments and supplements thereto complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Neither of the Prospectuses nor any amendments or supplements thereto, at the time the Prospectuses or any such amendments or supplements thereto were issued at the Closing Time (and, if any International Option Securities are purchased, at the Date of Delivery), included or will include an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If Rule 434 is used, the Company will comply with the requirements of Rule 434. The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or the International Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by any International Manager through the Lead Managers expressly for use in the Registration Statement or the International Prospectus. Each preliminary prospectus and the prospectuses filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so filed in all material respects with the 1933 Act Regulations and each preliminary prospectus and the Prospectuses delivered to the International Managers for use in connection with this offering was identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. 4 (ii) Independent Accountants. The accountants who certified the ----------------------- financial statements and supporting schedules included in the Registration Statement are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (iii) Financial Statements. The financial statements included in the -------------------- Registration Statement and the Prospectuses, together with the related schedules and notes, present fairly the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statement of operations, stockholders' equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; said financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included in the Registration Statement present fairly in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information included in the Prospectuses present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement. (iv) No Material Adverse Change in Business. Since the respective -------------------------------------- dates as of which information is given in the Registration Statement and the Prospectuses, except as otherwise stated or incorporated by reference therein, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) except for regular quarterly dividends on the Common Stock and Series B Cumulative Convertible Exchangeable Preferred Stock in amounts per share that are consistent with past practice, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (v) Good Standing of the Company. The Company has been duly ---------------------------- organized and is validly existing as a corporation in good standing under the laws of the State of Delaware and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and to enter into and perform its obligations under this Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect. (vii) Good Standing of Subsidiaries. Each "significant subsidiary" ----------------------------- of the Company (as such term is defined in Rule 1-02 of Regulation S-X) (each a "Subsidiary" and, 5 collectively, the "Subsidiaries") has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; except as otherwise disclosed in the Registration Statement, all of the issued and outstanding capital stock of each such Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding shares of capital stock of any Subsidiary was issued in violation of the preemptive or similar rights of any securityholder of such Subsidiary. The only subsidiaries of the Company are (a) the subsidiaries listed on Schedule C hereto and (b) certain other subsidiaries which, considered in the aggregate as a single Subsidiary, do not constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X. (viii) Capitalization. The authorized, issued and outstanding -------------- capital stock of the Company is as set forth in the Prospectuses in the column entitled "Actual" under the caption "Capitalization" (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements or employee benefit plans referred to in the Prospectuses or pursuant to the exercise of convertible securities or options referred to in the Prospectuses). The shares of issued and outstanding capital stock have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock was issued in violation of the preemptive or other similar rights of any securityholder of the Company. (ix) Authorization of Agreement. This Agreement and the U.S. -------------------------- Purchase Agreement have been duly authorized, executed and delivered by the Company. (x) Authorization and Description of Securities. The Securities to ------------------------------------------- be purchased by the International Managers and the U.S. Underwriters from the Company have been duly authorized for issuance and sale to the International Managers pursuant to this Agreement and the U.S. Underwriters pursuant to the U.S. Purchase Agreement, respectively, and, when issued and delivered by the Company pursuant to this Agreement and the U.S. Purchase Agreement, respectively against payment of the consideration set forth herein and the U.S. Purchase Agreement, respectively, will be validly issued and fully paid and non-assessable; the Common Stock conforms to all statements relating thereto contained in or incorporated by reference into the Prospectus and such description conforms to the rights set forth in the instruments defining the same; no holder of the Securities will be subject to personal liability 6 by reason of being such a holder; and the issuance of the Securities is not subject to the preemptive or other similar rights of any securityholder of the Company. (xi) Absence of Defaults and Conflicts. Neither the Company nor any --------------------------------- of its subsidiaries is in violation of its charter or by-laws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any subsidiary is subject (collectively, "Agreements and Instruments") except for such defaults that would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement and the U.S. Purchase Agreement and the consummation of the transactions contemplated in this Agreement, the U.S. Purchase Agreement and in the Registration Statement (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described in the Prospectuses under the caption "Use of Proceeds") and compliance by the Company with its obligations under this Agreement and the U.S. Purchase Agreement have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary pursuant to, the Agreements and Instruments (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any