-----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, A/GeBLCZuMAMtgrGYycBiyYOmyj0guIZKrm9nlTRMx18X5J8Zlo1jAs1W9W+WrNl 3p6gNOSuNavNGcFDH/N+wA== 0000950137-01-502821.txt : 20010813 0000950137-01-502821.hdr.sgml : 20010813 ACCESSION NUMBER: 0000950137-01-502821 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WABASH NATIONAL CORP /DE CENTRAL INDEX KEY: 0000879526 STANDARD INDUSTRIAL CLASSIFICATION: TRUCK TRAILERS [3715] IRS NUMBER: 521375208 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10883 FILM NUMBER: 1702940 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 10-Q 1 c64327e10-q.txt QUARTERLY REPORT 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF [X] THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 2001 OR TRANSITION REPORT UNDER SECTION 13 0R 15 (d) OF [ ] THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: 1-10883 WABASH NATIONAL CORPORATION --------------------------- ( Exact name of registrant as specified in its charter) Delaware 52-1375208 -------- ---------- (State of Incorporation) (IRS Employer Identification Number) 1000 Sagamore Parkway South, Lafayette, Indiana 47905 ------------------ ----- (Address of Principal (Zip Code) Executive Offices) Registrant's telephone number, including area code: (765) 771-5300 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days. YES X NO ---- ---- The number of shares of common stock outstanding at August 9, 2001 was 23,008,034. 2 WABASH NATIONAL CORPORATION INDEX FORM 10-Q PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements Condensed Consolidated Balance Sheets at June 30, 2001 and December 31, 2000 1 Condensed Consolidated Statements of Operations For the three and six months ended June 30, 2001 and 2000 2 Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2001 and 2000 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk 17 PART II - OTHER INFORMATION Item 1. Legal Proceedings 18 Item 2. Changes in Securities and Use of Proceeds 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 5. Other Information 18 Item 6. Exhibits and Reports on Form 8-K 18 3 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
June 30, December 31, 2001 2000 ---------- ----------- (Unaudited) (Note 1) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 23,300 $ 4,194 Accounts receivable, net 42,031 49,320 Current portion of finance contracts 10,602 11,544 Inventories 311,003 330,326 Refundable income taxes 16,230 5,552 Prepaid expenses and other 21,448 18,478 --------- --------- Total current assets 424,614 419,414 --------- --------- PROPERTY, PLANT AND EQUIPMENT, net 214,121 216,901 --------- --------- EQUIPMENT LEASED TO OTHERS, net 88,199 52,001 --------- --------- FINANCE CONTRACTS, net of current portion 39,065 44,906 --------- --------- INTANGIBLE ASSETS, net 44,008 31,123 --------- --------- OTHER ASSETS 15,661 17,269 --------- --------- $ 825,668 $ 781,614 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITES: Current maturities of long-term debt $ 33,814 $ 12,134 Accounts payable 82,676 94,118 Accrued liabilities 47,892 42,440 --------- --------- Total current liabilities 164,382 148,692 --------- --------- LONG-TERM DEBT, net of current maturities 279,317 226,126 --------- --------- DEFERRED INCOME TAXES 23,666 23,644 --------- --------- OTHER NONCURRENT LIABILITIES AND CONTINGENCIES 29,752 15,919 --------- --------- STOCKHOLDERS' EQUITY: Preferred stock, 482,041 shares issued and outstanding with an aggregate liquidation value of $30,600 5 5 Common stock, 23,008,034 and 23,002,490 shares issued and 230 230 outstanding , respectively Additional paid-in capital 236,729 236,660 Retained earnings 92,976 131,617 Accumulated other comprehensive loss (110) --- Treasury stock at cost, 59,600 common shares (1,279) (1,279) --------- --------- Total stockholders' equity 328,551 367,233 --------- --------- $ 825,668 $ 781,614 ========= =========
See Notes to Condensed Consolidated Financial Statements. 1 4 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share amounts)
Three Months Six Months Ended June 30, Ended June 30, ------------------------ ------------------------ 2001 2000 2001 2000 --------- --------- --------- --------- (Unaudited) (Unaudited) NET SALES $ 212,172 $ 358,729 $ 454,801 $ 711,577 COST OF SALES 212,198 324,684 456,570 643,109 --------- --------- --------- --------- Gross profit (loss) (26) 34,045 (1,769) 68,468 GENERAL AND ADMINISTRATIVE EXPENSES 15,521 8,669 25,531 16,746 SELLING EXPENSES 6,560 5,254 12,718 10,318 --------- --------- --------- --------- Income (Loss) from operations (22,107) 20,122 (40,018) 41,404 OTHER INCOME (EXPENSE): Interest expense (5,360) (5,643) (11,160) (9,772) Accounts receivable securitization costs (449) (1,736) (1,426) (3,396) Equity in losses of unconsolidated affiliate (1,844) (750) (4,333) (1,600) Other, net 843 326 (134) 653 --------- --------- --------- --------- Income (Loss) before income taxes (28,917) 12,319 (57,071) 27,289 PROVISION (BENEFIT) FOR INCOME TAXES (10,800) 4,804 (21,224) 10,643 --------- --------- --------- --------- Net income (loss) $ (18,117) $ 7,515 $ (35,847) $ 16,646 PREFERRED STOCK DIVIDENDS 476 476 952 951 --------- --------- --------- --------- NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS $ (18,593) $ 7,039 $ (36,799) $ 15,695 ========= ========= ========= ========= EARNINGS (LOSS) PER SHARE: Basic $ (0.81) $ 0.31 $ (1.60) $ 0.68 Diluted $ (0.81) $ 0.31 $ (1.60) $ 0.68 ========= ========= ========= ========= Cash dividends per share $ 0.04 $ 0.04 $ 0.08 $ 0.08 ========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements. 2 5 WABASH NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Six Months Ended June 30, ------------------------ 2001 2000 --------- --------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (35,847) $ 16,646 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities- Depreciation and amortization 16,420 13,729 Gain on the sale of assets (69) (126) Bad debt provision 7,795 1,329 Deferred income taxes (3,128) 402 Equity in losses of unconsolidated affiliate 4,333 1,600 Cash used for restructuring activities (5,156) --- Change in operating assets and liabilities: Accounts receivable 10,366 (48,894) Inventories 27,509 (94,986) Refundable income taxes (10,678) (400) Prepaid expenses and other 351 286 Accounts payable and accrued liabilities (16,403) (3,151) Other, net (6,221) 1,520 --------- --------- Net cash used in operating activities (10,728) (112,045) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (4,300) (38,372) Net additions to equipment leased to others (35,073) (23,986) Net additions to finance contracts (9,628) (9,709) Acquisition, net of cash acquired (6,336) --- Investment in unconsolidated subsidiary (2,550) (1,283) Proceeds from sale of leased equipment and finance contacts 29,054 5,436 Principal payments received on finance contracts 5,218 6,244 Proceeds from the sale of property, plant and equipment 124 626 --------- --------- Net cash used in investing activities (23,491) (61,044) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from: Short-term borrowings --- 50,000 Long-term debt --- 12,500 Long-term revolver 249,598 263,200 Common stock 69 28 Payments: Long-term debt (11,348) (1,759) Long-term revolver (182,202) (160,732) Common stock dividends (1,840) (1,839) Preferred stock dividends (952) (952) --------- --------- Net cash provided by financing activities 53,325 160,446 --------- --------- NET INCREASE (DECREASE) IN CASH 19,106 (12,643) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,194 22,484 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 23,300 $ 9,841 ========= =========
See Notes to Condensed Consolidated Financial Statements. 3 6 WABASH NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. GENERAL The condensed consolidated financial statements included herein have been prepared by Wabash National Corporation and its subsidiaries (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's 2000 Annual Report on Form 10-K. In the opinion of the registrant, the accompanying condensed consolidated financial statements contain all material adjustments (consisting only of normal recurring adjustments), necessary to present fairly the consolidated financial position of the Company at June 30, 2001 and December 31, 2000 and its results of operations for the three and six months ended June 30, 2001 and 2000 and cash flows for the six months ended June 30, 2001 and 2000. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Foreign Currency Accounting The financial statements of the Company's Canadian subsidiary are translated into U.S. dollars using the exchange rate at the balance sheet date for assets and liabilities and a weighted-average exchange rate during the period for revenue and expense accounts. The resulting translation adjustments are recorded as a component of stockholders' equity. Gains or losses resulting from foreign currency transactions are included in Other, net in the Company's Condensed Consolidated Statements of Operations. b. Comprehensive Income (Loss) The Company's comprehensive income (loss) includes net income (loss) and foreign currency translation adjustments. The Company's net income (loss) and total comprehensive income (loss) were ($18.1) million and ($17.3) million, respectively for the three months ended June 30, 2001 and $7.5 million and $7.5 million, respectively for the same period in the prior year. The Company's net income (loss) and total comprehensive income (loss) were ($35.8) million and ($36.0) million, respectively for the six months ended June 30, 2001 and $16.6 million and $16.6 million, respectively for the same period in the prior year. 4 7 c. