<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1996.
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GRADALL INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
3531
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
36-3381606
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
406 Mill Avenue SW
New Philadelphia, OH 44663
(330) 339-2211
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
BRUCE A. JONKER
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
GRADALL INDUSTRIES, INC.
406 MILL AVENUE SW
NEW PHILADELPHIA, OH 44663
(330) 339-2211
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
ANTHONY E. EFREMOFF, ESQ.
BLACK, MCCUSKEY, SOUERS & ARBAUGH
1000 UNITED BANK PLAZA
220 MARKET AVENUE SOUTH
CANTON, OHIO 44702
(330) 456-8341
WINTHROP B. CONRAD, JR., ESQ.
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED
NUMBER OF PROPOSED MAXIMUM
SHARES MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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Common Stock, par value $.001
per share.................... 3,593,750 $17.00 $61,093,750 $21,067
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</TABLE>
(1) Includes 468,750 shares which are being registered in connection with an
over-allotment option granted to the Underwriters.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
GRADALL INDUSTRIES, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM
NUMBER FORM S-1 CAPTION LOCATION OR CAPTION IN PROSPECTUS
------ ------------------------------------------ ------------------------------------------
<S><C> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Facing Page of Registration Statement;
Cross Reference Sheet; Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front Cover Page of Prospectus;
Table of Contents
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; Risk Factors; Business
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Outside Front Cover Page of Prospectus;
Underwriters
6. Dilution.................................. Dilution
7. Selling Security Holders.................. Principal and Selling Stockholders
8. Plan of Distribution...................... Outside Front Cover Page of Prospectus;
Underwriters
9. Description of Securities to Be
Registered.............................. Outside Front Cover Page of Prospectus;
Description of Capital Stock
10. Interests of Named Experts and Counsel.... Legal Matters; Experts
11. Information with Respect to the
Registrant.............................. Prospectus Summary; Risk Factors; The
Company; Capitalization; Business;
Underwriting; Description of Capital
Stock; Dividend Policy; Selected
Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Management; Principal and
Selling Stockholders; 1995
Recapitalization and Certain
Transactions; Index to Consolidated
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
</TABLE>
i
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED , 1996
3,125,000 SHARES
GRADALL INDUSTRIES, INC.
COMMON STOCK
OF THE 3,125,000 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE (THE
"COMMON STOCK"), OFFERED HEREBY, 2,125,000 SHARES ARE BEING OFFERED BY GRADALL
INDUSTRIES, INC. (THE "COMPANY") AND 1,000,000 SHARES ARE BEING OFFERED BY THE
SELLING STOCKHOLDERS. SEE "PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL
NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF SHARES BY THE SELLING
STOCKHOLDERS.
PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON
STOCK. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE
BETWEEN $15 PER SHARE AND $17 PER SHARE. SEE "UNDERWRITING" FOR THE FACTORS TO
BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE. APPLICATION IS
BEING MADE TO HAVE THE COMMON STOCK APPROVED FOR QUOTATION ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "GRDL."
FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE SHARES OF COMMON
STOCK OFFERED HEREBY, SEE "RISK FACTORS" ON PAGES 6 TO 8.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS* COMPANY+ STOCKHOLDERS
<S> <C> <C> <C> <C>
PER SHARE..................... $ $ $ $
TOTAL ++...................... $ $ $ $
</TABLE>
- ---------------
* The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
+ Before deducting expenses of the Offering payable by the Company estimated to
be $500,000.
++ The Selling Stockholders have granted the Underwriters a 30-day option to
purchase up to 468,750 additional shares of Common Stock on the same terms
per share solely to cover over-allotments, if any. If such option is
exercised in full, the total price to public will be $ , the total
underwriting discounts and commissions will be $ and the total
proceeds to Selling Stockholders will be $ . See "Underwriting."
------------------------
THE COMMON STOCK IS BEING OFFERED BY THE UNDERWRITERS AS SET FORTH UNDER
"UNDERWRITING" HEREIN. IT IS EXPECTED THAT DELIVERY OF CERTIFICATES THEREFOR
WILL BE MADE AT THE OFFICES OF DILLON, READ & CO. INC., NEW YORK, NEW YORK, ON
OR ABOUT , 1996. THE UNDERWRITERS INCLUDE:
DILLON, READ & CO. INC. MCDONALD & COMPANY
SECURITIES, INC.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless the context otherwise requires, "Gradall"
or the "Company" refers to Gradall Industries, Inc., a Delaware corporation, and
its consolidated subsidiaries. In addition, unless otherwise indicated, all
information in the Prospectus (i) assumes no exercise of the Underwriters'
over-allotment option and (ii) gives effect to a 5,540-for-1 split of the
Company's Common Stock to be effected immediately prior to the consummation of
the offering made hereby (the "Offering").
THE COMPANY
Gradall is a leading manufacturer of hydraulic excavators and material
handlers as well as related service parts. The Company's products are marketed
under the widely respected Gradall tradename and are distinguished by their
unique telescopic boom technology, versatility, productivity and reliability.
Gradall products serve niche markets within the construction equipment industry
and typically command premium prices. In 1995, total sales were $118.4 million,
comprised of $49.2 million in sales of excavators, $53.6 million in sales of
material handlers and $15.6 million in sales of service parts. Since January
1993, the Company has introduced 12 new products which accounted for in excess
of 50% of Gradall's net sales in 1995.
Gradall excavators are typically used by general contractors and government
agencies for ditching, sloping, finished grading, general maintenance and
infrastructure projects. The Company's excavators are sold through approximately
41 independent distributors at approximately 141 locations throughout North
America. The introduction and ongoing development of the Company's XL Series
excavators, featuring the unique Gradall rotating, telescopic booms with
high-pressure hydraulics, have allowed the Company to continue to dominate its
traditional niche market of wheeled, telescopic boom excavators and to
strengthen its competitive position in the larger market of conventional crawler
excavators, a market historically dominated by knuckle-boom technology.
Gradall rough-terrain variable reach material handlers are typically used
by residential, non-residential and institutional building contractors for
lifting, transporting and placing a wide variety of materials at their point of
use or storage. The Company's material handlers are sold through approximately
40 independent distributors at approximately 120 locations throughout North
America. In addition, Gradall material handlers are available at national rental
companies at over 129 locations. The Company continues to introduce new material
handlers with Gradall's unique 90 degree rear-pivot steering, hydrostatic
drive and low profile design which provide an exceptional combination of
maneuverability, versatility and stability. This new product development has
allowed the Company to increase its market share in the rapidly growing
rough-terrain variable reach material handler market.
Gradall's strategy is to design and produce high quality hydraulic
excavators and material handlers for niche markets while simultaneously reducing
manufacturing costs and increasing production efficiencies. Gradall's ability to
design and customize each of its product lines to fit the specifications of its
customers augments the uniqueness of the Company's products. In addition, in
1995, the Company commenced a multi-year capital expenditure program designed to
expand plant capacity and reduce production costs by increasing labor efficiency
and equipment productivity and improving quality. Management believes that these
strategies have enabled the Company to increase substantially its profitability
in recent years.
3
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company......... 2,125,000 shares
Common Stock offered by the Selling
Stockholders.............................. 1,000,000 shares(1)
-------------------
3,125,000 shares
Total Common Stock offered.................. ===================
Common Stock to be outstanding after the 8,114,294 shares(2)
Offering..................................
To repay certain outstanding indebtedness of
Use of proceeds by the Company.............. the Company incurred in connection with the
1995 Recapitalization (as defined below) and to
redeem all of the outstanding shares of the
Preferred Stock of the Company. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol...... GRDL
</TABLE>
- ---------------
(1) Includes 449,294 shares of Common Stock to be issued immediately prior to
the consummation of the Offering in connection with the exercise of the
Warrants (as defined below) owned by certain Selling Stockholders. Does not
include up to 468,750 shares of Common Stock which may be sold by the
Selling Stockholders pursuant to the Underwriters' over-allotment option.
(2) Does not include 132,406 shares of Common Stock issuable in connection with
outstanding stock options, none of which are currently exercisable. See
"Management."
RISK FACTORS
Any investment in the Common Shares offered hereby involves a high degree
of risk. For a discussion of considerations relevant to an investment in the
shares of Common Stock, see "Risk Factors" on pages 6 to 8.