subsidiary or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any subsidiary or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition that gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any subsidiary. (xii) Absence of Labor Dispute. No labor dispute with the employees ------------------------ of the Company or any subsidiary exists or, to the knowledge of the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any subsidiary's principal suppliers, manufacturers, customers or contractors, which, in either case, may reasonably be expected to result in a Material Adverse Effect. (xiii) Absence of Proceedings. There is no action, suit, ---------------------- proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or affecting the Company or any subsidiary, which is required to be disclosed in the Registration Statement (other than as disclosed therein), or which might reasonably be expected to result 7 in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the properties or assets thereof or the consummation of the transactions contemplated in this Agreement and the U.S. Purchase Agreement or the performance by the Company of its obligations hereunder or thereunder; the aggregate of all pending legal or governmental proceedings to which the Company or any subsidiary is a party or of which any of their respective property or assets is the subject which are not described in the Registration Statement, including ordinary routine litigation incidental to the business, could not reasonably be expected to result in a Material Adverse Effect. (xiv) Accuracy of Exhibits. There are no contracts or documents -------------------- that are required to be described in the Registration Statement, the Prospectuses or the documents incorporated by reference therein or to be filed as exhibits thereto which have not been so described and filed as required. (xv) Possession of Intellectual Property. The Company and its ----------------------------------- subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Intellectual Property") necessary to carry on the business now operated by them, and neither the Company nor any of its subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances that would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect. (xvi) Absence of Further Requirements. No filing with, or ------------------------------- authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Company of its obligations hereunder, in connection with the offering, issuance or sale of the Securities under this Agreement and the U.S. Purchase Agreements the consummation of the transactions contemplated by this Agreement and the U.S. Purchase Agreement, except such as have been already obtained or as may be required under the 1933 Act or the 1933 Act Regulations or state securities laws. 8 (xvii) Possession of Licenses and Permits. The Company and its ---------------------------------- subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (xviii) Title to Property. The Company and the Subsidiaries have ----------------- good and marketable title to all real property owned by the Company and the Subsidiaries and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (a) are described in the Prospectuses or (b) do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of the Subsidiaries; and all of the leases and subleases material to the business of the Company and the Subsidiaries, considered as one enterprise, and under which the Company or any of the Subsidiaries holds properties described in the Prospectuses, are in full force and effect, and neither the Company nor any Subsidiary has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any Subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such Subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease. (xix) Environmental Laws. Except as described in the Registration ------------------ Statement and except as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, "Environmental Laws"), (B) the Company and its subsidiaries have all permits, authorizations and approvals 9 required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries and (D) there are no events or circumstances that might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company or any of its subsidiaries relating to Hazardous Materials or any Environmental Laws. (b) Officer's Certificates. Any certificate signed by any officer of the Company or any of its subsidiaries delivered to the Global Coordinator, the Lead Managers or to counsel for the International Managers shall be deemed a representation and warranty by the Company to each International Manager as to the matters covered thereby. SECTION 2. Sale and Delivery to International Managers; Closing. ---------------------------------------------------- (a) Initial Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each International Manager, severally and not jointly, and each International Manager, severally and not jointly, agrees to purchase from the Company, at the price per share set forth in Schedule B, the number of Initial International Securities set forth in Schedule A opposite the name of such International Manager, plus any additional number of Initial International Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof. (b) Option Securities. In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the International Managers, severally and not jointly, to purchase up to an additional 90,000 shares of Common Stock at the price per share set forth in Schedule B, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial International Securities but not payable on the International Option Securities. The option hereby granted will expire 30 days after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments that may be made in connection with the offering and distribution of the Initial International Securities upon notice by the Global Coordinator to the Company setting forth the number of International Option Securities as to which the several International Managers are then exercising the option and the time and date of payment and delivery for the International Option Securities. Any such time and date of delivery for the International Option Securities (a "Date of Delivery") shall be determined by the Global Coordinator, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined. If the option is exercised as to all or any portion of the International Option Securities, each of the International Managers, acting severally and not jointly, will purchase that proportion of the total number of International Option Securities then being 10 purchased