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities which was subsequently amended by SFAS 137 and SFAS 138. These Statements require that all derivative instruments be recorded on the balance sheet at their fair value. This standard is effective for the Company's financial statements beginning January 1, 2001. The adoption of SFAS 133 did not have an effect on the Company's annual results of operations or its financial position. In June 2001, FASB issued SFAS No. 142, Goodwill and Other Intangible Assets. This Statement requires companies to cease the amortization of goodwill and establishes a new method of testing goodwill for impairment. This standard is effective for the Company's financial statements beginning January 1, 2002. The Company's goodwill amortization for the three and six months ended June 30, 2001 was $0.4 million and $0.8 million, respectively, in advance of implementing the provisions within this statement. The Company is currently evaluating this Statement's requirement for testing goodwill impairment and the related impact, if any, to the Company's results of operations and financial position. d. Inventories Inventories consisted of the following (in thousands): June 30, December 31, 2001 2000 ----------- ------------ (Unaudited) Raw material and components $ 59,270 $ 84,167 Work in process 19,900 18,765 Finished goods 105,396 93,332 Aftermarket parts 31,685 33,566 Used trailers 94,752 100,496 -------- -------- $311,003 $330,326 ======== ======== e. Reclassifications Certain items previously reported in specific condensed consolidated financial statement captions have been reclassified to conform with the 2001 presentation. NOTE 3. SUPPLEMENTAL CASH FLOW INFORMATION Six Months Ended June 30, --------------------------- (In thousands) 2001 2000 - ----------------------------------------------------------------------------- Cash paid during the period for: (Unaudited) Interest $10,487 $ 8,635 Income taxes 562 17,529 - ----------------------------------------------------------------------------- 5 8 NOTE 4. RESTRUCTURING AND OTHER RELATED CHARGES In December 2000, the Company recorded restructuring and other related charges totaling $46.6 million ($28.5 million, net of tax) primarily related to the Company's exit from manufacturing products for export outside the North American market, international leasing and financing activities and the consolidation of certain domestic operations. Included in this total is $40.8 million that has been included as a component in computing income from operations. Specifically, $19.1 million of this amount represents the impairment of certain equipment subject to leases with the Company's international customers, $8.6 million represents losses recognized for various financial guarantees related to international financing activities, and $6.9 million was recorded for the write-down of other assets as well as charges associated with the consolidation of certain domestic operations including severance of $0.2 million. Also included in the $40.8 million is a $4.5 million charge for inventory write-downs related to the restructuring actions. The total impairment charge recognized by the Company as a result of its restructuring activities was $26.7 million. This amount was computed in accordance with the provisions of SFAS 121. The estimated fair value of the impaired assets totaled $3.4 million and was determined by management based upon economic conditions and potential alternative uses and markets for the equipment. These assets are held for sale and are classified in prepaid expenses and other in the accompanying Condensed Consolidated Balance Sheets. Depreciation has been discontinued on these assets pending their disposal. Upon the ultimate divestiture of the Company's ownership in ETZ, expected to occur in 2001, the Company will no longer record equity in losses of unconsolidated affiliate. The Company is continuing its restructuring plan implemented in the fourth quarter of 2000. During the six-month period ended June 30, 2001, the Company paid $4.3 million related to certain guarantees as well as paid $0.9 million related to the consolidation of certain domestic operations including severance payments of $0.2 million. Details of the restructuring charges and reserve are as follows (in thousands):
UTILIZED Original ----------------------- Balance Provision 2000 2001 06/30/01 --------- -------- --------- -------- Restructuring of majority-owned operations: Impairment of long-term assets $ 20,819 $(20,819) $ --- $ --- Loss related to equipment guarantees 8,592 --- (4,264) 4,328 Write-down of other assets and other charges 6,927 (4,187) (892) 1,848 -------- -------- -------- -------- $ 36,338 $(25,006) $ (5,156) $ 6,176 -------- -------- -------- -------- Restructuring of minority interest operations: Impairment of long-term assets $ 5,832 $ (5,832) $ --- $ --- -------- -------- -------- -------- Inventory write-down and other charges $ 4,480 $ (3,897) $ --- $ 583 -------- -------- -------- -------- Total restructuring and other related charges $ 46,650 $(34,735) $ (5,156) $ 6,759 ======== ======== ======== ========
As of June 30, 2001, the Company has a restructuring reserve of $6.8 million included in accrued liabilities in the accompanying Condensed Consolidated Balance Sheets. The Company anticipates completion of its restructuring activities during 2001. 6 9 NOTE 5. SEGMENTS Under the provisions of SFAS No. 131, the Company has two reportable business segments; manufacturing and retail and distribution operations. The manufacturing segment principally produces and sells new trailers to customers who purchase trailers direct or through independent dealers and for the retail and distribution segment. The retail and distribution segment sells new and used trailers, aftermarket parts, performs service repair on used trailers and provides rental, leasing and financing activity through its retail branch network. In December 2000, the Company combined its rental, leasing and finance activities into a separate product line within the retail and distribution segment. As a result, the 2000 presentation has been restated to conform to the 2001 presentation. Reportable segment information is as follows (in thousands):
THREE MONTHS ENDED Retail and Combined Consolidated JUNE 30, 2001 Manufacturing Distribution Segments Eliminations Totals - ------------- ------------- ------------ ----------- ------------ ----------- (unaudited) Revenues External customers $ 127,424 $ 84,748 $ 212,172 $ --- $ 212,172 Intersegment sales 21,849 353 22,202 (22,202) --- ----------- ----------- ----------- ----------- ----------- Total Revenues $ 149,273 $ 85,101 $ 234,374 $ (22,202) $ 212,172 =========== =========== =========== =========== =========== Income (loss) from $ (18,883) $ (2,764) $ (21,647) $ (460) $ (22,107) Operations Total Assets $ 866,950 $ 451,877 $ 1,318,827 $ (493,159) $ 825,668 THREE MONTHS ENDED JUNE 30, 2000 - ------------- (Unaudited) Revenues External customers $ 270,502 $ 88,227 $ 358,729 $ --- $ 358,729 Intersegment sales 26,433 (2,128) 24,305 (24,305) --- ----------- ----------- ----------- ----------- ----------- Total Revenues $ 296,935 $ 86,099 $ 383,034 $ (24,305) $ 358,729 =========== =========== =========== =========== =========== Income (loss) from $ 19,534 $ 1,948 $ 21,482 $ (1,360) $ 20,122 Operations Total Assets $ 951,757 $ 442,770 $ 1,394,527 $ (426,149) $ 968,378 SIX MONTHS ENDED JUNE 30, 2001 - ------------- (Unaudited) Revenues External customers $ 285,413 $ 169,388 $ 454,801 $ --- $ 454,801 Intersegment sales 35,908 607 36,515 (36,515) --- ----------- ----------- ----------- ----------- ----------- Total Revenues $ 321,321 $ 169,995 $ 491,316 $ (36,515) $ 454,801 =========== =========== =========== =========== =========== Income (loss) from $ (35,639) $ (4,028) $ (39,667) $ (351) $ (40,018) Operations Total Assets $ 866,950 $ 451,877 $ 1,318,827 $ (493,159) $ 825,668 SIX MONTHS ENDED JUNE 30, 2000 - ------------- (Unaudited) Revenues External customers $ 542,717 $ 168,860 $ 711,577 $ --- $ 711,577 Intersegment sales 51,607 (1,827) 49,780 (49,780) --- ----------- ----------- ----------- ----------- ----------- Total Revenues $ 594,324 $ 167,033 $ 761,357 $ (49,780) $ 711,577 =========== =========== =========== =========== =========== Income (loss) from $ 39,567 $ 3,786 $ 43,353 $ (1,949) $ 41,404 Operations Total Assets $ 951,757 $ 442,770 $ 1,394,527 $ (426,149) $ 968,378
7 10 NOTE 6. ACQUISITION On January 5, 2001, the Company acquired the Breadner Group of Companies (the Breadner Group) in a stock purchase agreement (the Breadner Acquisition). The Breadner Group is headquartered in Kitchener, Ontario, Canada and has ten branch locations in six Canadian Provinces. These branches are the leading Canadian distributor of new trailers as well as providers of new trailer services and aftermarket parts. For financial statement purposes, the Breadner Acquisition was accounted for as a purchase, and accordingly, the Breadner Group's assets and liabilities were recorded at fair value and the operating results are included in the Condensed Consolidated Statements of Operations since the date of acquisition. The aggregate consideration for this transaction included approximately $6.3 million in cash and $10.0 million in a long-term note and the assumption of certain indebtedness. The long-term note has an annual interest rate of 7.25% and is due April 2001 through January 2006. The excess of the purchase price over the underlying assets acquired was approximately $14.3 million and is being amortized on a straight-line basis over twenty-five years. NOTE 7. EARNINGS (LOSS) PER SHARE Earnings (loss) per share (EPS) are computed in accordance with SFAS No. 128, Earnings per Share. A reconciliation of the numerators and denominators of the basic EPS computations, as required by SFAS No. 128, is presented below. The Company did not include the effect of other securities that could be converted into common in its calculation of diluted EPS for the three and six months ended June 30, 2001 and June 30, 2000, since their inclusion would have resulted in an antidilutive effect. As a result, basic and diluted EPS are equal for the periods presented below. (Amounts in thousands except per share amounts):
Three Months Six Months Ended June 30, Ended June 30, -------------------------- -------------------------- 2001 2000 2001 2000 -------- -------- --------- ------- (Unaudited) Net Income (Loss) $(18,117) $ 7,515 $ (35,847) $16,646 Less: Preferred Stock Dividends 476 476 952 951 -------- -------- --------- ------- Basic and Diluted Net Income (Loss) Available to Common $(18,593) $ 7,039 $ (36,799) $15,695 ======== ======== ========= ======= Weighted Average Shares 23,004 22,987 23,003 22,986 ======== ======== ========= ======= Basic and Diluted EPS $ (0.81) $ 0.31 $ (1.60) $ 0.68 ======== ======== ========= =======
NOTE 8. CONTINGENCIES a. Litigation Various lawsuits, claims and proceedings have been or may be instituted or asserted against the Company arising in the ordinary course of business, including those pertaining to product liability, labor and health related matters, successor liability, environmental and possible tax assessments. While the amounts claimed could be substantial, the ultimate liability cannot now be determined because of the considerable uncertainties that exist. Therefore, it is possible that 8 11 results of operations or liquidity in a particular period could be materially affected by certain contingencies. However, based on facts currently available, management believes that the disposition of matters that are pending or asserted will not have a material adverse effect on the Company's financial position or its annual results of operations. From January 22, 1999 through February 24, 1999, five purported class action complaints were filed against the Company and certain of its officers in the United States District Court for the Northern District of Indiana. The complaints purported to be brought on behalf of a class of investors who purchased the Company's common stock between April 20, 1998 and January 15, 1999. The complaints alleged that the Company violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated under the Act by disseminating false and misleading financial statements and reports respecting the first three quarters of the Company's fiscal year 1998. The complaints sought unspecified compensatory damages and attorney's fees, as well as other relief. In addition, on March 23, 1999, another purported class action lawsuit was also filed in the United States District Court for the Northern District of Indiana, naming the Company, its directors and the underwriters of the Company's