4
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data set forth below should be read in
conjunction with the Consolidated Financial Statements of the Company and the
Notes thereto included elsewhere in this Prospectus and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- -----------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................ $49,946 $57,665 $72,208 $88,820 $ 118,438 $ 30,453 $ 34,137
Cost of sales........................ 42,639 48,780 59,274 71,280 92,637 24,027 26,467
------- ------- ------- ------- --------- --------- ---------
Gross profit......................... 7,307 8,885 12,934 17,540 25,801 6,426 7,670
Operating expenses:
Engineering........................ 1,439 1,477 1,848 2,123 2,504 601 752
Selling and marketing.............. 3,367 3,345 4,232 4,728 5,365 1,258 1,586
Administrative..................... 3,027 2,986 5,075 4,618 5,138 949 1,177
------- ------- ------- ------- --------- --------- ---------
Operating income (loss).............. (526) 1,077 1,779 6,071 12,794 3,618 4,155
Amortization of FAS 106(1)........... -- -- -- (3,626) -- -- --
Interest expense..................... 1,436 1,062 1,055 1,146 1,642 257 1,018
Other, net........................... 578 (376) (549) 234 865 219 141
------- ------- ------- ------- --------- --------- ---------
Income before provision for taxes.... (2,540) 391 1,273 8,317 10,287 3,142 2,996
Income tax provision (benefit)....... (227) 334 550 3,152 3,680 1,125 1,162
------- ------- ------- ------- --------- --------- ---------
Net income before change in
accounting......................... (2,313) 57 723 5,165 6,607 2,017 1,834
Change in accounting
(gain)/loss(2)..................... -- (243) 9,014 -- -- -- --
------- ------- ------- ------- --------- --------- ---------
Net income (loss)(3)................. $(2,313) $ 300 $(8,291) $ 5,165 $ 6,607 $ 2,017 $ 1,834
======== ======== ======== ======== ========= ========= =========
PRO FORMA DATA(4):
Net income per common share.......... $ 0.83 $ 0.24 $ 0.29
========= ========= =========
Weighted average common shares
outstanding........................ 8,114,294 8,114,294 8,114,294
OTHER OPERATING DATA:
Employees............................ 424 459 518 557 581 566 590
Sales per employee................... $ 118 $ 126 $ 139 $ 159 $ 204 $ 54 $ 58
Capital expenditures................. 346 740 534 1,214 4,189 1,083 201
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1996
1995 ------------------------
------------ AS
ACTUAL ACTUAL ADJUSTED(5)
------------ -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................................... $ 10,735 $ 14,498 $ 16,950
Total assets...................................................... 52,024 57,567 56,796
Total debt........................................................ 37,922 40,140 11,965
Stockholders' equity.............................................. (23,119) (21,285) 6,771
</TABLE>
- ---------------
(1) The FAS 106 gain in 1994 resulted from the reduction in the post-retirement
health care benefits liability reflecting a change in actuarial assumptions
related to the projected growth rate in medical costs.
(2) Reflects in 1992 a $0.2 million after-tax increase in net income resulting
from the adoption of a new accounting standard for income taxes (FAS 109)
and in 1993 a $9 million after-tax decrease in net income resulting from the
adoption of the accrual basis of accounting for post-retirement health care
benefits (FAS 106).
(3) Net income (loss) per share data have been omitted as such amounts are not
comparable due to the 1995 Recapitalization.
(4) Presented as if the 1995 Recapitalization, the exercise of the Warrants, the
issuance of shares of Common Stock pursuant to the Offering and the
application of the estimated net proceeds thereof had occurred on January 1,
1995. Pro forma net income per share data do not include a $0.6 million
extraordinary loss (net of a tax benefit of $0.4 million) on repayment in
full of the Senior Subordinated Notes and a $0.5 million write-off (net of a
tax benefit of $0.3 million) of the financing costs related to the repayment
in full of the Senior Subordinated Notes and the Term Loan and a portion of
the Revolver which will be reported in the period in which the Offering is
consummated.
(5) Adjusted as if the exercise of the Warrants, the issuance of shares of
Common Stock pursuant to the Offering and the application of the estimated
net proceeds thereof had occurred on March 31, 1996. Reflects a $0.6 million
extraordinary loss (net of a tax benefit of $0.4 million) on repayment in
full of the Senior Subordinated Notes and a $0.5 million write-off (net of a
tax benefit of $0.3 million) of the financing costs related to the repayment
in full of the Senior Subordinated Notes and the Term Loan and a portion of
the Revolver which will be reported in the period in which the Offering will
be consummated. See "Use of Proceeds."
5
<PAGE> 8
RISK FACTORS
Any investment in the shares of Common Stock offered hereby involves
risk. Prospective investors should consider carefully the following factors in
evaluating any investment in the Common Stock.
IMPACT OF SIGNIFICANT COMPETITION
The markets in which the Company operates are highly competitive. The
Company faces competition in each of its product lines from a number of
different manufacturers, some of which have greater financial and other
resources than the Company. The principal competitive factors affecting the
markets for the Company's products include performance, functionality, price,
brand recognition, customer service and support, and product availability.
CYCLICALITY MAY LEAD TO FLUCTUATIONS IN DEMAND
The Company markets its products primarily to the construction industry.
Accordingly, demand for the Company's products, and therefore the profitability
of the Company, are sensitive to the state of the U.S. economy in general,
regional economic conditions, and particularly to changes in private
construction spending and infrastructure spending funded by the public sector.
There can be no assurance that the cyclicality of any of these factors will not
have an adverse effect on the Company's business, operations or financial
performance.
DEPENDENCE ON SUCCESSFUL PRODUCT DEVELOPMENT
In excess of 50% of the Company's net sales in 1995 were attributable to
new products introduced since 1993. The Company believes that its future growth
and profitability are dependent on its continued development of new products and
the success of such new products, and no assurance can be given that the Company
will be able to successfully develop and distribute additional new products.
DEPENDENCE ON DISTRIBUTION NETWORK
The Company primarily markets and distributes its products through a
network of independent distributors and believes that this network is a core
strength of its business. While it is not dependent on any single distributor,
loss of certain key distributors could have an adverse effect on the business,
operations and financial results of the Company. The Company also sells its
products to national rental companies, who in turn rent the products to
end-users. The Company believes that this distribution channel is increasingly
important to its continued success, and the loss of certain key national rental
company accounts could have an adverse effect on the business, operations and
financial results of the Company.
DEPENDENCE ON NEW PHILADELPHIA FACILITY
The Company operates from a single company-owned facility in New
Philadelphia, Ohio (the "New Philadelphia Facility") which accommodates the
Company's corporate offices, manufacturing and assembly operations and
warehouse. Equipment failures at the New Philadelphia Facility could limit or
shut down the Company's production for a significant period of time. In order to
minimize the risk of equipment failure, the Company follows a comprehensive
maintenance and loss prevention program and periodically reviews its failure
exposure. To date, the Company has not experienced any significant equipment
failure. However, no assurance can be given that a material shutdown will not
occur in the future or that such a shutdown would not have an adverse effect on
the business, operations and financial results of the Company. In addition to
equipment failure, the New Philadelphia Facility also is subject to the risk of
catastrophic loss. The Company maintains property damage insurance which it
believes to be adequate to provide for reconstruction of damaged equipment, as
well as business interruption insurance to mitigate losses resulting from any
production shutdown caused by an insured loss. However, no assurance can be
given that such insurance will be adequate to cover losses which could occur.
Based on its current equipment and manufacturing processes, the New
Philadelphia Facility is operating at capacity. Significant increases in output
from current levels will require increases in capital expenditures
6
<PAGE> 9
and other productivity improvements. In 1995, the Company invested $4.2 million
in capital improvements and initiated a multi-year capital program designed to
increase production efficiency, material utilization and output and improve
product quality. The Company plans to invest in excess of $4 million in capital
improvements in each of 1996 and 1997. The Company believes that recently
completed capital expenditures, which have expanded plant capacity, together
with planned capital expenditures, should allow the Company to meet anticipated
demand for its products. However, there can be no assurance that the Company
will be successful in implementing these measures or that such measures will be
successful in increasing plant capacity or meeting future increases in demand.
LABOR RELATIONS
The Company's 395 hourly employees are represented by the International
Association of Machinists and Aerospace Workers and are currently working under
a three-year contract which will expire in March 1997. In the history of the
Company, there have been two strikes by the union employees -- the first in 1975
and the second in 1994 in connection with the negotiation of the current
contract. There can be no assurance that the Company will be able to negotiate
satisfactory contracts with the union in the future or that the Company's union
employees will not participate in any work stoppage which could have an adverse
effect on the operations of the Company.