which the number of Initial International Securities set forth in Schedule A opposite the name of such Underwriter bears to the total number of Initial International Securities, subject in each case to such adjustments as the Global Coordinator in its discretion shall make to eliminate any sales or purchases of fractional shares. (c) Payment. Payment of the purchase price for, and delivery of certificates for, the Initial Securities shall be made at the offices of Winston & Strawn, 35 W. Wacker Dr., Chicago, IL 60601, or at such other place as shall be agreed upon by the Global Coordinator and the Company, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten business days after such date as shall be agreed upon by the Global Coordinator and the Company (such time and date of payment and delivery being herein called "Closing Time"). In addition, in the event that any or all of the International Option Securities are purchased by the International Managers, payment of the purchase price for, and delivery of certificates for, such International Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Global Coordinator and the Company, on each Date of Delivery as specified in the notice from the Global Coordinator to the Company. Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company against delivery to the Lead Managers for the respective accounts of the International Managers of certificates for the International Securities to be purchased by them. It is understood that each International Manager has authorized the Lead Managers, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial International Securities and the International Option Securities, if any, which it has agreed to purchase. Merrill Lynch, individually and not as representative of the International Managers, may (but shall not be obligated to) make payment of the purchase price for the Initial International Securities or the International Option Securities, if any, to be purchased by any International Manager whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such U.S. Underwriter from its obligations hereunder. (d) Denominations; Registration. Certificates for the Initial International Securities and the International Option Securities, if any, shall be in such denominations and registered in such names as the Lead Managers may request in writing at least one full business day before the Closing Time or the relevant Date of Delivery, as the case may be. The certificates for the Initial International Securities and the International Option Securities, if any, will be made available for examination and packaging by the Lead Managers in The City of New York not later than 10:00 A.M. (Eastern time) on the business day prior to the Closing Time or the relevant Date of Delivery, as the case may be. 11 SECTION 3. Covenants of the Company. The Company covenants with each ------------------------ International Manager as follows: (a) Compliance with Securities Regulations and Commission Requests. The Company, subject to Section 3(b), will comply with the requirements of Rule 430A or Rule 434, as applicable, and will notify the Global Coordinator immediately, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective, or any supplement to the Prospectuses or any amended Prospectuses shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectuses or for additional information, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes. The Company will promptly effect the filings necessary pursuant to Rule 424(b) and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (b) Filing of Amendments. The Company will give the Global Coordinator notice of its intention to file or prepare any amendment to the Registration Statement (including any filing under Rule 462(b)), any Term Sheet or any amendment, supplement or revision to either the prospectus included in the Registration Statement at the time it became effective or to the Prospectuses, whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the Global Coordinator with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the Global Coordinator or counsel for the International Managers shall object. (c) Delivery of Registration Statements. The Company has furnished or will deliver to Merrill Lynch and counsel for Merrill Lynch, without charge, signed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated or deemed to be incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also deliver to the Lead Managers, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the International Managers. The copies of the Registration Statement and each amendment thereto furnished to the International Managers will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. 12 (d) Delivery of Prospectuses. The Company has delivered to each International Manager, without charge, as many copies of each preliminary prospectus as such International Manager reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to each International Manager, without charge, during the period when the International Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of the International Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The International Prospectus and any amendments or supplements thereto furnished to the International Managers will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (e) Continued Compliance with Securities Laws. The Company will comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement, the U.S. Purchase Agreement and in the Prospectuses. If at any time when a prospectus is required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the International Managers or for the Company, to amend the Registration Statement or amend or supplement any Prospectus in order that the Prospectuses will not include any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any such time to amend the Registration Statement or amend or supplement any Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and file with the Commission, subject to Section 3(b), such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectuses comply with such requirements, and the Company will furnish to the International Managers such number of copies of such amendment or supplement as the International Managers may reasonably request. (f) Blue Sky Qualifications. The Company will use its best efforts, in cooperation with the International Managers, to qualify the International Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Global Coordinator may designate and to maintain such qualifications in effect for a period of not less than one year from the later of the effective date of the Registration Statement and any Rule 462(b) Registration Statement; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. In each jurisdiction in which the Securities have been so qualified, the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for a period of not less than one year from the effective date of the Registration Statement and any Rule 462(b) Registration Statement. 