April 1998 public offering. That complaint alleged that the Company and the individual defendants violated Section 11 of the Securities Act of 1933, and that the Company, the individual defendants as "controlling persons" of the Company, and the underwriters are liable under Section 12 of that Act, by making untrue statements of material fact and omitting material facts from the prospectus used in that offering. The complaint sought unspecified compensatory damages and attorney's fees, as well as other relief. Both the Securities Exchange Act complaints and the Securities Act complaint arise out of the restatement of the Company's financial statements for the first three quarters of 1998. At a hearing on May 10, 1999 and in an order entered on June 22, 1999, Judge Allen Sharp consolidated the six pending cases under the caption In re Wabash National Corporation Securities Litigation, No. 4:99CV0003AS. On March 29, 2001, all plaintiffs voluntarily withdrew their claims arising under Sections 10 (b) and 20 (a) of the Securities and Exchange Act of 1934 (the "1934 Act Claims"), when a Stipulation of Dismissal with Prejudice was filed with the Court. On April 2, 2001, the Court entered an Order of Dismissal giving effect to the Stipulation of Dismissal. As a result of that dismissal, the only claims remaining in the case were those brought by purchasers of shares in the Company's public offering on April 23, 1998 (i.e., claims arising under Sections 11 and 12 of the Securities Act of 1933). On April 17, 2001, the Company announced that it had reached an agreement that terminates the remaining elements of the shareholder litigation brought against the Company. Under the agreement, which is subject to court approval, the Company will pay $500,000 into a fund from which purchasers of stock in the Company's 1998 public offering and who satisfy certain criteria will be entitled to recover $0.33 per share. Unclaimed monies remaining in the fund, after attorney's fees and expenses are paid, will be returned to the Company. Also on April 17, 2001, the Court entered an order dismissing the action without prejudice to the right of any party upon good cause shown within ninety days to vacate the order and reopen the action if the settlement is not consummated. On July 16, 2001, the Court entered an order extending that period until November 1, 2001. The parties are currently preparing the filings necessary to complete the settlement process. 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. 9 12 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 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. As of June 30, 2001, the estimated potential exposure for such costs ranges from approximately $0.5 million to approximately $1.7 million, for which the Company has a reserve of approximately $0.9 million. These reserves were primarily recorded for exposures associated with the costs of environmental remediation projects to address soil and ground water contamination 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. In the second quarter 2000, the Company received a grand jury subpoena requesting certain documents relating to the discharge of wastewaters into the environment at a Wabash facility in Huntsville, Tennessee. The subpoena sought the production of documents and related records concerning the design of the facility's discharge system and the particular discharge in question. On April 17, 2000, the Company received a Notice of Violation/Request for Incident Report from the Tennessee Department of Environmental Conservation (TDEC) with respect to the same matter. On September 6, 2000, the Company received an Order and Assessment from TDEC directing the Company to pay a fine of $100,000 for violations of Tennessee environmental requirements as a result of the discharge. The Company filed an appeal of the Order and Assessment on October 10, 2000. On May 16, 2001, the Company received a second grand jury subpoena that sought the production of additional documents relating to the discharge in question. The Company has provided documents in response to that subpoena. The Company is fully cooperating with state and federal officials with respect to their respective investigations into the matter. At this time, the Company is unable to predict the outcome of federal grand jury inquiry into this matter, but does not believe it will result in a material adverse effect on its financial position or future results of operations; however, at this early stage of the proceedings, no assurance can be given as to the ultimate outcome of the case. 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 consolidated financial position of the Company. c. Used Trailer Restoration Program During 1999, the Company reached a settlement with the Internal Revenue Service related to federal excise tax on certain used trailers restored by the Company during 1996 and 1997. The Company continued the restoration program with the same customer since 1997. The customer has indemnified the Company for any potential excise tax assessed by the IRS for years subsequent to 1997. The IRS has substantially completed their audit work with respect to certain used trailers restored by the Company during 1998 and 1999. The Company anticipates receiving a notice of assessment related to such matters during 2001. The Company has recorded a liability and a corresponding receivable of approximately $8.1 million and $7.9 million in the accompanying condensed Consolidated Balance Sheets at June 30, 2001 and December 31, 2000, respectively. 10 13 d. Possible Management Actions in Light of Industry Conditions In response to the continued weakness in the truck trailer manufacturing industry and the Company's recent results, management is currently evaluating strategies to improve its operating results and financial position. In July 2001, the Company issued Worker Adjustment and Retraining Notification Act (WARN) notices to the employees of its Fort Madison, Iowa and Huntsville, Tennessee manufacturing plants informing them of the potential closure or temporary shutdown of these two plants. Combined, these two plants accounted for less than 20% of the Company's production for the six months ended June 30, 2001. In addition, the Company is evaluating its investment in used trailer inventory given current market conditions and is pursuing strategies to reduce this investment and associated carrying costs. The Company's Board of Directors must approve any decisions relative to the above strategies before any action can be taken. To the extent these strategies are approved and implemented, the impact of these actions could have a material impact on the Company's financial position and operating results in the period incurred. 11 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This report and the information incorporated by reference may include "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position, operating results and our business strategy are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend." Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and was derived using numerous assumptions. Although we believe that our expectations that are expressed in these forward-looking statements are reasonable, we cannot promise that our expectations will turn out to be correct. Our actual results could be materially different from and worse than our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations include the factors that are disclosed elsewhere herein and in Item 4A in the Company's Form 10-K as filed with the Securities and Exchange Commission on March 29, 2001. RESULTS OF OPERATIONS Under the provisions of SFAS No. 131, the Company has two reportable business segments; manufacturing and retail and distribution operations. The manufacturing segment principally produces and sells new trailers to customers who purchase trailers direct or through independent dealers and for the retail and distribution segment. The retail and distribution segment sells new and used trailers, aftermarket parts, performs service repair on used trailers and provides rental, leasing and financing activity through its retail branch network. In December 2000, the Company combined its rental, leasing and finance activities into a separate product line within the retail and distribution segment. As a result, the 2000 presentation has been restated to conform to the 2001 presentation. Net Sales Consolidated net sales for the second quarter of 2001 decreased approximately $146.6 million or 40.9% compared to the same period in 2000 and decreased $256.8 million or 36.1% for the six-month period ended June 30, 2001 compared with the same period in the prior year. This decrease primarily reflects lower sales activity in the Company's manufacturing segment as sales in the retail and distribution segment were approximately level with prior year sales. The manufacturing segment's external net sales decreased 52.9% or $143.1 million in the second quarter of 2001 compared to the same period in 2000 and were $257.3 million or 47.4% lower for the six-month period ended June 30, 2001 compared to the same period in 2000. These decreases were driven primarily by a 53.1% decrease (7,500 units vs. 16,000 units) and a 46.4% decrease (17,000 units vs. 31,700 units) in the number of new trailers sold during the three and six-month periods ended June 30, 2001 compared to the same periods in 2000, respectively. The Company's proprietary DuraPlate(R) trailer continued to comprise the majority of the Company's 12 15 production at over 70% during the quarter. At June 30, 2001, the Company's backlog of orders was approximately $450 million, over 65% of which is related to the DuraPlate trailer. During 2001, the Company's manufacturing segment continued to be negatively impacted by overall economic conditions including the current recessionary environment of the U.S. manufacturing sector and, more specifically, the transportation industry, which has been plagued by a general slowing in freight tonnage. According to a Federal Reserve report released on July 17, 2001, production at factories, mines and utilities slipped for the ninth straight month in June, the longest stretch of negative readings since 1982. In addition, manufacturing capacity utilization was the lowest since August 1983. The retail and distribution segment's external net sales decreased 3.9% or $3.5 million in the second quarter of 2001 compared to the same period in 2000 and were $0.5 million or 0.3% higher for the six-month period ended June 30, 2001 compared to the same period in 2000. The change in net sales was primarily attributable to increased net sales from new branch and rental centers opened since the first and second quarters of 2000. The total number of store locations as of March 31, 2001 and June 30, 2001 was 47 and 49 respectively, as compared to 37 and 37, respectively for the same periods in the prior year. The increase in the net sales associated with these new locations was offset by a 46.2% and 33.2% decline in external net sales in same store sales for the three and six month periods ended June 30, 2001 as compared to the same periods in the previous year. Gross