DEPENDENCE ON KEY MANAGEMENT
The success of the Company's business is dependent upon the management and
leadership skills of Barry L. Phillips, the Company's President, and other
members of the Company's senior management team. Although the Company has an
employment agreement with Mr. Phillips, the loss of Mr. Phillips or any other
member of the senior management team or an inability to attract and retain
additional personnel could adversely affect the Company. There can be no
assurance that the Company will be able to retain its existing senior management
personnel or to continue to attract additional qualified personnel.
DEPENDENCE ON CERTAIN SUPPLIERS
Certain of the components included in the Company's products are obtained
from a single supplier or a limited number of suppliers. Disruption or
termination of supplier relationships could have an adverse effect on the
Company's operations. The Company believes that alternative sources could be
obtained, if necessary, but the inability to obtain sufficient quantities of the
components or the need to develop alternative sources, if and as required in the
future, could result in delays or reductions in product shipments which in turn
may have an adverse effect on the Company's operating results and customer
relationships. See "Business -- Suppliers."
IMPACT OF CHANGING STEEL PRICES
A principal raw material used by the Company in its operations is steel.
The steel industry as a whole is cyclical, and steel prices are volatile due to
numerous factors beyond the control of the Company. This volatility can
significantly affect the Company's raw material costs. Competitive conditions
will determine the extent to which steel price increases can be passed on to the
Company's customers. If the Company is unable to pass some or all of future
steel price increases to its customers, the Company's financial performance
would be adversely affected.
RISK OF CLAIMS FOR PRODUCT LIABILITY
Due to the nature of its products, the Company may be subject to
significant claims for product liability. The Company is a party to various
lawsuits seeking damages for alleged product liability arising from the use of
its products. The Company currently maintains product liability insurance with
an annual aggregate limit of $6 million subject to a self-insurance retention in
the amount of $225,000 per claim. There can be no assurance that the Company's
insurance policy would be adequate to cover potential product liability claims.
A successful claim against the Company in excess of the Company's insurance
coverage could have an adverse effect on the financial results of the Company.
In each of the fiscal years ended December 31, 1995, 1994 and
7
<PAGE> 10
1993, the Company's product liability costs for any claim have not exceeded its
self-insurance retention amount.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state and local environmental
laws and regulations. Pursuant to these laws and regulations, the Company may
also be required from time to time to remediate environmental contamination
associated with releases of hazardous substances. Although the Company does not
anticipate that expenditures to comply with environmental laws and regulations
will be material, there can be no assurance that the costs of complying with
such existing or future laws or regulations will not exceed current estimates.
CONTROL BY MLGA FUND II, L.P.
Upon the consummation of the Offering, approximately 49.5% of the
outstanding Common Stock of the Company (approximately 45.5% if the
Underwriters' over-allotment option is exercised in full) will be owned by MLGA
Fund II, L.P. ("Fund II") and its affiliates. Accordingly, Fund II and its
affiliates will be able to exert significant influence over the Company and its
business and affairs, including the election of directors. See "Principal and
Selling Stockholders" and "Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market following
the Offering could have a material adverse effect on the market price of the
Common Stock and may make it more difficult for the Company to sell shares of
Common Stock in the future for prices and at times it deems appropriate. Upon
completion of the Offering, the Company will have outstanding 8,114,294 shares
of Common Stock. Of these shares, the 3,125,000 shares of Common Stock sold in
the Offering (3,593,750 shares if the Underwriters' over-allotment option is
exercised in full) will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"), unless such shares are owned by "affiliates" of the Company as that term
is defined in Rule 144 under the Securities Act. The remaining 4,989,294 shares
of Common Stock (4,520,544 shares if the Underwriters' over-allotment option is
exercised in full) are "restricted securities" as that term is defined under
Rule 144 and, accordingly, may not be sold unless they are registered under the
Securities Act or are sold pursuant an applicable exemption from registration,
including Rule 144. Holders of the 4,989,294 shares of Common Stock (4,520,544
shares if the Underwriters' over-allotment option is exercised in full)
constituting "restricted securities" have entered into a lock-up agreement with
the Underwriters pursuant to which they have agreed not to sell or otherwise
dispose of any shares of such stock for a period of 180 days after the date of
this Prospectus without the prior written consent of Dillon, Read & Co. Inc.
which may, in its sole discretion and at any time without prior notice, release
all or any portion of the shares of Common Stock subject to such lock-up
agreement. See "Description of Capital Stock" and "Underwriting."
ABSENCE OF PRIOR PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICES
Prior to the Offering, there has been no public market for the Common
Stock. Application is being made to have the Common Stock approved for quotation
on the Nasdaq National Market; however, there can be no assurance that an active
trading market will develop or be sustained. The initial public offering price
of the Common Stock will be determined by negotiations among the Company, the
Selling Stockholders and the Underwriters and may not be indicative of the
market price for the Common Stock after the Offering. The market price of the
Common Stock may be highly volatile depending on a number of factors. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price.
DILUTION
The initial public offering price is substantially higher than the book
value per share of Common Stock. Investors purchasing shares of Common Stock in
the Offering will therefore incur immediate and substantial dilution of $15.17
per share, assuming an initial public offering price of $16 per share. See
"Dilution."
8
<PAGE> 11
THE COMPANY
The Gradall Company, an Ohio corporation and a wholly-owned subsidiary of
Gradall Industries, Inc., is a leading manufacturer of hydraulic excavators and
material handlers as well as related service parts. Gradall was established in
1946 by the Warner and Swasey Company to manufacture and market a newly designed
hydraulic excavator featuring a unique rotating, telescopic boom and a truck
mounted design which added versatility and highway mobility to the excavator. In
1982, Gradall acquired a product line of material handlers which Gradall
redesigned to incorporate its telescopic boom technology and rough-terrain
equipment expertise.
Gradall Industries, Inc. was incorporated in Delaware in 1985 as a holding
company to acquire all of the outstanding capital stock of The Gradall Company.
In October 1995, the Company consummated a series of transactions which resulted
in a new capitalization and ownership structure (the "1995 Recapitalization").
As a result of the 1995 Recapitalization, Fund II and its affiliates acquired
82.5% of the Company's Common Stock, certain officers and key employees of
Gradall acquired 10% of the Company's Common Stock, and the percentage ownership
of the Company's Common Stock held by existing stockholders (the "Existing
Stockholders") was reduced from 100% to 7.5%. As a part of the 1995
Recapitalization, the Company issued 140 shares of its Series A Preferred Stock
(the "Preferred Stock") to the Existing Stockholders which represents 100% of
the Company's total outstanding Preferred Stock. In connection with the 1995
Recapitalization, the Company entered into a securities purchase agreement
pursuant to which the Company issued $10 million of 12.5% Senior Subordinated
Notes due 2003 (the "Senior Subordinated Notes") and warrants to purchase
449,294 shares of Common Stock (the "Warrants"). The Company also entered into a
loan and security agreement (the "Credit Facility") pursuant to which the
Company borrowed $10 million under a term loan repayable in quarterly
installments through September 30, 2000 (the "Term Loan"). In addition, the
Credit Facility provides a revolving line of credit of $22 million through
September 30, 2000 (the "Revolver"). Unless the context otherwise requires, the
"Company" or "Gradall" refers to Gradall Industries, Inc. and its consolidated
subsidiaries.
The Company's principal offices are located at 406 Mill Avenue, S.W., New
Philadelphia, Ohio 44663, and its telephone number is (330) 339-2211.
9
<PAGE> 12
USE OF PROCEEDS
The net proceeds to the Company of this Offering, after deducting
underwriting discounts and commissions and expenses payable by the Company in
connection with this Offering, are estimated to be approximately $31.1 million,
assuming an initial public offering price of $16.00 per share, the mid-point of
the range set forth on the cover page of this Prospectus. The Company intends to
use the net proceeds to redeem all of the outstanding shares of the Preferred
Stock and repay certain outstanding indebtedness incurred in connection with the
1995 Recapitalization. Of the net proceeds, approximately $2.0 million will be
used to redeem all of the outstanding shares of the Preferred Stock,
approximately $10.0 million will be used to redeem all of the Company's Senior
Subordinated Notes, approximately $10.0 million will be used to repay in full
the Term Loan and approximately $9.1 million will be used to repay a portion of
the amount outstanding under the Revolver ($18.2 million outstanding at May 31,
1996).