13 (g) Rule 158. The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to provide the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act. (h) Use of Proceeds. The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the Prospectuses under "Use of Proceeds". (i) Listing. The Company will use its best efforts to effect the listing of the Securities on the New York Stock Exchange. (j) Restriction on Sale of Securities. During a period of 90 days from the date of the Prospectuses, the Company will not, without the prior written consent of the Global Coordinator, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any share of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Securities to be sold hereunder or under the U.S. Purchase Agreement, any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and referred to in the Prospectuses, (C) any shares of Common Stock issued or options to purchase Common Stock granted pursuant to existing employee benefit plans of the Company referred to in the Prospectuses, (D) any shares of Common Stock issued pursuant to any non-employee director stock plan or dividend reinvestment plan, (E) up to 440,000 shares of Common Stock offered or sold in connection with any acquisition of complementary products, technologies or businesses, or (F) any registration statement that the Company is contractually obligated to file relating to the resale of up to 200,000 shares of Common Stock and 352,000 shares of Series B 6% Cumulative Convertible Exchangeable Preferred Stock of the Company distributed by Fruehauf to creditors pursuant to a plan of reorganization. (k) Reporting Requirements. The Company, during the period when the Prospectuses required to be delivered under the 1933 Act or the 1934 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations. SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay ------------------- all expenses incident to the performance of its obligations under this Agreement, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as 14 originally filed and of each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of this Agreement, any Agreement among Underwriters and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Securities, (iii) the preparation, issuance and delivery of the certificates for the Securities to the Underwriters, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Securities to the Underwriters and the transfer of the Securities between the International Managers and the U.S. Underwriters, (iv) the fees and disbursements of the Company's counsel, accountants and other advisors, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(f) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing and delivery to the Underwriters of copies of each preliminary prospectus, any Term Sheets and of the Prospectuses and any amendments or supplements thereto, (vii) the preparation, printing and delivery to the Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii) the fees and expenses of any transfer agent or registrar for the Securities, the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by the National Associate of Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Securities and (ix) the fees and expenses incurred in connection with the listing of the Securities on the New York Stock Exchange. (b) Termination of Agreement. If this Agreement is terminated by the Lead Managers in accordance with the provisions of Section 5, Section 9(a)(i) or Section 11 hereof, the Company shall reimburse the International Managers for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the International Managers. SECTION 5. Conditions of International Managers' Obligations. The ------------------------------------------------- obligations of the several International Managers hereunder are subject to the accuracy of the representations and warranties of the Company contained in Section 1 hereof or in certificates of any officer of the Company or any subsidiary of the Company delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions: (a) Effectiveness of Registration Statement. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and at Closing Time no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the International Managers. A prospectus containing the Rule 430A Information shall have been filed with the Commission in accordance with Rule 424(b) (or a post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434, a Term Sheet shall have been filed with the Commission in accordance with Rule 424(b). 15 (b) Opinion of Counsel for Company. At Closing Time, the Lead Managers shall have received the favorable opinion, dated as of Closing Time, of Hogan & Hartson L.L.P., counsel for the Company, in form and substance satisfactory to counsel for the International Managers, together with signed or reproduced copies of such letter for each of the other International Managers to the effect set forth in Exhibit A hereto and to such further effect as counsel to the International Managers may reasonably request. (c) Opinion of Counsel for International Managers. At Closing Time, the Lead Managers shall have received the favorable opinion, dated as of Closing Time, of Winston & Strawn, counsel for the International Managers, together with signed or reproduced copies of such letter for each of the other International Managers with respect to the matters set forth in Exhibit B hereto. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the States of Illinois and New York, the federal law of the United States and the General Corporation Law of the State of Delaware, upon the opinions of counsel satisfactory to the Lead Managers. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and its subsidiaries and certificates of public officials. (d) Officers' Certificate. At Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Prospectuses, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and the Lead Managers shall have received a certificate of the President of the Company and of the chief financial or chief accounting officer of the Company, dated as of Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties in Section 1(a) hereof are true and correct with the same force and effect as though expressly made at and as of Closing Time, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or are contemplated by the Commission. (e) Accountant's Comfort Letter. At the time of the execution of this Agreement, the Lead Managers shall have received from Arthur Andersen LLP a letter dated such date, in form and substance satisfactory to the Lead Managers, together with signed or reproduced copies of such letter for each of the other International Managers containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectuses. 