Profit (Loss) Gross profit (loss) as a percentage of sales totaled 0.0% for the second quarter of 2001 compared to 9.5% for the same period in 2000 and totaled (0.4%) for the six-month period ended June 30, 2001 compared to 9.6% for the same period in 2000 primarily due to the manufacturing segment, as discussed below: - the decrease in sales volume previously discussed; - additional costs related to the start-up of the Company's painting and coating system at its Huntsville, Tennessee plant; - charges of $9.1 million in the first quarter and $5.9 million in the second quarter of 2001 related to new and used stock trailers in order to reflect the Company's estimate of net realizable value or cost. The Company accepts used trailers taken in trade on new trailer transactions in the normal course of business. In accordance with Generally Accepted Accounting Principles (GAAP) and consistent with the Company's accounting policies, used trailer inventories are carried at the lower of their estimated net realizable value or cost. As of June 30, 2001, the Company had $94.8 million of used trailers in inventory. The Company will continue to evaluate the carrying value of its used trailer inventories and to the extent, in the Company's judgment, there is a further decline in used trailer market values such that an adjustment in the Company's financial statements is necessary the Company will make additional provisions to reflect the inventory at its lower of cost or market. These adjustments may be material to the financial position or results of operations of the Company in the period they are recorded. These factors were partially offset by the continued increase in the proportion of sales from proprietary products such as the DuraPlate trailer. 13 16 Income (Loss) From Operations Income (loss) from operations as a percentage of sales for the second quarter of 2001 was (10.4%) compared to 5.6% for the same period in 2000 and was (8.8%) for the six-month period ended June 30, 2001 compared to 5.8% for the same period in 2000. Income (loss) from operations in 2001 was impacted primarily by a decrease in gross profit previously discussed and increased selling, general and administrative costs. The increase in selling, general and administrative expenses was primarily a result of a $4.0 million charge to earnings during the second quarter of 2001 related to a collection dispute with one of the Company's customers, along with increased expenses associated with the Company's effort to increase sales activity in its aftermarket parts, service and trailer rental, leasing and finance businesses and the acquisition of the Canadian retail branch operations in January. Subsequent to the end of the second quarter, the Company settled the aforementioned collection dispute and, as a result of this settlement, determined the $4.0 million reserve recorded during the period to be adequate. In response to the continued weakness in the truck trailer manufacturing industry and the Company's recent results, management is currently evaluating strategies to improve its operating results and financial position. In July 2001, the Company issued Worker Adjustment and Retraining Notification Act (WARN) notices to the employees of its Fort Madison, Iowa and Huntsville, Tennessee manufacturing plants informing them of the potential closure or temporary shutdown of these two plants. Combined, these two plants accounted for less than 20% of the Company's production for the six months ended June 30, 2001. In addition, the Company is evaluating its investment in used trailer inventory given current market conditions and is pursuing strategies to reduce this investment and associated carrying costs. The Company's Board of Directors must approve any decisions relative to the above strategies before any action can be taken. To the extent these strategies are approved and implemented, the impact of these actions could have a material impact on the Company's financial position and operating results in the period incurred. Other Income (Expense) Interest expense for the three month period ended June 30, 2001 totaled $5.4 million compared to $5.6 million in the same period in 2000 and was $11.2 million for the six month period ended June 30, 2001 compared to $9.8 million during the same period in 2000. This increase during the first six months of 2001 primarily reflects higher borrowings on the Company's revolving credit facility during 2001 as a result of decreased proceeds from the Company's trade receivable securitization facility along with increased investing activities. Equity in losses of unconsolidated affiliate for the three month period ended June 30, 2001 totaled $1.8 million compared to $0.8 million in the same period in 2000 and was $4.3 million for the six month period ended June 30, 2001 as compared to $1.6 million during the same period in 2000. During January 2001, the Company assumed the remaining ownership interest in Europaische Trailerzug Beteiligunsgessellshaft mbH (ETZ) from the majority shareholder. As a result, the Company has reflected 100% of ETZ's operating results during 2001 and 25.1% during the same period in the previous year. The Company intends to pursue the orderly divestiture of ETZ during 2001 and will record 100% of ETZ's operating results until the divestiture is complete. Other, net primarily includes miscellaneous interest income and gain (loss) on foreign currency transactions. The foreign currency transactions primarily reflect realized and unrealized adjustments of certain receivables and payables from the Company's recently acquired Canadian subsidiary. Also included in Other, net for the six month period ended June 30, 2001 is a $0.5 14 17 million charge related to the settlement of the Company's shareholder litigation suit that occurred during the first quarter of 2001. Taxes The provision (benefit) for income taxes for the three month period ended June 30, 2001 and 2000 of ($10.8) million and $4.8 million respectively, represents 37.3% and 39.0% of pre-tax income (loss) for the periods. The effective tax rates are higher than the Federal statutory rates of 35% due primarily to state income taxes. LIQUIDITY AND CAPITAL RESOURCES As presented in the Condensed Consolidated Statements of Cash Flows, the Company's cash position increased $19.1 million during the six month period ended June 30, 2001 from $4.2 million in cash and cash equivalents at December 31, 2000 to $23.3 million at June 30, 2001. This increase was due to cash provided by financing activities of $53.3 million partially offset by cash used in operating and investing activities of $34.2 million. Operating Activities Net cash used in operating activities of $10.7 million during the first six months of 2001 consisted of the net loss during the period partially offset by the add-back of certain non-cash charges and a decrease in working capital. Non-cash charges primarily consisted of depreciation and amortization and the provision for bad debt which included the aforementioned $4.0 million charge related to a collection dispute. Working capital decreased during the period due to the Company's continued focus on reducing its days sales outstanding in receivables and minimizing raw material inventory levels required in manufacturing. Also included in the decrease in inventory is the aforementioned $15.0 million charge during the period related to the Company's inventory valuation writedown, primarily attributed to used trailers. In addition, contributing to the change in accounts receivable is a decrease in the amount outstanding under the Company's accounts receivable securitization facility. As of June 30, 2001, $35.5 million was outstanding under this facility, compared to $69.4 million outstanding as of December 31, 2000. Investing Activities Net cash used in investing activities of $23.5 million during the first six months of 2001 was primarily due to the following: - Additional investment in the Company's trailer rental and operating lease portfolio of approximately $35.1 million, partially offset by proceeds of $17.5 million received during the second quarter under the rental fleet sale and leaseback facility; - net decrease in the Company's finance contract portfolio of approximately $5.5 million; - the Breadner Acquisition of $6.3 million; and - capital expenditures of $4.3 million. The Company anticipates capital expenditures to be less than $10 million over the next twelve months. 15 18 Financing Activities Net cash provided by financing activities was $53.3 million during the first six months of 2001 was primarily due to a net increase in total long-term debt of $56.1 million partially offset by the payment of common stock dividends and preferred stock dividends of $2.8 million in the aggregate. The increase in total debt primarily reflects debt incurred with the Breadner Acquisition and additional borrowings under the Company's unsecured revolving bank line of credit. At June 30, 2001, the Company had available borrowing capacity under its revolving credit facilities of approximately $20 million as compared to $90 million at December 31, 2000. This decrease is primarily due to the impact of decreasing availability under the Company's accounts receivable securitization facility, as mentioned previously. In addition, the Company's liquidity was further impacted by the maturity of the Company's 364-day facility and operating losses incurred by the business during the period. During the third quarter, the Company expects to replace its accounts receivable securitization facility as well as fund additional equipment under its existing rental fleet sale and leaseback facility. The Company believes that these facilities, combined with other financing transactions and improved cash flow from operations, will be adequate to meet its anticipated requirements related to capital expenditures, dividend and interest payments and working capital requirements. BACKLOG The Company's backlog of orders was approximately $450 million and $640 million at June 30, 2001 and December 31, 2000, respectively. The Company expects to fill a majority of its backlog within the next twelve months. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities which was subsequently amended by SFAS 137 and SFAS 138. These Statements require that all derivative instruments be recorded on the balance sheet at their fair value. This standard is effective for the Company's financial statements beginning January 1, 2001. The adoption of SFAS 133 did not have an effect on the Company's annual results of operations or its financial position. In June 2001, FASB issued SFAS No. 142, Goodwill and Other Intangible Assets. This Statement requires companies to cease the amortization of goodwill and establishes a new method of testing goodwill for impairment. This standard is effective for the Company's financial statements beginning January 1, 2002. The Company's goodwill amortization for the three and six months ended June 30, 2001 was $0.4 million and $0.8 million, respectively, in advance of implementing the provisions within this statement. The Company is currently evaluating this Statement's requirement for testing goodwill impairment and the related impact, if any, to the Company's results of operations and financial position. 