The Senior Subordinated Notes bear interest at the rate of 12.5% and mature
in 2003. The Term Loan bears interest at either LIBOR plus 3.00% or prime plus
1.00% (8.31% weighted average at May 31, 1996) and is repayable in quarterly
installments through 2000. Interest due under the Revolver is based on either
LIBOR plus 2.75% or prime plus 0.75% (8.35% weighted average at May 31, 1996).
The Revolver terminates in 2000. At May 31, 1996, the amount available to be
drawn under the Revolver was $3.8 million, which amount will increase to $12.9
million as a result of the use of a part of the net proceeds from this Offering
to repay a portion of the amount outstanding thereunder. Amounts available under
the Revolver, together with internally generated funds, will be available to
fund capital expenditures and expansion of the Company's business. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Company will not receive any of the proceeds from the sale of shares of
Common Stock by the Selling Stockholders in this Offering. See "Principal and
Selling Stockholders."
DIVIDEND POLICY
The Company currently intends to retain its future earnings to finance the
growth and development of its business and therefore does not anticipate paying
cash dividends on the Common Stock for the foreseeable future. Any future
determination to pay dividends will be at the discretion of the Board of
Directors and will be dependent upon the Company's financial condition, results
of operations, capital requirements and such other factors as the Board of
Directors deems relevant. The Company's Credit Facility prohibits the payment of
any dividends on the Common Stock.
10
<PAGE> 13
CAPITALIZATION
The following table sets forth the current debt and capitalization of the
Company as of March 31, 1996, as adjusted to give effect to the sale of the
Common Stock offered hereby and the application of the Company of its portion of
the estimated net proceeds therefrom. See "Use of Proceeds." This table should
be read in conjunction with the Consolidated Financial Statements of the
Company, including the Notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------
AS
ACTUAL ADJUSTED
-------- --------
(DOLLARS IN
THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Long-term debt:
Revolver (including current portion)....................... $ 20,336 $ 11,216
Term Loan (including current portion)...................... 10,000 0
Senior Subordinated Notes, net of discount of $945,000
related to the Warrants.................................. 9,055 0
Capital lease obligation (including current portion)....... 749 749
-------- --------
40,140 11,965
-------- --------
Stockholders' (deficit) equity:
Common Stock: actual, no par value, 2,200 shares
authorized, 1,000 shares issued and outstanding; as
adjusted, par value $.001 per share, 18,000,000 shares
authorized, 8,114,294 issued and outstanding(1).......... 1 8
Preferred Stock: actual, par value $.01 per share, 300
shares authorized, 140 shares issued and outstanding; as
adjusted, par value $.001 per share, 2,000,000 shares
authorized, none issued and outstanding.................. 2,000 0
Additional paid in capital................................. 11,999 44,112
Additional paid in capital -- warrants..................... 1,000 0
Accumulated deficit........................................ (36,285) (37,349)(2)
-------- --------
Total stockholders' (deficit) equity.................. (21,285) 6,771
-------- --------
Total capitalization.................................. $ 18,855 $ 18,736
======== ========
</TABLE>
- ---------------
(1) Does not include an aggregate of 132,406 shares of Common Stock issuable in
connection with outstanding stock options, none of which are currently
exercisable. "As adjusted" includes shares to be issued pursuant to the
Offering, including 449,294 shares to be issued immediately prior to the
consummation of the Offering in connection with the exercise of the
Warrants. See "Management," "Principal and Selling Stockholders," and
"Description of Capital Stock."
(2) Reflects a $0.6 million extraordinary loss (net of a tax benefit of $0.4
million) on repayment in full of the Senior Subordinated Notes and a $0.5
million write-off (net of a tax benefit of $0.3 million) of the financing
costs related to the repayment in full of the Senior Subordinated Notes and
the Term Loan and a portion of the Revolver which will be reported in the
period in which the Offering will be consummated. See "Use of Proceeds."
11
<PAGE> 14
DILUTION
At March 31, 1996, the Company had an aggregate of 5,989,294 shares of
Common Stock outstanding with a deficit in net tangible book value of $(21.3)
million or $(3.55) per share. Net tangible book value per share represents the
amount of total tangible assets less total liabilities of the Company, divided
by the number of shares of Common Stock outstanding. Without taking into account
any changes in such net tangible book value after March 31, 1996, other than to
give effect to the sale of the Common Stock in the Offering, the pro forma net
tangible book value at March 31, 1996 would have been $6.8 million or $0.83 per
share. This represents an immediate increase in net tangible book value of $4.38
per share to existing stockholders and an immediate dilution in net tangible
book value of $15.17 per share to new investors purchasing shares in the
Offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of Common Stock............ $16.00
Deficit in net tangible book value per share of Common Stock
before the Offering................................................. $(3.55)
Increase per share attributable to new investors...................... 4.38
Pro forma net tangible book value per share of Common Stock after the
Offering................................................................. 0.83
------
Dilution per share to new investors........................................ $15.17
======
</TABLE>
The following table summarizes, as of March 31, 1996 on a pro forma basis,
the difference between existing stockholders and new investors in this Offering
with respect to: (i) the number of shares of Common Stock purchased from the
Company; (ii) the total consideration paid to the Company; and (iii) the average
price paid or assumed to be paid per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)........... 5,989,294 73.8% $13,000,000 27.7% $ 2.17
New investors...................... 2,125,000 26.2 34,000,000 72.3 16.00
--------- ------- ----------- -------
Total......................... 8,114,294 100.0% $47,000,000 100.0%
======== ======= ========== =======
</TABLE>
- ---------------
(1) Sale of Common Stock by the Selling Stockholders in the Offering and sale of
Common Stock by the Selling Stockholders pursuant to the Underwriters'
over-allotment option will reduce the number of shares held by the existing
stockholders of the Company to 4,520,544 or 55.7% of the total number of
shares of Common Stock to be outstanding after the Offering, and will
increase the number of shares to be purchased by new investors to 3,593,750
or 44.3% of the total shares of Common Stock to be outstanding after the
Offering. See "Principal and Selling Stockholders."
12
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data relating to the Company have been
taken or derived from the historical financial statements of the Company and are
qualified in their entirety by reference to such financial statements and notes
included therein. See "Consolidated Financial Statements." Certain information
at March 31, 1996 and for the respective three month periods ended March 31,
1995 and March 31, 1996 has been derived from the Company's unaudited interim
financial statements, which are also contained in this Prospectus, and which, in
the opinion of the Company, reflect all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation. Results for the period
ended March 31, 1996 are not necessarily indicative of results for the full
year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................ $49,946 $57,665 $72,208 $88,820 $118,438 $ 30,453 $ 34,137
Cost of sales........................ 42,639 48,780 59,274 71,280 92,637 24,027 26,467
------- ------- ------- ------- -------- -------- --------
Gross profit......................... 7,307 8,885 12,934 17,540 25,801 6,426 7,670
Operating expenses:
Engineering........................ 1,439 1,477 1,848 2,123 2,504 601 752
Selling and marketing.............. 3,367 3,345 4,232 4,728 5,365 1,258 1,586
Administrative..................... 3,027 2,986 5,075 4,618 5,138 949 1,177
------- ------- ------- ------- -------- -------- --------
Operating income (loss)................ (526) 1,077 1,779 6,071 12,794 3,618 4,155
Amortization of FAS 106(1)............. -- -- -- (3,626) -- -- --
Interest expense..................... 1,436 1,062 1,055 1,146 1,642 257 1,018
Other, net........................... 578 (376) (549) 234 865 219 141
------- ------- ------- ------- -------- -------- --------
Income before provision for taxes.... (2,540) 391 1,273 8,317 10,287 3,142 2,996
Income tax provision (benefit)....... (227) 334 550 3,152 3,680 1,125 1,162
------- ------- ------- ------- -------- -------- --------
Net income before change in
accounting......................... (2,313) 57 723 5,165 6,607 2,017 1,834
Change in accounting
(gain)/loss(2)..................... -- (243) 9,014 -- -- -- --
------- ------- ------- ------- -------- -------- --------
Net income (loss)(3)................. $(2,313) $ 300 $(8,291) $ 5,165 $ 6,607 $ 2,017 $ 1,834
======== ======== ======== ======== ========= ========= =========
PRO FORMA DATA(4):
Net income per common share.......... $ 0.83 $ 0.24 $ 0.29
========= ========= =========
Weighted average common shares
outstanding........................ 8,114,294 8,114,294 8,114,294
OTHER OPERATING DATA:
Employees............................ 424 459 518 557 581 566 590
Sales per employee................... $ 118 $ 126 $ 139 $ 159 $ 204 $ 54 $ 58
Capital expenditures................. 346 740 534 1,214 4,189 1,083 201
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1996
1995 --------------------------
------------ AS
ACTUAL ACTUAL ADJUSTED(5)
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital..................................................... $ 10,735 $14,498 $16,950
Total assets........................................................ 52,024 57,567 56,796
Total debt.......................................................... 37,922 40,140 11,965
Stockholders' equity................................................ (23,119) (21,285) 6,771
</TABLE>
- ---------------
(1) The FAS 106 gain in 1994 resulted from the reduction in the post-retirement
health care benefits liability reflecting a change in actuarial assumptions
related to the projected growth in medical costs.