16 (f) Bring-down Comfort Letter. At Closing Time, the Lead Managers shall have received from Arthur Andersen LLP a letter, dated as of Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than three business days prior to Closing Time. (g) Approval of Listing. At Closing Time, the Securities shall have been approved for listing on the New York Stock Exchange, subject only to official notice of issuance. (h) No Objection. The NASD has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements. (i) Lock-up Agreements. At the date of this Agreement, the Lead Managers shall have received an agreement substantially in the form of Exhibit C hereto or as otherwise agreed to by counsel for the Lead Managers signed by the persons listed on Schedule D hereto. (j) Purchase of Initial International Securities. Contemporaneous with the purchase by the International Managers of the Initial International Securities under this Agreement, the U.S. Underwriters shall have purchased the Initial U.S. Securities under the U.S. Purchase Agreement. (k) Conditions to Purchase of International Option Securities. In the event that the International Managers exercise their option provided in Section 2(b) hereof to purchase all or any portion of the International Option Securities, the representations and warranties of the Company contained herein and the statements in any certificates furnished by the Company and any subsidiary of the Company hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Lead Managers shall have received: (i) Officers' Certificate. A certificate, dated such Date of --------------------- Delivery, of the President of the Company and of the chief financial or chief accounting officer of the Company confirming that the certificate delivered at the Closing Time pursuant to Section 5(d) hereof remains true and correct as of such Date of Delivery. (ii) Opinion of Counsel for Company. The favorable opinion of ------------------------------ Hogan & Hartson L.L.P., counsel for the Company, in form and substance satisfactory to counsel for the International Managers, dated such Date of Delivery, relating to the International Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(b) hereof. 17 (iii) Opinion of Counsel for International Managers. The favorable --------------------------------------------- opinion of Winston & Strawn, counsel for the International Managers, dated such Date of Delivery, relating to the International Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(c) hereof. (iv) Bring-down Comfort Letter. A letter from Arthur Andersen LLP, ------------------------- in form and substance satisfactory to the Lead Managers and dated such Date of Delivery, substantially in the same form and substance as the letter furnished to the Lead Managers pursuant to Section 5(f) hereof, except that the "specified date" in the letter furnished pursuant to this paragraph shall be a date not more than five days prior to such Date of Delivery. (l) Additional Documents. At Closing Time and at each Date of Delivery counsel for the International Managers shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Lead Managers and counsel for the International Managers. (m) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of International Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several International Managers to purchase the relevant International Option Securities, may be terminated by the Lead Managers by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such termination and remain in full force and effect. SECTION 6. Indemnification. (a) Indemnification of International Managers. (1) The Company agrees to indemnify and hold harmless each International Manager and each person, if any, who controls any International Manager within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 18 430A Information and the Rule 434 Information, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus or the Prospectuses (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, - -------- ------- liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any International Manager through the Lead Managers expressly for use in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary prospectus or the International Prospectus (or any amendment or supplement thereto). (b) Indemnification of Company, Directors and Officers. Each International Manager severally agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary International Prospectus or the International Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such International Manager through the Lead Managers expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the International Prospectus (or any amendment or supplement thereto). 19 (c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. SECTION 7. Contribution. If the indemnification provided for in ------------ Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the International Managers on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only 20 the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the International Managers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the International Managers on the other hand in connection with the offering of the International Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the International Securities pursuant to this Agreement (before deducting expenses) received by the Company and the total underwriting discount received by the International Managers, in each case as set forth on the cover of the International Prospectus, or, if Rule 434 is used, the corresponding location on the Term Sheet bear to the aggregate initial public offering price of the International Securities as set forth on such cover. The relative fault of the Company on the one hand and the International Managers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the International Managers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the International Managers agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the International Managers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 