16 19 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS In addition to the risks inherent in its operations, the Company has exposure to financial and market risk resulting from volatility in commodity prices, interest rates and foreign exchange rates. The following discussion provides additional detail regarding the Company's exposure to these risks. a. Commodity Price Risks The Company is exposed to fluctuation in commodity prices through the purchase of raw materials that are processed from commodities such as aluminum, steel, wood and virgin plastic pellets. Given the historical volatility of certain commodity prices, this exposure can significantly impact product costs. The Company manages aluminum and virgin plastic pellets price changes by entering into fixed price contracts with its suppliers prior to a customer sales order being finalized. Because the Company typically does not set prices for its products in advance of its commodity purchases, it can take into account the cost of the commodity in setting its prices for each order. To the extent that the Company is unable to offset the increased commodity costs in its product prices, the Company's results would be materially and adversely affected. b. Interest Rates As of June 30, 2001, the Company had approximately $85.6 million of London Interbank Rate (LIBOR) based debt outstanding under its Revolving Credit Facility, $48.6 million of proceeds from its rental fleet sale and leaseback agreement which calls for LIBOR based interest payments and $35.5 million of proceeds from its accounts receivable securitization facility, which also requires LIBOR based interest payments. A hypothetical 100 basis-point increase in the floating interest rate from the current level would correspond to a $1.7 million increase in interest expense over a one-year period. This sensitivity analysis does not account for the change in the Company's competitive environment indirectly related to the change in interest rates and the potential managerial action taken in response to these changes. c. Foreign Exchange Rates The Company has historically entered into foreign currency forward contracts (principally against the German Deutschemark and French Franc) to hedge the net receivable/payable position arising from trade sales (including lease revenues) and purchases with regard to the Company's international activities. In addition, in light of the Breadner Acquisition, the Company is reviewing its foreign currency exposure related to the Canadian dollar. The Company does not hold or issue derivative financial instruments for speculative purposes. As of June 30, 2001, the Company had no foreign currency forward contracts outstanding. 17 20 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Footnote 8 to the Condensed Consolidated Financial Statements for information related to Legal Proceedings. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its annual meeting of security-holders on May 15, 2001, at which time the following nominees were elected to the Board of Directors: WITHHOLD AUTHORITY NOMINEES FOR TO VOTE -------- --- ------- Richard E. Dessimoz 18,797,089 3,950,115 Donald J. Ehrlich 18,954,619 3,792,585 John T. Hackett 21,375,800 1,371,404 E. Hunter Harrison 22,328,950 418,254 Mark R. Holden 18,792,407 3,954,797 Ludvik F. Koci 21,480,627 1,266,577 ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10.01 Consulting and Non-Competition Agreement dated July 16, 2001 between Donald J. Ehrlich and Wabash National Corporation. 15.01 Report of Independent Public Accountants (b) Reports on Form 8-K: None. 18 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WABASH NATIONAL CORPORATION Date: August 9, 2001 By: /s/ Rick B. Davis -------------- ----------------- Rick B. Davis Corporate Controller (Principal Accounting Officer) And Duly Authorized Officer 19 EX-10.01 3 c64327ex10-01.txt CONSULTING AND NON-COMPETITION AGREEMENT 1 EXHIBIT 10.01 CONSULTING AND NON-COMPETITION AGREEMENT THIS CONSULTING AND NON-COMPETITION AGREEMENT ("Agreement") is made and entered into as of the 16th day of July, 2001 (the "Effective Date"), by and between Wabash National Corporation, a Delaware corporation having its principal place of business located at 1000 Sagamore Parkway South, Lafayette, Indiana 47905 (the "Company"), and Donald J. Ehrlich, an individual residing at 6829 Ripple Creek Drive, Lafayette, Indiana 47905 ("Consultant"). WITNESSETH: WHEREAS, Consultant has been an employee, an officer and a member of the Board of Directors of the Company and/or certain of its subsidiaries for a number of years; WHEREAS, Consultant is resigning from his positions as an employee, officer and/or director of the Company and each of its subsidiaries, other than his membership on the Board of Directors of the Company, as of the Effective Date; and WHEREAS, upon the terms and conditions set forth below, the Company desires to retain the services of Consultant, and Consultant desires to serve as a consultant to the Company; NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Consultant hereby agree as follows: AGREEMENT SECTION 1. ENGAGEMENT. On the terms and conditions hereinafter set forth, during the Consulting Term (as defined below), the Company hereby engages Consultant to provide, and Consultant hereby agrees to provide, to the Company or any entity controlling, controlled by or under common control with the Company (each, an "Affiliate") the Services as described in Section 2 below. SECTION 2. CONSULTING SERVICES. (a) During the period commencing on the date hereof (the "Effective Date") and continuing for a period of three (3) years thereafter, unless earlier terminated pursuant to Section 6 hereof (the "Consulting Term"), Consultant will, at the request of the officers of the Company from time to time, provide consulting services to the Company or any Affiliate of the Company with respect to all aspects of their respective business affairs, including without limitation, with respect to sales activities and customer and dealer relationships of the Company or any of its Affiliates (collectively, the "Services"). (b) Consultant shall provide the Services at such times and at such locations as may be reasonably requested by the Company; provided, however, that if a location for provision of the Services is not specified by the Company, Consultant shall provide the Services from a location of his own selection that is separate and distinct from any office or facility of the Company or 2 any of its Affiliates. Consultant will keep the Company informed with respect to the Services through monthly reports, telephone calls, meetings or other forms of communication as Consultant and the Company mutually agree. (c) Consultant shall not engage in any activity which would interfere with the timely and faithful performance of the Services. Nothing in this Section 2(c), however, shall be construed to prevent Consultant from engaging in additional activities in connection with personal investments, business investments and community affairs that are not inconsistent with and do not interfere with the performance by Consultant of the Services. (d) Consultant shall devote such time and diligent effort to the Services as may be required to fully discharge Consultant's responsibilities and shall perform the Services in a competent and professional manner, consistent with generally accepted standards of decorum and conduct and sound business practices. (e) Consultant shall at all times throughout the Consulting Term maintain Consultant's own separate and distinct place of business, which may be Consultant's residence, and shall not use any of the offices and facilities of the Company or any of its Affiliates on a regular basis in performance of the Services. Consultant shall not be entitled to use the secretarial services, word processing services or any other services provided by the Company's staff or the staff of any of the Company's Affiliates. Consultant shall purchase Consultant's own equipment to be used in the provision of the Services, including without limitation, computer equipment, word processing equipment, copiers, pagers, fax machines, calculators and office supplies, and shall be responsible for securing at his own cost any secretarial or administrative assistance he shall require in performance of the Services. (f) Consultant shall retain and exercise full control over the order, sequence, details, manner and means by which Consultant provides the Services. Neither the Company nor any of its Affiliates shall have the right to control or direct the order, sequence, details, manner or means by which Consultant provides the Services except as provided in this Agreement. SECTION 3. PAYMENT. (a) Monthly Compensation. Subject to the terms and conditions of this Agreement, the Company will pay to Consultant a fixed monthly consulting fee during the Consulting Term as follows: (i) during the first (1st) full year of the Consulting Term, the Company shall pay to Consultant the amount of Fifty Thousand Dollars ($50,000.00) per month, payable on the fifteenth (15th) day of each month, or the next business day thereafter if such is not a business day; (ii) during the second (2nd) full year of the Consulting Term, the Company shall pay to Consultant the amount of Forty One Thousand Six Hundred Sixty Six and 67/100 Dollars ($41,666.67) per month, payable on the fifteenth (15th) day of each month, or the next business day thereafter if such is not a business day; and (iii) during the third (3rd) full year of the Consulting Term, the Company shall pay to Consultant the amount of Thirty Three Thousand Three Hundred Thirty Three and 33/100 Dollars ($33,333.33) per month, payable on the fifteenth (15th) day of each month, or the next business day thereafter if such is not a business day. 2 3 (b) Automobile. As soon as practicable following the Effective Date, the Company shall transfer to Consultant good and marketable title to the automobile owned by the Company and used by Consultant prior to the date of this Agreement. Such automobile shall be transferred by the Company to Consultant "as is", with all defects, and the Company makes no representations and/or warranties as to the condition of such automobile. Consultant shall pay all transfer, sales and use taxes in connection with the transfer contemplated by this Section 3(b). (c) COBRA Expenses. The Company shall reimburse Consultant for the amount of any expenses paid by Consultant pursuant to Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and attributable to continuance of coverage under the Company's health and hospitalization plan for the period commencing on the Effective Date and ending on November 31, 2002. (d) Expenses. Consultant shall be solely responsible for all costs and expenses incurred by him in connection with the provision of the Services; provided, however, that the Company will reimburse Consultant for reasonable and necessary business expenses of Consultant during the Consulting Term for travel (at the request of the Company) and related items incurred in connection