(2) Reflects in 1992 a $0.2 million after-tax increase in net income resulting
from the adoption of a new accounting standard for income taxes (FAS 109)
and in 1993 a $9 million after-tax decrease in net income resulting from the
adoption of the accrual basis of accounting for post-retirement health care
benefits (FAS 106).
(3) Net income (loss) per share data have been omitted as such amounts are not
comparable due to the 1995 Recapitalization.
(4) Presented as if the 1995 Recapitalization, the exercise of the Warrants, the
issuance of shares of Common Stock pursuant to the Offering and the
application of the estimated net proceeds thereof had occurred on January 1,
1995. Pro forma net income per share data do not include a $0.6 million
extraordinary loss (net of a tax benefit of $0.4 million) on repayment in
full of the Senior Subordinated Notes and a $0.5 million write-off (net of a
tax benefit of $0.3 million) of the financing costs related to the repayment
in full of the Senior Subordinated Notes and the Term Loan and a portion of
the Revolver which will be reported in the period in which the Offering is
consummated.
(5) Adjusted as if the exercise of the Warrants, the issuance of shares of
Common Stock pursuant to the Offering and the application of the estimated
net proceeds thereof had occurred on March 31, 1996. Reflects a $0.6
extraordinary loss (net of a tax benefit of $0.4 million) on repayment in
full of the Senior Subordinated Notes and a $0.5 million write-off (net of a
tax benefit of $0.3 million) of the financing costs related to the repayment
in full of the Senior Subordinated Notes and the Term Loan and a portion of
the Revolver which will be reported in the period in which the Offering will
be consummated. See "Use of Proceeds."
13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of results of operations and financial condition
is based upon and should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto, the Selected Consolidated Financial Data
and other financial data appearing elsewhere in this Prospectus.
GENERAL
Gradall Industries, Inc. was formed in 1985 to acquire all of the
outstanding capital stock of The Gradall Company which primarily manufactured
telescopic boom excavators and variable reach material handlers. Concurrent with
the formation of Gradall Industries, Inc., the Company hired a new management
team and embarked on a strategy to profit from its established tradename by
redesigning and improving both its excavator and material handler product lines
and by strengthening and expanding its distribution network.
The Company's consolidated net sales grew from $72.2 million in 1993 to
$118.4 million in 1995, an increase of $46.2 million or 28.1% per annum. This
increase is largely due to significant growth in the rough-terrain variable
reach material handler market and to the expansion of the Company's excavator
product line. Of the $46.2 million total increase, $33.5 million or 72.5%
reflects growth in the Company's material handler business (including related
service parts), and $12.7 million or 27.5% relates to the growth of its
excavator business (including related service parts).
From 1993 to 1995, sales of excavators grew from $40.2 million to $49.2
million, representing an increase of 10.6% per annum. This growth is due to the
success of the Company's new XL Series excavators which were formally introduced
in March 1993 and to an increase in demand for excavators in the market overall
as the result of expanding applications and improved general economic conditions
during the period. The development of the XL Series excavators significantly
strengthened Gradall's competitive position in the larger market of conventional
crawler excavators. Approximately two-thirds of excavator units sold by the
Company in 1995 were XL Series models. In March 1996, the Company introduced the
new XL 2200 excavator in the 11-14 ton size class at Con Expo, a major industry
trade show. The Company believes that this new model is well-positioned to take
advantage of growth in the niche market for smaller, more versatile
high-pressure excavators.
From 1993 to 1995, sales of material handlers grew from $21.4 million to
$53.6 million, representing an increase of 58.3% per annum. This growth is due
to the overall growth in the market for material handlers and to an increase in
demand for the Company's material handlers. Since 1991, the rough-terrain
variable reach material handler market has more than quadrupled in size in terms
of unit sales. This growth is due to new applications, increased rental demand
and displacement of straight-mast forklifts and small rough-terrain cranes.
The Company also manufactures and markets service parts for its excavators
and material handlers. Sales of service parts grew from $10.7 million in 1993 to
$15.6 million in 1995, representing an increase of 20.7% per annum.
Approximately 75% of service parts sales are related to the excavator product
line. The increasing population of working Gradall excavators and material
handlers provides the Company with a large and growing market for its high
margin service parts business.
The implementation of the Company's strategies to improve manufacturing
processes, product quality and cost control has also contributed to the
Company's growth. In 1995, Gradall invested $4.2 million in capital improvements
and plans to invest in excess of $4 million in capital improvements in each of
1996 and 1997. Gradall believes that the recently completed capital
expenditures, which have improved manufacturing techniques, reduced production
costs, expanded plant capacity and improved quality, have contributed
significantly to its increased sales and profitability and, together with
planned capital expenditures, should benefit profit margins in the future. The
final aspect of the Company's operating strategy is the careful monitoring and
management of Gradall's cost structure to improve margins and profitability.
Material purchases constitute Gradall's largest component of cost of sales with
labor cost being the next largest
14
<PAGE> 17
component. Improved sourcing and the increased number of long term vendor
agreements have helped control the materials portion of product cost.
In 1994, net income benefited from a $3.6 million gain resulting from the
reduction in the post-retirement health care benefits liability reflecting a
change in actuarial assumptions related to the projected growth in medical
costs. Income before provisions for income taxes in 1992 benefited from a $0.2
million gain resulting from the adoption of new accounting standards for income
taxes, and net income in 1993 was reduced by a charge of $9.0 million, net of
taxes, resulting from the adoption of the accrual basis of accounting for post-
retirement health care benefits.
BACKLOG
As of March 31, 1996, the Company's backlog of orders aggregated
approximately $25.0 million compared to approximately $17.9 million at December
31, 1995 and approximately $23.3 million at December 31, 1994. The increase in
backlog of orders at March 31, 1996 is due primarily to an increase in orders
for material handlers. Substantially all backlog orders at March 31, 1996 are
expected to be shipped by June 30, 1996.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, items in the
Company's income statements as a percentage of net sales for the periods
indicated(1):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales:
Excavators............................. 55.6% 50.9% 41.5% 40.9% 41.3%
Material handlers...................... 29.6 34.6 45.3 43.6 45.8
Service parts.......................... 14.8 14.5 13.2 15.5 12.9
-------- -------- -------- -------- --------
Total net sales........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................ 82.1 80.3 78.2 78.9 77.5
-------- -------- -------- -------- --------
Gross profit........................... 17.9 19.7 21.8 21.1 22.5
Operating expenses:
Engineering............................ 2.6 2.4 2.1 2.0 2.2
Selling and marketing.................. 5.9 5.3 4.5 4.1 4.6
Administrative......................... 7.0 5.2 4.3 3.1 3.4
-------- -------- -------- -------- --------
Total operating expenses............... 15.4 12.9 11.0 9.2 10.3
-------- -------- -------- -------- --------
Operating income......................... 2.5 6.8 10.8 11.9 12.2
Other expense (income):
Amortization of FAS 106 (gain)......... 0.0 (4.1) 0.0 0.0 0.0
Interest expense....................... 1.5 1.3 1.4 0.8 3.0
Other, net............................. (0.8) 0.3 0.7 0.7 0.4
-------- -------- -------- -------- --------
Income before provision for taxes........ 1.8 9.4 8.7 10.3 8.8
Income tax provision..................... 0.8 3.5 3.1 3.7 3.4
-------- -------- -------- -------- --------
Net income before change in accounting... 1.0% 5.8% 5.6% 6.6% 5.4%
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) The sum in any column may not equal the indicated total due to rounding.