7, no International Manager shall be required to contribute any amount in excess of the amount by which the total price at which the International Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such International Manager has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 21 For purposes of this Section 7, each person, if any, who controls a International Manager within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such International Manager, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The International Managers' respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial International Securities set forth opposite their respective names in Schedule A hereto and not joint. SECTION 8. Representations, Warranties and Agreements to Survive ----------------------------------------------------- Delivery. All representations, warranties and agreements contained in this - -------- Agreement or in certificates of officers of the Company or any of its subsidiaries submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any International Manager or controlling person, or by or on behalf of the Company or controlling person, and shall survive delivery of the Securities to the International Managers. SECTION 9. Termination of Agreement. ------------------------ (a) Termination; General. The Lead Managers may terminate this Agreement, by notice to the Company, at any time at or prior to Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the International Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Lead Managers, impracticable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the New York Stock Exchange, or if trading generally on the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority, or (iv) if a banking moratorium has been declared by either Federal or New York authorities. (b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6, 7 and 8 shall survive such termination and remain in full force and effect. 22 SECTION 10. Default by One or More of the International Managers. If ---------------------------------------------------- one or more of the International Managers shall fail at Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the "Defaulted Securities"), the Lead Managers shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting International Managers, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Lead Managers shall not have completed such arrangements within such 24-hour period, then: (a) if the number of Defaulted Securities does not exceed 10% of the number of International Securities to be purchased on such date, each of the non-defaulting International Managers shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting International Managers, or (b) if the number of Defaulted Securities exceeds 10% of the number of International Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the International Managers to purchase and of the Company to sell the International Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of any non-defaulting Underwriter. No action taken pursuant to this Section shall relieve any defaulting International Manager from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the International Managers to purchase and the Company to sell the relevant International Option Securities, as the case may be, either the Lead Managers or the Company shall have the right to postpone Closing Time or the relevant Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration Statement or Prospectus or in any other documents or arrangements. As used herein, the term "International Manager" includes any person substituted for a International Manager under this Section 10. SECTION 11. Default by the Company. If the Company shall fail at ----------------------- Closing Time or at the Date of Delivery to sell the number of Securities that it is obligated to sell hereunder, then this Agreement shall terminate without any liability on the part of any non-defaulting party; provided, however, that the provisions of Sections 1, 4, 6, 7 and 8 shall remain in full force and effect. No action taken pursuant to this Section shall relieve the Company from liability, if any, in respect of such default. 23 SECTION 12. Notices. All notices and other communications hereunder ------- shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the International Managers shall be directed to the Lead Managers at North Tower, World Financial Center, New York, New York 10281-1201, attention of [ ]; notices to the Company shall be directed to it at 1000 Sagamore Parkway South, Lafayette, Indiana 47905, attention of Donald J. Ehrlich. SECTION 13. Parties. This Agreement shall each inure to the benefit of ------- and be binding upon the International Managers, the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the International Managers, the Company and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the International Managers and the Company and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any International Managers shall be deemed to be a successor by reason merely of such purchase. SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY ---------------------- AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. SECTION 15. Effect of Headings. The Article and Section headings herein ------------------ and the Table of Contents are for convenience only and shall not affect the construction hereof. 24 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the International Managers and the Company in accordance with its terms. Very truly yours, WABASH NATIONAL CORPORATION By .......................................... Title: CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH INTERNATIONAL BT ALEX. BROWN INTERNATIONAL ROBERT W. BAIRD & CO. INCORPORATED MORGAN KEEGAN & COMPANY, INC. By: MERRILL LYNCH INTERNATIONAL By .................................... Authorized Signatory 25 SCHEDULE A
Name of Underwriter Number of - ------------------- Initial Securities ---------- Merrill Lynch International BT Alex. Brown International Robert W. Baird & Co. Incorporated Morgan Keegan & Company, Inc. ---------- Total................................................ ==========