with the performance of Consultant's duties hereunder, and which are consistent with such guidelines as the Company may from time to time establish and as shall be applicable to employees of the Company. (e) Benefits. Consultant will not be entitled to any remuneration for the Services except as specifically set forth in Sections 3(a), 3(b) and 3(c). Consultant will not be entitled to receive any insurance of any kind from or through the Company, or any of its Affiliates and will not be entitled to participate in any pension, retirement, deferred compensation or other benefit plans, or any other employee benefits generally provided by the Company or any of its Affiliates to their respective employees. The foregoing shall not constitute a release by Consultant of the rights, if any, he may have to participate in any employee benefit plans of the Company or its Affiliates as a former employee of the Company or any of its Affiliates. (f) Acknowledgment. The parties acknowledge that the compensation provided in this Section 3 was negotiated at arm's-length and represents the fair market value for the Services provided by Consultant hereunder. SECTION 4. INDEPENDENT CONTRACTOR RELATIONSHIP. The parties hereto mutually agree, intend and understand that, in performance of the Services under this Agreement, Consultant at all times will act and perform solely as an independent contractor providing the Services to the Company or any of its Affiliates, and not as an employee of the Company or any of its Affiliates. Notwithstanding any other provision of this Agreement, this Agreement shall not be deemed to represent or evidence the hiring of Consultant by any party as an employee, nor does it constitute a contract of employment. No acts or assistance given to Consultant by the Company or any of its Affiliates shall be construed to alter their independent contractor relationship, and nothing contained in this Agreement shall be construed to place the parties in a relationship of partners, joint venturers, principal and agent or franchisor and franchisee. Consultant will make no representations to third parties inconsistent with the relationship established by this Agreement. All amounts payable hereunder to Consultant shall be paid without any reduction by the Company for any taxes, including but not limited to foreign or 3 4 federal, state or local income, employment, self-employment or withholding taxes, it being the intention of the parties that Consultant shall be solely responsible for the payment of all taxes, fines, penalties or assessments imposed on or related to Consultant's activities pursuant to this Agreement. SECTION 5. RESIGNATIONS; NO LIABILITY. (a) Consultant hereby resigns his positions as an employee, officer and/or director of the Company and each of its Affiliates, to the extent applicable, as of 12:01 a.m. on the Effective Date; provided, however, that Consultant is not resigning from his position as a member of the Board of Directors of the Company. No obligation on the part of the Company shall exist to maintain Consultant as a member of the Board of Directors of the Company. Consultant hereby agrees to promptly return to the Company any and all property of the Company or any of its Affiliates in his possession, custody or control. (b) Consultant hereby acknowledges and agrees that he has voluntarily resigned from, and terminated his employment with, and his status as an officer and/or director of, the Company and each of its Affiliates, except as provided above, and hereby further acknowledges and agrees that neither the Company nor any of its Affiliates shall have any obligations or liabilities of any kind or nature in connection with such resignation and termination. (c) Consultant hereby acknowledges that, as of the Effective Date, Consultant has been paid all monies due to him from the Company or any of its Affiliates on account of salary, wages, compensation, commissions, bonuses, vacation, benefits and all other entitlements in respect of Consultant's services to the Company or any of its Affiliates through and including the Effective Date, excluding any amount payable pursuant to the provisions of this Agreement. SECTION 6. TERMINATION. (a) Termination for Cause. The Company may terminate the engagement of Consultant pursuant to Section 1 only for Cause. Termination for "Cause" shall mean termination by the Company for any one or more of the following reasons: (a) any violation of any of the provisions of Section 7 or Section 8 of this Agreement; or (b) any refusal by Consultant to perform his duties hereunder upon request of the Company. (b) Resignation by Consultant. Consultant may resign from Consultant's engagement pursuant to Section 1 at any time by providing at least ninety (90) days' written notice to the Company. The effective date of the resignation shall be stated in the notice. (c) Termination by Mutual Agreement; Death; Permanent Disability. The engagement of Consultant pursuant to Section 1 may be terminated at any time by mutual agreement of the parties. The engagement of Consultant pursuant to Section 1 will automatically terminate if Consultant dies or becomes Permanently Disabled during the Consulting Term. Consultant shall be deemed to have become "Permanently Disabled" for purposes of this Section 6(c) if Consultant becomes unable to perform the Services for any period of at least six (6) consecutive months. 4 5 (d) Rights and Obligations Upon Termination. Upon any termination of the engagement of Consultant pursuant to Section 1 under the terms of this Section 6, the obligations of Consultant to provide the Services, and the obligations of the Company to continue to pay Consultant pursuant to Section 3(a), shall terminate immediately upon any such event, and neither party will have any further rights against or owe any further obligations to the other party, except for (i) rights or obligations arising out of a breach of the terms hereof, (ii) rights to the compensation due and payable under Section 3 through the date of termination of the engagement of Consultant, and (iii) the rights and obligations of the parties under Section 7 and Section 8 of this Agreement. SECTION 7. NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIALITY. (a) Non-Competition. For a period of three (3) years following the Effective Date (the "Restricted Period"), Consultant hereby covenants and agrees with the Company that Consultant shall not, directly or indirectly, for himself or on behalf of or in conjunction with any individual, company, partnership, limited liability company, corporation, joint venture, strategic alliance or business or other entity of whatever nature (each, a "Person"), engage in the business of, or own, manage, operate, join, control, lend money or other assistance to, or participate in or otherwise be connected with (as an individual, officer, director, manager, employee, partner, stockholder, trustee, proprietor, joint venturer, consultant, member, agent or otherwise), any Person that is, directly or indirectly, (i) involved in the business of designing, manufacturing, marketing and/or financing standard or customized truck trailers (or any related services), (ii) involved in any business which competes at any time during the Restricted Period with any of the respective businesses of the Company or any of its Affiliates, or (iii) involved in any other business in which the Company or any of its Affiliates is engaged as of the Effective Date or at any time during the Restricted Period. Because of the nature of the business of the Company and its Affiliates, the potential irreparable harm that will occur to the Company and its Affiliates as a result of competition by Consultant is not necessarily tied to the physical location or presence of the Company, any of its Affiliates, Consultant, or any competitor or customer of the Company or any of its Affiliates. Therefore, the non-competition restrictions set forth in this Section 7(a) shall apply to the broadest enforceable geographic area, as follows: any state, commonwealth or other jurisdiction within Canada or the United States of America (or any portion thereof). The obligations of Consultant pursuant to this Section 7(a) shall survive any termination of the engagement of Consultant pursuant to Section 6. (b) Non-Solicitation. During the Restricted Period, Consultant hereby covenants and agrees with the Company that Consultant shall not, directly or indirectly (as an individual, officer, director, member, manager, partner, shareholder, employee, trustee, proprietor, joint venturer, consultant, agent or in any other capacity whatsoever), (i) interfere with the contractual relationship of the Company or any of its Affiliates with any of the Customers (as defined below) of the Company or any of its Affiliates, (ii) attempt to provide (or solicit to provide) products or services to such Customers which are the same as or substantially similar to those products or services provided by the Company or any of its Affiliates pursuant to the existing contractual arrangements with such Customers, (iii) hire, employ or attempt to hire or employ any person who is or was an employee of the Company or any of its Affiliates at any time prior to or during the Restricted Period, or (iv) in any way (a) cause or assist or attempt to cause or assist any person who is an employee of the Company or any of its Affiliates at any time prior to or during 5 6 the Restricted Period to leave the employ of the Company or any of its Affiliates or (b) directly or indirectly seek to solicit, induce, bring about, influence, promote, facilitate, or encourage any person who is an employee of the Company or any of its Affiliates at any time prior to or during the Restricted Period to leave the employ of the Company or any such Affiliate to join a competitor or otherwise. "Customer" of the Company or any of its Affiliates shall mean any Person which, within the twelve (12) month period immediately preceding the date in question, used or purchased, or contracted to use or purchase, any products or services of the Company or any of its Affiliates. The obligations of Consultant pursuant to this Section 7(b) shall survive any termination of the engagement of Consultant pursuant to Section 6. (c) Confidentiality. (i) Obligations. Consultant recognizes and acknowledges that the services he has performed and will perform for the Company and/or any of its Affiliates are special, unique, and extraordinary in that, by reason of his previous status as an employee, officer and director of the Company and/or certain of its Affiliates and his continued provision of the Services, he has had and will continue to have access to confidential and proprietary information of a special and unique nature and value relating to the business of the Company and its Affiliates, the use or disclosure of which could cause the Company and its Affiliates immeasurable and substantial loss and damages for which no remedy at law would be adequate. Accordingly, Consultant shall hold all Confidential Information (as defined below) in strict confidence and solely for the benefit of the Company and its Affiliates and shall not use