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995
Net sales. Net sales for the three months ended March 31, 1996 were $34.1
million, an increase of $3.7 million or 12.1%, compared to $30.5 million for the
three months ended March 31, 1995. The increase in net sales was primarily
attributable to a significant increase in sales volume of material handlers, a
moderate increase in sales volume of excavators and price increases affecting
both product lines. Net sales of excavators
15
<PAGE> 18
for the three months ended March 31, 1996 were $14.1 million, an increase of
$1.6 million or 12.8%, compared to $12.5 million for the three months ended
March 31, 1995. Net sales of material handlers for the three months ended March
31, 1996 were $15.6 million, an increase of $3.0 million or 23.8%, compared to
$12.6 million for the three months ended March 31, 1995. Net sales of service
parts for the three months ended March 31, 1996 were $4.4 million, a decrease of
$0.3 million or 6.4%, compared to $4.7 million for the three months ended March
31, 1995.
Cost of sales. Cost of sales for the three months ended March 31, 1996
were $26.5 million, an increase of $2.4 million or 10.2%, compared to $24.0
million for the three months ended March 31, 1995. This increase was due to an
increase in sales volume. Cost of sales as a percentage of net sales declined to
77.5% for the three months ended March 31, 1996 from 78.9% for the three months
ended March 31, 1995 primarily due to higher production efficiencies and
economies of higher production volume.
Engineering. Engineering expense for the three months ended March 31, 1996
was $0.8 million, an increase of $0.2 million or 25.1%, compared to $0.6 million
for the three months ended March 31, 1995. This increase was due to the addition
of engineering personnel to support new product development.
Selling and marketing. Selling and marketing expenses for the three months
ended March 31, 1996 were $1.6 million, an increase of $0.3 million or 26.1%,
compared to $1.3 million for the three months ended March 31, 1995. This
increase was primarily attributable to the expenses related to the 1996 Con
Expo, a major trade show held every three years.
Administrative. Administrative expenses for the three months ended March
31, 1996 were $1.2 million, an increase of $0.2 million or 24.0%, compared to
$0.9 million for the three months ended March 31, 1995. This increase was
primarily attributable to higher legal expenses and the addition of professional
employees to support quality control and management information systems.
Interest expense. Interest expense for the three months ended March 31,
1996 was $1.0 million, an increase of $0.8 million or 296.1%, compared to $0.3
million for the three months ended March 31, 1995. This increase in interest
expense was due to increased borrowings in connection with the 1995
Recapitalization.
Income tax provision. Income tax expense for the three months ended March
31, 1996 was $1.2 million which was comparable with income tax expense for the
three months ended March 31, 1995 and represented an effective tax rate of 38.8%
and 35.8%, respectively.
Fiscal 1995 Compared to Fiscal 1994
Net sales. Net sales were $118.4 million for fiscal 1995, an increase of
$29.6 million or 33.3%, compared to $88.8 million for fiscal 1994. The increase
in net sales was primarily attributable to a significant increase in sales
volume of material handlers, a moderate increase in sales volume of excavators
and price increases affecting both product lines. Net sales of excavators were
$49.2 million for fiscal 1995, an increase of $4.0 million or 8.9%, compared to
$45.2 million for fiscal 1994. Net sales of material handlers were $53.6 million
for fiscal 1995, an increase of $22.9 million or 74.6%, compared to $30.7
million for fiscal 1994. Net sales of service parts were $15.6 million for
fiscal 1995, an increase of $2.7 million or 20.9%, compared to $12.9 million for
fiscal 1994.
Cost of sales. Cost of sales were $92.6 million for fiscal 1995, an
increase of $21.4 million or 30.0%, compared to $71.3 million for fiscal 1994.
This increase was due to an increase in sales volume. Cost of sales as a
percentage of net sales declined to 78.2% for fiscal 1995 from 80.3% for fiscal
1994 primarily due to higher production efficiencies and economies of higher
production volume.
Engineering. Engineering expense was $2.5 million for fiscal 1995, an
increase of $0.4 million or 17.9%, compared to $2.1 million for fiscal 1994.
This increase was due to the addition of engineering personnel to support new
product development.
Selling and marketing. Selling and marketing expenses were $5.4 million
for fiscal 1995, an increase of $0.6 million or 13.5%, compared to $4.7 million
for fiscal 1994. This increase was primarily attributable to
16
<PAGE> 19
greater spending for advertising, higher interest expense for distributor
financing plans and prepaid freight on stock service orders.
Administrative. Administrative expenses were $5.1 million for fiscal 1995,
an increase of $0.5 million or 11.3%, compared to $4.6 million for fiscal 1994.
This increase was primarily attributable to greater post-retirement health care
expenses and an increase in legal expenses.
Interest expense. Interest expense was $1.6 million for fiscal 1995, an
increase of $0.5 million or 43.3%, compared to $1.1 million for fiscal 1994.
This increase was due to increased borrowings associated with the 1995
Recapitalization which occurred in October 1995.
Income tax provision. Income tax expense was $3.7 million for fiscal 1995,
an increase of $0.5 million or 16.8%, compared to $3.2 million for fiscal 1994
and represented an effective tax rate of 35.8% for fiscal 1995 and 37.9% for
fiscal 1994.
Fiscal 1994 Compared to Fiscal 1993
Net Sales. Net sales were $88.8 million for fiscal 1994, an increase of
$16.6 million or 23.0%, compared to $72.2 million for fiscal 1993. This increase
was primarily attributable to a significant increase in sales volume of material
handlers, a moderate increase in sales volume of excavators and price increases
affecting both product lines. Net sales of excavators were $45.2 million for
fiscal 1994, an increase of $5.1 million or 12.7%, compared to $40.2 million for
fiscal 1993. Net sales of material handlers were $30.7 million for fiscal 1994,
an increase of $9.3 million or 43.5%, compared to $21.4 million for fiscal 1993.
Net sales of service parts were $12.9 million for fiscal 1994, an increase of
$2.2 million or 20.6%, compared to $10.7 million for fiscal 1993.
Cost of sales. Cost of sales were $71.3 million for fiscal 1994, an
increase of $12.0 million or 20.3%, compared to $59.3 million for fiscal 1993.
This increase was due to an increase in sales volume. Cost of sales as a
percentage of net sales declined to 80.3% for fiscal 1994 from 82.1% for fiscal
1993 primarily due to higher production efficiencies and economies of higher
production volume.
Engineering. Engineering expense was $2.1 million for fiscal 1994, an
increase of $0.3 million or 14.9%, compared to $1.8 million for fiscal 1993.
This increase was primarily attributable to reduced expenses in 1993 resulting
from recovery of product engineering costs associated with a special military
project.
Selling and marketing. Selling and marketing expenses were $4.7 million
for fiscal 1994, an increase of $0.5 million or 11.7%, compared to $4.2 million
for fiscal 1993. This increase was primarily attributable to added service parts
support staff and greater spending for advertising.
Administrative. Administrative expenses were $4.6 million for fiscal 1994,
a decrease of $0.5 million or 9.0%, compared to $5.1 million for fiscal 1993.
This decrease was primarily attributable to a $0.6 million decrease in
post-retirement health care expenses.
Interest expense. Interest expense was $1.1 million for fiscal 1994, an
increase of $0.1 million or 8.6%, compared to $1.0 million for fiscal 1993. This
increase resulted from the increase in prime interest rates for 1994 over 1993.
Income tax provision. Income tax expense was $3.2 million for fiscal 1994,
an increase of $2.6 million or 473.1%, compared with an income tax expense of
$0.6 million for fiscal 1993 and represented an effective tax rate of 37.9% for
fiscal 1994 and 43.2% for fiscal 1993.
LIQUIDITY AND CAPITAL RESOURCES
On October 13, 1995, the Company completed the 1995 Recapitalization. In
connection with the 1995 Recapitalization, the Company entered into a securities
purchase agreement pursuant to which the Company issued $10 million of the
Senior Subordinated Notes and the Warrants. The Company also entered into the
Credit Facility pursuant to which the Company borrowed $10 million under the
Term Loan. In addition, the Credit Facility provides a revolving line of credit
of $22 million under the Revolver. The Company may select
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<PAGE> 20
from various interest rate options on principal balances outstanding under the
Credit Facility. Under the Revolver, the interest rate options are either LIBOR
plus 2.75% or prime plus 0.75%. Under the Term Loan, the interest rate options
are either LIBOR plus 3.00% or prime plus 1.00%. On December 31, 1995, the
weighted average interest rate under the Credit Facility was 8.9%. In addition,
there were $18.1 million of borrowings under the Revolver and $10 million of the
Term Loan outstanding. On March 31, 1996, the weighted average interest rate
under the Credit Facility was 8.8%. As of the end of the first quarter, there
were $20.3 million of borrowings under the Revolver and $10 million of the Term
Loan outstanding. In addition, on March 31, 1996, there was $1.7 million
available for future borrowings under the Revolver.