Sch A - 1 1 26 SCHEDULE B WABASH NATIONAL CORPORATION 600,000 Shares of Common Stock (Par Value $0.01 Per Share) 1. The initial public offering price per share for the Securities, determined as provided in said Section 2, shall be $____. 2. The purchase price per share for the International Securities to be paid by the several International Managers shall be $[ ], being an amount equal to the initial public offering price set forth above less $[ ] per share; provided that the purchase price per share for any International Option Securities purchased upon the exercise of the over-allotment option described in Section 2(b) shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial International Securities but not payable on the International Option Securities. Sch A - 1 1 27 SCHEDULE C List of subsidiaries Wabash National Finance Corporation Freuhauf Trailer Services, Inc. Sch C - 1 1 28 SCHEDULE D List of persons and entities subject to lock-up Fruehauf Trailer Corporation Donald J. Ehrlich Richard E. Dessimoz Mark R. Holden Sch D - 1 1 29 Exhibit A FORM OF OPINION OF COMPANY'S COUNSEL TO BE DELIVERED PURSUANT TO SECTION 5(b) (i) Each of the Company and each subsidiary listed on Schedule I hereto (each a "Subsidiary" and collectively the "Subsidiaries") was incorporated, and is validly existing and in good standing under the laws of the State of Delaware. (ii) The Company and each Subsidiary has corporate power and corporate authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and the Company has corporate power and corporate authority to enter into and perform its obligations under the U.S. Purchase Agreement and the International Purchase Agreement (collectively the "Purchase Agreements"). (iii) The Company and each Subsidiary is authorized to transact business as a foreign corporation under the laws of each State, and as of the respective dates of the certificates, specified in Schedule I hereto. (iv) The authorized, issued and outstanding capital stock of the Company, as of December 31, 1997, was set forth under the captions "Capitalization" in the Prospectuses. All shares of capital stock of the Company shown as issued and outstanding under said captions are duly authorized and, assuming the receipt of consideration therefor as provided in resolutions of the Company's Board of Directors, are validly issued, fully paid and non-assessable. None of the outstanding shares of Common Stock of the Company was issued in violation of any statutory preemptive right under the DGCL or to our knowledge, any contractual right of any security holder of the Company to subscribe for any shares of Common Stock. (v) When issued in accordance with the provisions of the Purchase Agreements and, based upon certificates of the officers of the Company as to receipt of consideration therefor, the shares of Common Stock issued pursuant to the terms of the Purchase Agreements (the "Securities") will be validly issued, fully paid and non-assessable. A-1 (vi) No holder of outstanding common stock of the Company has any statutory preemptive right under DGCL or, to our knowledge, any contractual right to subscribe for any of the Securities. (vii) Each of the Purchase Agreements has been duly authorized, executed and delivered by or on behalf of the Company. (viii) The Registration Statement has been declared effective under the 1933 Act; any required filing of the Prospectuses pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); and, to our knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are threatened by the Commission. (ix) The Registration Statement and the Prospectuses as of their respective effective or issue dates (other than the financial statements and supporting schedules included therein or omitted therefrom, as to which we need express no opinion) complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. (x) The documents incorporated by reference into the Prospectuses (other than the financial statements and supporting schedules included therein or omitted therefrom, as to which we express no opinion), when they were filed with the Commission or became effective, as the case may be, complied as to form in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder. (xi) The form of certificate used to evidence the Securities complies in all material respects with any applicable requirements of DGCL, the charter and bylaws of the Company and the New York Stock Exchange, Inc. (xii) The information in the International Prospectus under the caption "Certain United States Taxation of Foreign Shareholders" to the extent that it constitutes matters of law has been reviewed by us and is correct in all material respects. (xiii) No consent, approval, authorization, order, registration or qualification of or with any Delaware or Federal court or governmental agency or body having jurisdiction over the Company or the Subsidiaries is required to be made or obtained by the Company for the issuance and sale of the Securities or the consummation by the Company of the transactions contemplated by the Purchase Agreements as of the date hereof, except such as have been obtained under the 1933 Act and the 1934 Act. A-2 (xiv) The issuance and sale of the Securities being delivered under the Purchase Agreements and the execution and delivery by the Company of the Purchase Agreements as of the date hereof and the consummation by the Company as of the date hereof of the transactions therein contemplated do not (i) conflict with or result in a breach or violation of any of the provisions of, or constitute a default under, any of the terms or provisions of any agreement filed as an exhibit to the Registration Statement or a document incorporated by reference therein, or (ii) violate the provisions of the charter or bylaws of the Company or the Subsidiaries or, any statute, order, rule or regulation known to us of any Delaware or Federal court or governmental agency or body having jurisdiction over the Company or the Subsidiaries. The foregoing opinion shall not be deemed to address any federal securities law matters specifically addressed elsewhere in this opinion letter. * * * * * Based solely upon an officer's certificate and our review of the firm's litigation docket, we hereby confirm that, to our knowledge, there are no legal or governmental proceedings pending or threatened, except as set forth in the Prospectuses, in which the Company or its Subsidiaries is a named party or of which any property of the Company or its Subsidiaries is the subject which, if determined adversely to the Company, could reasonably be expected individually or in the aggregate to have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries. During the course of the preparation of the Registration Statement, we participated in conferences with officers and other representatives of the Company, with representatives of the independent pubic accountants of the Company and with you and your representatives. While we have not undertaken to determine independently, and we do not assume any