or disclose any Confidential Information to anyone except the Company or its Affiliates or their respective authorized representatives. Consultant shall use such Confidential Information only in the course of performance of the Services and for no other purpose. Consultant shall follow all policies and procedures of the Company to protect all Confidential Information and shall take any additional precautions necessary under the circumstances to preserve and protect the use or disclosure of any Confidential Information at all times. The obligations of Consultant set forth in this Section 7(c)(i) shall survive any termination of the engagement of Consultant pursuant to Section 6 and shall survive indefinitely thereafter. (ii) Ownership of Confidential Information. All Confidential Information is and shall remain the exclusive property of the Company and its Affiliates, as applicable, whether or not prepared in whole or in part by Consultant and whether or not disclosed to or entrusted to the custody of Consultant. Upon the termination of the engagement of Consultant under this Agreement for any reason, or upon the request of the Company, at any time, Consultant shall promptly deliver to the Company all documents, tapes, disks, or other storage media and any other materials, and all copies thereof, in whatever form, in the possession of, or under the custody or control of, Consultant and pertaining to the business of the Company or any of its Affiliates, including, but not limited to, any containing 6 7 Confidential Information, and all other property of the Company or any of its Affiliates in Consultant's possession or under Consultant's custody or control (the "Company Documents"). Consultant shall use the Company Documents and information contained therein only in the course of performing the Services and for no other purpose. Consultant shall not use or disclose any Company Documents or copies of Company Documents to anyone except to authorized representatives of the Company or its Affiliates. The obligations of Consultant set forth in this Section 7(c)(ii) shall survive any termination of the engagement of Consultant pursuant to Section 6 and shall survive indefinitely thereafter. (iii) Definition. "Confidential Information" shall mean information about the Company or any of its Affiliates disclosed to or known by Consultant as a consequence of Consultant's performance of the Services or Consultant's relationship with the Company as an employee, officer, director or shareholder, or former employee, officer, director or shareholder, or otherwise, that in any way relates to the business of the Company or any of its Affiliates and regardless of the format in which it is presented or embodied (written, graphic, electromagnetic or otherwise). Confidential Information includes, but is not limited to, the following types of information (whether or not designated as confidential): (a) Information regarding the Company's or any of its Affiliate's customers, and their representatives, potential customers or leads; the identity of any contracts (contents and parties) to which the Company or any of its Affiliates is or was a party or is or was bound; data provided by the Company or any of its Affiliates; and the type, quantity and specifications of products and services being sold to, purchased, leased, licensed or received by the Company or any of its Affiliates; (b) Information received by the Company or any of its Affiliates from third parties (such as vendors or dealers) under an obligation of confidentiality, restricted disclosure or restricted use, including, but not limited to, information pertaining to such third parties' customers or clients which have been provided to the Company or any of its Affiliates; (c) Internal personnel and financial information of the Company or any of its Affiliates (including the revenue, costs or profits associated with any of their respective products or services); vendor and supplier names, payroll information, purchasing and internal cost information, internal service and operational manuals and other information of the Company or any of its Affiliates; and the manner and methods of conducting the businesses of the Company or any of its Affiliates; (d) Information with respect to the products, facilities, methods, systems, trade secrets and Intellectual Property of the Company or any of its 7 8 Affiliates including, but not limited to, design, development or construction information; (e) Work product and other information related to work or projects performed or about to be performed for the Company or any of its Affiliates or for any of their respective customers; (f) Marketing and developmental plans, price and cost data, price and fee amounts, pricing and billing policies, quoting procedures, marketing techniques, methods of obtaining business, forecasts, forecast assumptions and volumes, future plans and potential strategies of the Company or any of its Affiliates; (g) Any other information relating to the Company or any of its Affiliates which may have been obtained by Consultant prior to or after the date of this Agreement; and (h) Hardware, software, computer programs and other technology used by the Company or any of its Affiliates. "Confidential Information" does not include information which (i) was publicly available at the time of disclosure to Consultant or (ii) became known to the public after disclosure to Consultant through no fault of Consultant; provided, however, that information or documents which are generally available or accessible to the public shall be deemed Confidential Information of the Company or any of its Affiliates if the information was retrieved, gathered, assembled or maintained by Consultant, the Company or any of its Affiliates in a manner not available to the public. From time to time, the Company may, for its own benefit, choose to place certain Confidential Information or records of the Company or any of its Affiliates in the public domain. The fact that such Confidential Information may be made available to the public in a limited form and under limited circumstances does not change its characterization as Confidential Information hereunder, and does not release Consultant from the duties with respect to such Confidential Information as set forth in this Agreement (iv) Non-Disclosure of Terms. Consultant shall not at any time communicate or divulge any information regarding the circumstances surrounding this Agreement, or the terms and conditions or amounts payable under this Agreement, to any other Person; provided, however, that nothing in this Section 7(c)(iv) shall prevent Consultant from sharing with his legal, accounting and financial advisors on a confidential basis any legal or financial information regarding this Agreement. The obligations of Consultant set forth in this Section 7(c)(iv) shall survive any termination of the engagement of Consultant pursuant to Section 6 and shall survive indefinitely thereafter. 8 9 SECTION 8. NON-DISPARAGEMENT. Consultant agrees that he shall not, directly or indirectly, make any disparaging statement, or release any information, or encourage others to make any statement or release any information that is designed to embarrass or criticize the Company or any of its Affiliates, any of their respective employees, officers, directors, representatives or agents, or any of their respective policies or practices, to any Person, including any of the Company's or its Affiliate's actual or prospective customers, competitors, employees, former employees, or the press or other media in the United States of America or in any other country; provided, however, that it will not be a violation of this Section 8 for Consultant to make truthful statements when required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with the jurisdiction to order Consultant to divulge, disclose or make accessible such information. The obligations of Consultant pursuant to this Section 8 shall survive any termination of the engagement of Consultant pursuant to Section 6 and shall survive indefinitely thereafter. SECTION 9. REASONABLENESS OF TERMS. Consultant agrees that the restrictions contained in Section 7 and in Section 8 are reasonable and necessary to protect the goodwill, trade secrets, proprietary interests and other legitimate business interests of the Company and its Affiliates. Each of the covenants set forth in Section 7 and Section 8 is severable and separate and, in the event that any court of competent jurisdiction later determines that any of the restrictions in Section 7 or Section 8 are not reasonable and/or are too broad to be enforceable at law or in equity, the Company and Consultant agree that such court is authorized to restrict the scope of Section 7 or Section 8, or any portion thereof, to a reasonable restriction, so long as such restriction is no broader than that contained in the applicable covenant. SECTION 10. INJUNCTIVE RELIEF. Consultant understands and agrees that any breach of Sections 7 or 8 of this Agreement will cause material and irreparable injury to the goodwill and proprietary interests of the Company and its Affiliates for which there is no adequate remedy at law, and that injury and damages resulting from any such breach will be immeasurable. Accordingly, in addition to any other legal or equitable remedies that may be available to the Company or its Affiliates, Consultant agrees that, upon any breach or threatened breach of any portion of Sections 7 or 8 of this Agreement, the Company and/or its Affiliates will be entitled to seek and obtain immediate injunctive relief without notice or the posting of any bond, in the form of a temporary restraining order, preliminary injunction or permanent injunction against Consultant in order to enforce Sections 7 or 8 of this Agreement. The Company and its Affiliates shall not be required to demonstrate any actual injury or damage to obtain such injunctive relief from any court. In addition to any injunctive relief to which it shall be entitled, the Company shall be entitled to recover from Consultant all costs, expenses and reasonable attorneys' fees incurred by the Company or any of its Affiliates in seeking enforcement of this Agreement and/or damages for Consultant's breach of this Agreement. The Company and its Affiliates shall also be entitled to pursue any other legal or equitable remedies that may be available to the Company. SECTION 11. ASSIGNMENT OF INTELLECTUAL PROPERTY. Consultant shall assign to the Company as soon as practicable following the date hereof all of Consultant's right, title and interest in and to any and all Intellectual Property (as defined below), including any copyright therein and any copyright renewal thereof, for the United States of America and throughout the 9 10 world. Consultant agrees to execute any and all applications for domestic and foreign patents, copyrights or other proprietary rights and to do such other acts (including, among others, the execution and delivery of instruments of further assurance or confirmation) requested by the Company to assign the Intellectual Property to the Company and to permit the Company to file, obtain and enforce