The net proceeds of the Offering are proposed to be used as follows: $2
million to redeem all of the outstanding shares of the Preferred Stock; $10
million to redeem all of the Senior Subordinated Notes; $10 million to repay in
full the Term Loan; and the balance of $9.1 million to repay a portion of the
amount outstanding under the Revolver. The pro forma amount of total debt to be
outstanding after the Offering is approximately $12.0 million. Immediately prior
to the consummation of the Offering, the Warrants will be exercised and 449,294
shares of Common Stock will be issued. The Company will incur a non-cash
extraordinary charge against earnings upon the early retirement of the Senior
Subordinated Notes in the amount of approximately $0.6 million, net of a tax
benefit of approximately $0.4 million, attributable to the original issue
discount related to the Senior Subordinated Notes. In addition, the Company will
incur a non-cash charge against earnings in the amount of approximately $0.5
million, net of a tax benefit of approximately $0.3 million, attributable to the
write-off of the deferred financing costs related to the repayment in full of
the Senior Subordinated Notes and the Term Loan and a portion of the Revolver.
These charges will be reflected in the fiscal quarter in which such repayment
occurs.
Substantially all of the Company's assets are pledged to secure the
Company's obligations owed under the Credit Facility. The terms of the Credit
Facility contain, among other provisions, requirements for maintaining various
financial ratios, defined levels of minimum earnings before interest, taxes,
depreciation and amortization, and prohibitions on certain payments, including
dividends on Common Stock. The Company is in the process of amending or
replacing the Credit Facility, so as to reflect the improved financial condition
of the Company after completion of the Offering. The Company is currently
seeking to obtain a revised senior credit facility (the "New Credit Facility")
under which the Company anticipates it will have the ability to borrow up to $25
million on more favorable terms and with financial covenants that would provide
greater financial flexibility to the Company than the terms of the Credit
Facility. No assurance can be given that the Company will be able to obtain the
New Credit Facility on terms acceptable to the Company.
The Company has funded its operations primarily with cash from operations.
The Company generated net cash from (used in) operating activities of
$(1,348,000) for the three months ended March 31, 1996 and $7,570,000 for 1995.
Net cash from (used in) operating activities for the three months ended March
31, 1996 primarily resulted from $1,834,000 of net income, and $579,000 of
non-cash charges to income less deferred taxes which were more than offset by
$(3,761,000) of net cash used by changes in operating assets and liabilities,
primarily a $5,760,000 increase in accounts receivable due to strong shipments
in the first quarter. Net cash from operating activities for 1995 resulted
primarily from $6,607,000 of net income, $908,000 of non-cash charges to income
less deferred taxes and $55,000 of net cash provided by changes in operating
assets and liabilities, primarily a $4,106,000 increase in payables and accruals
that more than offset a $3,618,000 increase in inventory.
Net cash used by investing activities, consisting of purchases of property
and equipment, was $201,000 for the three months ended March 31, 1996 and
$4,159,000 in 1995. These capital expenditures were incurred primarily in
connection with the Company's multi-year program to increase production
efficiencies, labor productivity and the New Philadelphia Facility's output
through investments in new capital equipment. Management anticipates that the
Company's capital expenditures in 1996 will exceed $4 million. Management
believes that the remaining $3.8 million will be funded by cash from operations
and by the New Credit Facility. Management expects to maintain a similar level
of capital spending in 1997 which would also be funded from internally generated
cash flow as well as from borrowings under the New Credit Facility.
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<PAGE> 21
A substantial amount of the Company's working capital is invested in
accounts receivable and inventories. The Company periodically reviews accounts
receivable for noncollectability and inventories for obsolescence and
establishes allowances that it believes are appropriate. In addition, the
Company continuously monitors the level of its purchase orders for raw materials
and correlates these orders, and its inventory balances of the various raw
materials, to its current production schedule. To avoid shortages of raw
materials during periods of increased demand, the Company may from time to time
increase its level of purchases to meet its anticipated future level of
production. After giving effect to the Offering, the Company believes that cash
flow from operations together with funds available under its New Credit Facility
will be adequate to fund its working capital and capital expenditure
requirements for the foreseeable future.
ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," is
effective for the year ending December 31, 1996. In the opinion of management,
this statement will not materially impact the Company's financial position or
results of operations.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation," is effective for the year ending December 31, 1996. The
Company has not decided how it intends to apply the accounting and disclosure
provisions of this statement.
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<PAGE> 22
BUSINESS
OVERVIEW
Gradall is a leading manufacturer of hydraulic excavators and material
handlers as well as related service parts. The Company's products are marketed
under the widely respected Gradall tradename and are distinguished by their
unique telescopic boom technology, versatility, productivity and reliability.
Gradall products serve niche markets within the construction equipment industry
and typically command premium prices. In 1995, total sales were $118.4 million,
comprised of $49.2 million in sales of excavators, $53.6 million in sales of
material handlers and $15.6 million in sales of service parts. Since January
1993, the Company has introduced 12 new products which accounted for in excess
of 50% of Gradall's net sales in 1995.
Gradall excavators are typically used by general contractors and government
agencies for ditching, sloping, finished grading, general maintenance and
infrastructure projects. The Company's excavators are sold through approximately
41 independent distributors at approximately 141 locations throughout North
America. The introduction and ongoing development of the Company's XL Series
excavators featuring the unique Gradall rotating, telescopic booms with
high-pressure hydraulics have allowed the Company to continue to dominate its
traditional niche market of wheeled, telescopic boom excavators and to
strengthen its competitive position in the larger market of conventional crawler
excavators, a market historically dominated by knuckle-boom technology.
Gradall rough-terrain variable reach material handlers are typically used
by residential, non-residential and institutional building contractors for
lifting, transporting and placing a wide variety of materials at their point of
use or storage. The Company's material handlers are sold through approximately
40 independent distributors at approximately 120 locations throughout North
America. In addition, Gradall material handlers are available at national rental
companies at over 129 locations. The Company continues to introduce new material
handlers with Gradall's unique 90 degree rear-pivot steering, hydrostatic drive
and low profile design which provide an exceptional combination of
maneuverability, versatility and stability. This new product development has
allowed the Company to increase its market share in the rapidly growing
rough-terrain variable reach material handler market.
Gradall's strategy is to design and produce high quality hydraulic
excavators and material handlers for niche markets while simultaneously reducing
manufacturing costs and increasing production efficiencies. Gradall's ability to
design and customize each of its product lines to fit the specifications of its
customers augments the uniqueness of the Company's products. In addition, in
1995, the Company commenced a multi-year capital expenditure program designed to
expand plant capacity and reduce production costs by increasing labor efficiency
and equipment productivity and improving quality. Management believes that these
strategies have enabled the Company to increase substantially its profitability
in recent years.
THE INDUSTRY
Gradall competes principally in the construction equipment industry. In
1994, the latest year for which U.S. industry figures have been published, sales
of construction equipment exceeded $14 billion. In 1995, total construction
spending was approximately $470 billion. The construction equipment industry is
highly competitive and global in scope. The U.S. construction equipment industry
consists of about 700 manufacturers. The demand for construction equipment is
largely driven by general economic conditions.
Since the beginning of 1993, the construction equipment industry has grown
due to improved general economic conditions, increased public funding for
infrastructure projects and increased demand for rental equipment. The U.S.
Department of Commerce has estimated that more than half of the country's major
highways and one-third of the bridges are in need of some repair. Gradall
management believes that the need for such repairs will continue to benefit the
demand for the Company's products to the extent that funding for such repairs is
available. In addition, construction machinery rentals have increased due to the
need for specific, high-cost equipment for short durations, distributors'
ability to convert rentals into subsequent sales and the lack of an investment
tax credit for purchasers. In particular, the market for material handlers,
which typically are rented by distributors or other rental companies before
being sold in the retail market, has notably
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<PAGE> 23
increased over the past several years consistent with the trend towards rental
of construction equipment. Another important element of the current demand for
construction machinery is the replacement of older machines with new and more
versatile ones. The Company believes that the present popularity of machines
with multiple functions, faster work cycles, ease of transport and special
attachments, such as Gradall products, will continue in the future.
Excavators. The total market for hydraulic excavators in the U.S. grew
from approximately 11,000 units in 1993 to 16,000 units in 1995. The growth in
the market is due to improved general economic conditions and expanding
applications of hydraulic excavators. Excavators were traditionally used for
earth moving and below-ground applications such as trenching, road construction,
site development, mining and irrigation. The use of excavators has expanded to
include many above-ground applications such as demolition, bridge work,
hazardous waste clean-up, scrap handling and forestry work as well as
applications at industrial sites such as mines and steel mills.