responsibility for, the accuracy, completeness, or fairness of the statements in the Registration Statement or the Prospectuses, we may state on the basis of these conferences and our activities as counsel to the Company in connection with the Registration Statement that no facts have come to our attention which cause us to believe that (i) the Registration Statement, at the time it became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectuses, as of the date hereof, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, (ii) there are any legal or governmental proceedings pending or threatened against the Company that are required to be disclosed in the Registration Statement or the Prospectuses, other than those disclosed therein, or (iii) there are any contracts or documents to which the Company is a party of a character required to be described in the Registration Statement or the Prospectuses or to be filed as exhibits to the Registration Statement that are not described or A-3 referred to therein or so filed; provided that in making the foregoing -------- ---- statements (which shall not constitute an opinion), we are not expressing any views as to the financial statements and supporting schedules and other financial information and data included in or omitted from the Registration Statement or the Prospectuses. A-4 SCHEDULE I Subsidiary Certificate Date Jurisdiction - ---------- ---------------- ------------ Fruehauf Trailer [ ] [ ] Services Corporation Wabash Finance Company Sch I - 1 Exhibit B FORM OF OPINION OF UNDERWRITERS COUNSEL TO BE DELIVERED PURSUANT TO SECTION 5(c) (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the state of Delaware. (ii) The Company has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and to enter into and perform its obligations under the U.S. Purchase Agreement and the International Purchase Agreement. (iii) The Securities to be purchased by the U.S. Underwriters and the International Managers from the Company have been duly authorized for issuance and sale to the U.S. Underwriters and International Managers pursuant to the U.S. Purchase Agreement and the International Purchase Agreement, respectively, and, when issued and delivered by the Company pursuant to the U.S. Purchase Agreement and the International Purchase Agreement respectively, against payment of the consideration set forth in the U.S. Purchase Agreement and the International Purchase Agreement, will be validly issued and fully paid and non- assessable and no holder of the Securities is or will be subject to personal liability by reason of being such a holder. (iv) The issuance and sale of the Securities by the Company is not subject to the preemptive or other similar rights of any securityholder of the Company arising by operation of law or under the charter or by-laws of the Company. B-1 (v) Each Subsidiary has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; except as otherwise disclosed in the Registration Statement, all of the issued and outstanding capital stock of each Subsidiary has been duly authorized and validly issued, is fully paid and non- assessable and, to the best of our knowledge, is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding shares of capital stock of any Subsidiary was issued in violation of the preemptive or similar rights of any securityholder of such Subsidiary. (vi) The U.S. Purchase Agreement and the International Purchase Agreement have been duly authorized, executed and delivered by the Company. (vii) The Registration Statement, including any Rule 462(b) Registration Statement, has been declared effective under the 1933 Act; any required filing of the Prospectuses pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); and, to the best of our knowledge, no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or threatened by the Commission. (viii) The Registration Statement, including any Rule 462(b) Registration Statement, the Rule 430A Information and the Rule 434 Information, as applicable, the Prospectuses, excluding the documents incorporated by reference therein, and each amendment or supplement to the Registration Statement and the Prospectuses, excluding the documents incorporated by reference therein, as of their respective effective or issue dates (other than the financial statements and supporting schedules included therein or omitted therefrom, as to which we need express no opinion) complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. (ix) The form of certificate used to evidence the Common Stock complies in all material respects with all applicable statutory requirements, with any applicable requirements of the charter and by-laws of the Company and the requirements of the New York Stock Exchange. B-2 Nothing has come to our attention that would lead us to believe that the Registration Statement or any amendment thereto, including the Rule 430A Information and Rule 434 Information (if applicable), (except for financial statements and schedules and other financial data included or incorporated by reference therein or omitted therefrom, as to which we need make no statement), at the time such Registration Statement or any such amendment became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectuses or any amendment or supplement thereto (except for financial statements and schedules and other financial data included or incorporated by reference therein or omitted therefrom, as to which we need make no statement), at the time the Prospectuses were issued, at the time any such amended or supplemented prospectus was issued or at the Closing Time, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. In rendering such opinion, such counsel may rely as to matters of fact (but not as to legal conclusions), to the extent they deem proper, on certificates of responsible officers of the Company and public officials. Such opinion shall not state that it is to be governed or qualified by, or that it is otherwise subject to, any treatise, written policy or other document relating to legal opinions, including, without limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991). B-3 EX-23.02 4 CONSENT OF ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report included in this registration statement and to the incorporation by reference in this registration statement of our report dated January 19, 1998 included in Wabash National Corporation's Form 10-K for the year ended December 31, 1997 and to all references to our Firm included in this registration statement. ARTHUR ANDERSEN LLP Indianapolis, Indiana April 21, 1998 -----END PRIVACY-ENHANCED MESSAGE-----