any patents, copyrights or other proprietary rights in the Intellectual Property. Consultant agrees that Consultant's obligation to execute, or cause to be executed, when it is in Consultant's power to do so, any such instrument or document, will continue indefinitely after termination of Consultant's engagement pursuant to this Agreement. Consultant agrees to make and maintain adequate and current written records of all Intellectual Property, in the form of notes, sketches, drawings or reports relating thereto, which records shall be and remain the property of and available to the Company at all times. "Intellectual Property" shall mean all legally-recognized rights, whether statutory or at common law, to the designs, writings, computer software or firm source code, object code, data base structures, inventions, formulas, discoveries, developments, methods, know-how and processes (whether or not patentable or copyrightable or constituting trade secrets) conceived, made, developed or discovered, by Consultant (whether alone or with others) at any time prior to or during Consultant's employment with the Company or any of its Affiliates or at any time during the Restricted Period and that relate, directly or indirectly, to the past, present or future business activities, research, product design or development, personnel and business opportunities, of the Company or any of its Affiliates, or result from tasks assigned to Consultant by the Company or any of its Affiliates or done by Consultant for, or on behalf of, the Company or any of its Affiliates. Intellectual Property includes, but is not limited to, works of authorship, developments, inventions, innovations, designs, discoveries, improvements, trade secrets, applications, techniques, know-how and ideas, whether or not patentable or copyrightable, patents, patent applications, copyrights and applications or registrations therefor, trademarks and applications or registrations therefor, conceived, created, made, developed or first reduced to practice by Consultant (solely or in cooperation with others) in connection with his or her previous employment with the Company or any of its Affiliates or in connection with the performance of the Services or which derive from information or materials Consultant has received from the Company or any of its Affiliates. Consultant agrees that any Intellectual Property which constitutes a work of authorship that is copyrightable shall constitute a "work for hire" as defined in the 17 U.S.C. ss.101 et seq., and shall be the property of the Company. SECTION 12. TAXES AND COMPLIANCE WITH LAWS. Consultant shall be solely responsible for compliance with all state, local and federal laws, orders, codes and ordinances applicable to the performance of Consultant's obligations under this Agreement or the compensation paid to Consultant pursuant to this Agreement. Consultant shall indemnify, defend and hold harmless the Company and each of its Affiliates, and each of their respective officers, directors, representatives, agents and employees, from and against any and all liabilities which the Company or any of its Affiliates may incur as a result of any failure by Consultant to pay any local, state or federal income, employment, self-employment or withholding tax, including without limitation any failure to timely pay any estimated tax. SECTION 13. NONASSIGNABILITY, BINDING AGREEMENT. (a) By Consultant. Consultant shall not assign or delegate this Agreement or any right or interest under this Agreement without the Company's prior written consent; provided, however, 10 11 that in the event Consultant dies prior to his receipt of all payments due to him pursuant to this Agreement, Consultant hereby designates (and the Company hereby consents) that Consultant's estate shall receive the remaining payments due to him hereunder. (b) By the Company. The Company may assign, delegate, or transfer this Agreement and all of the Company's rights and obligations under this Agreement to any of its Affiliates or to any business entity that by merger, consolidation or otherwise acquires all or substantially all of the assets of the Company or to which the Company transfers all or substantially all of its assets. Upon assignment, delegation, or transfer to any business entity, such entity shall be deemed to be substituted for the Company for all purposes of this Agreement. (c) Binding Effect. Subject to Sections 13(a) and (b), this Agreement shall be binding upon and inure to the benefit of the parties, any successors to or assigns of the Company, Consultant's heirs and the personal representatives or executor of his estate. SECTION 14. SEVERABILITY. If a court of competent jurisdiction makes a final determination that any term or provision of this Agreement is invalid or unenforceable, the remaining terms and provisions shall be unimpaired and the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that most closely approximates the intention of the parties with respect to the invalid or unenforceable term or provision, as evidenced by the remaining valid and enforceable terms and conditions of this Agreement. SECTION 15. AMENDMENT. This Agreement may not be modified, amended or waived in any manner except by an instrument in writing signed by both parties to this Agreement. SECTION 16. WAIVER. The waiver by either party of compliance by the other party with any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement (whether or not similar), or a continuing waiver or a waiver of any subsequent breach by a party of a provision of this Agreement. Performance by either of the parties of any act not required of it under the terms and conditions of this Agreement shall not constitute a waiver of the limitations on its obligations under this Agreement, and no performance shall estop that party from asserting those limitations as to any further or future performance of its obligations. SECTION 17. GOVERNING LAW; CHOICE OF FORUM; CONSENT TO JURISDICTION. Notwithstanding the conflict of laws principles of any state or other jurisdiction to the contrary, the laws of the State of Indiana shall govern the validity, performance, enforcement, interpretation and any other aspect of this Agreement. Any proceeding to enforce, interpret, challenge the validity of or recover for the breach of any provision of this Agreement shall be filed exclusively in the courts of the State of Indiana or the United States District Court for the [NORTHERN] District of Indiana, and the parties hereto expressly waive any and all objections to personal jurisdiction, service of process or venue in connection therewith. SECTION 18. NOTICES. All notices required or desired to be given under this Agreement shall be in writing and shall be deemed to have been given if delivered (i) in person and receipted for by the party to whom the notice is directed; (ii) mailed by certified or registered United States 11 12 mail, postage prepaid, not later than the day upon which the notice is required to be given pursuant to this Agreement; (iii) by facsimile with receipt of confirmation, at the facsimile numbers listed below; or (iv) delivered by expedited courier, shipping prepaid or mailed to sender, on the next business day, after the date on which it is so sent, and addressed as follows: If to the Company, to: Wabash National Corporation 1000 Sagamore Parkway South Lafayette, Indiana 47905 Attention: Richard E. Dessimoz, Acting Chief Executive Officer Facsimile: (765)771-5308 With a copy to: Ice Miller One American Square Box 82001 Indianapolis, IN 46282 Attention: John R. Thornburgh, Esq. Facsimile: (317) 236-2219 If to Consultant, to such address for him as is last shown on the payroll records of the Company. With a copy to: -------------------------- -------------------------- -------------------------- Attention: --------------- Facsimile: --------------- Either party may, by giving notice to the other party, change the address to which notice shall then be sent. SECTION 19. EXPENSES. Each of the parties to this Agreement shall bear all of his or its own expenses, including attorneys' fees and other out-of-pocket expenses, in connection with the negotiation, preparation and enforcement of this Agreement; provided, however, that, in the event a proceeding is brought by either of the parties to this Agreement to enforce any of the terms or provisions of this Agreement, the prevailing party shall be entitled to reimbursement of all expenses in connection therewith, including reasonable attorneys' fees and other out-of-pocket expenses. SECTION 20. PRIOR AGREEMENTS. This Agreement is the complete and total integration of the understanding of the parties with respect to the subject matter contained herein, and this Agreement supersedes all prior or contemporaneous negotiations, commitments, agreements, writings, including handbooks, and discussions with respect to the subject matter of this Agreement, and all prior negotiations, commitments, agreements, writings, including handbooks, and discussions will have no force or effect. 12 13 SECTION 21. HEADINGS. The headings of the Sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction of this Agreement. SECTION 22. COUNTERPARTS. This Agreement may be executed in two counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. Only one counterpart signed by the party against which enforceability is sought needs to be produced to evidence the existence of this Agreement. SECTION 23. JOINT DRAFTING. This Agreement shall be deemed to have been drafted jointly by the parties, and, in the event of any ambiguity in this Agreement, the terms and provisions of this Agreement shall not be construed against either party as a result of the drafting of this Agreement. SECTION 24. REMEDIES. All remedies specified in this Agreement shall be cumulative and not exclusive of any other rights or remedies, and either party may pursue all rights and remedies available at law or in equity for a breach of this Agreement. [SIGNATURE PAGE FOLLOWS] 13 14 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date. "COMPANY" WABASH NATIONAL CORPORATION By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- "CONSULTANT" ---------------------------------------- Donald J. Ehrlich 14 EX-15.01 4 c64327ex15-01.txt REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHBIT 15.01 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Wabash National Corporation: We have reviewed the accompanying condensed consolidated balance sheets of WABASH NATIONAL CORPORATION (a Delaware corporation) and subsidiaries as of June 30, 2001, and the related condensed consolidated statements of operations for the three and six-month periods ended June 30, 2001 and 2000, and the condensed consolidated statements of cash flows for the six-month periods ended June 30, 2001 and 2000. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Wabash National Corporation and subsidiaries as of December 31, 2000 (not presented herein) and, in our report dated February 6, 2001, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2000 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Indianapolis, Indiana, July 23, 2001. -----END PRIVACY-ENHANCED MESSAGE-----