The excavator market may be divided into two product categories consisting
of track-mounted "crawler" excavators (which is further divided into several
size classes) and wheel-mounted "wheeled" excavators, which in recent years have
constituted approximately 96% and 4% of the total market for excavators,
respectively. The conventional crawler excavator market has been traditionally
dominated by knuckle-boom technology. The Company manufactures telescopic boom
crawler excavators in three size classes -- 11-14 tons, 19-21 tons and 24-28
tons -- which in 1995 accounted for approximately 11%, 23% and 9% of the total
crawler excavator market, respectively, for a total of approximately 43%. The
remainder of the crawler excavator market is represented by size classes which
are smaller or larger than the sizes currently manufactured by the Company.
Gradall is a leading manufacturer of wheeled telescopic boom excavators. Based
on industry data, the Company estimates that its market share of wheeled
excavators is 50-55% and that its market share of highway speed, telescopic boom
excavators is 85-90%.
Material handlers. The market for rough-terrain variable reach material
handlers has experienced dynamic growth in recent years due to new applications,
increased rental demand and displacement of straight-mast forklifts and small
rough-terrain cranes. The retail market for material handlers has grown from
approximately 1,900 units in 1993 to more than 4,700 units in 1995. Material
handlers are typically used for lifting, transporting and placing a wide variety
of materials such as bricks, blocks, lumber, drywall, structural steel and
roofing materials at their point of use or storage. The increased use of new
attachments such as buckets, augers, winches, truss booms, side shifting/fork
positioning carriages and swing carriages has contributed to the development of
new applications of material handlers.
The rough-terrain variable reach material handler market is divided into
several size classes. The Company manufactures and markets material handlers in
three size classes -- 6-7,000 lbs., 8-9,000 lbs. and 10,000 lbs. and
over -- which in the aggregate represent over 90% of the total market for
material handlers. Based on industry data, the Company estimates that its market
share of rough-terrain variable reach material handlers is 17-20%.
GROWTH STRATEGY
The Company's growth strategy is to design and produce high quality
hydraulic excavators and material handlers for niche markets while
simultaneously reducing manufacturing costs and increasing production capacity.
From 1993 to 1995, the Company introduced 12 new products, and its sales and
operating income increased from $72.2 million to $118.4 million, and from $1.8
million to $12.8 million, respectively. The key components of the Company's
strategy are:
Develop unique products. The Company remains committed to devoting
significant resources toward engineering and producing unique excavators and
material handlers. With the development of its XL Series excavators, the Company
introduced new products to the conventional crawler excavator market. The XL
Series excavators are exceptional because they combine the versatility of the
Gradall rotating, telescopic boom with the productivity of high-pressure
hydraulics. The XL 2200, introduced in March 1996, is the latest XL Series model
and will compete in the 11-14 ton size class. In 1994, the Company significantly
strengthened its material handler product line with the introduction of a new
model in the 8-9,000 lbs. size class; and, in March
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<PAGE> 24
1996, Gradall introduced a new material handler in the 10,000 lbs. and over size
class which is one of the largest material handlers in the industry. The
Company's product development engineers are currently designing additional new
excavators and material handlers which Gradall plans to market in the near
future.
Target niche markets. The Company is working to continue its leading
position in its traditional niche market of highway speed, telescopic boom
excavators and to gain a leading position in several niche markets in the
conventional crawler market. Prior to 1993, the Company focused on the wheeled
excavator market which represents approximately 4% of the total excavator
market. Although this niche market accounts for a small portion of the overall
excavator market, it is a stable market with historically consistent profit
margins. With the introduction of the XL Series excavators in 1993, the Company
significantly strengthened its competitive position in several size classes of
the conventional crawler excavator market which in the aggregate currently
represent approximately 43% of that market. Gradall believes that it is
well-positioned to take advantage of the niches in the crawler excavator market
which demand premium full-featured products. In the material handler market, the
Company focuses on the segment which demands a reliable premium product that
offers a high level of versatility and maneuverability. The Company believes it
is well-positioned to compete in this dynamically growing market.
Improve manufacturing processes. An important element of Gradall's growth
strategy is to expand profit margins through improved manufacturing processes.
In 1995, Gradall invested $4.2 million in capital equipment and initiated a
multi-year capital program designed to increase automation and technology,
material utilization and overall output. In addition, Gradall plans to invest in
excess of $4 million in capital equipment in each of 1996 and 1997 as part of
this multi-year capital program. The recent capital expenditures have included
robotic welding systems, fabrication equipment and direct computer-controlled
equipment for cellular production. Gradall has also adopted programs designed to
reward its employees for improvements in overall productivity and profitability.
In addition, the Company has implemented aggressive quality programs in the
areas of statistical process control, warranty reduction and quality assurance.
Gradall believes its recent and planned investments in automation and
technology, material control, productivity incentives and quality programs
should improve its manufacturing processes and benefit profit margins in the
future.
Emphasize quality. Gradall has adopted a "continuous improvement" strategy
for every facet of its operation. The Company has carried the continuous
improvement concept beyond the scope of the traditional quality definition to
include product development and employee training and development. This strategy
has led to significant reductions in the Company's total cost of quality
(defined as warranty, rework and scrap expenses), which declined from 2.6% of
sales in 1993 to 2.0% in 1995. The Company has implemented statistical process
controls, a monitored product quality review program and a formal supplier
quality assurance program.
Increase distributor support. The Company believes that its distribution
network is among the strongest in the industry and a core strength for its
future growth. The Company plans to further enhance its distribution network by
continuing to produce unique new products, provide marketing and sales support
through its regional sales managers, and provide technical and service support
through its district service managers.
Expand service parts business. Management has focused on expanding the
Company's service parts business to increase revenues and profits by taking
advantage of the growth in the working population of Gradall excavators and
material handlers. As a part of this focus, the Company has implemented the
Gradall On Line Distributor ("GOLD") computer system which links the Company and
its distributors to facilitate communications regarding orders, availability and
other information involving Gradall service parts.
Pursue joint venture and international business opportunities. Although
substantially all of the Company's business has been focused in North America,
the Company believes its increased product development efforts should enable the
Company to take advantage of international opportunities, including
infrastructure development in emerging markets in Europe and Asia. The Company
currently has a joint venture to manufacture and market material handlers in
Eastern Europe and is exploring other international joint venture projects. In
addition, the Company has embarked on a program to obtain its ISO 9001
certification in order to assist the international marketing of its products.
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<PAGE> 25
Capitalize on greater financial flexibility. The Company will use its net
proceeds from this Offering to reduce its debt and better position the Company
to expand the scope of its operations through further development of its
products, manufacturing process and distribution network as well as to pursue
possible acquisitions. The Company believes it will have the opportunity to
participate in the current trend of consolidation in the construction equipment
industry, although it is not currently involved in any active discussions in
this regard.
PRODUCTS AND MARKETS
The Company engineers, manufactures and markets premium hydraulic
excavators and material handlers which incorporate Gradall's unique design
features. In addition, the Company manufactures and markets service parts for
its excavators and material handlers. Since January 1993, the Company has
introduced 12 new products which accounted for in excess of 50% of total sales
in 1995.
REVENUE BY PRODUCT CATEGORY(1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1991 1992 1993 1994 1995
----- ----- ----- ----- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Excavators.................... $30.0 $33.8 $40.2 $45.2 $ 49.2
Material handlers............. 9.5 12.2 21.4 30.7 53.6
Service parts................. 10.5 11.6 10.7 12.9 15.6
----- ----- ----- ----- ------
Total......................... $49.9 $57.7 $72.2 $88.8 $118.4
===== ===== ===== ===== ======
</TABLE>
- ---------------
(1) The sum in any column may not equal the indicated total due to rounding.
Excavators
All Gradall excavators are distinguished by their rotating telescopic boom
technology, versatility, productivity and reliability. Gradall excavators are
typically used for ditching, sloping, finished grading and general maintenance
which often require precise boom and bucket movements which conventional
knuckle-boom excavators cannot provide. Gradall excavators are also used at
various construction sites with restricted overhead clearance areas or other
operating requirements where it would be difficult for conventional knuckle-boom
excavators to operate. Gradall's highway speed excavators are particularly
useful to customers who require their equipment to be at multiple locations
within short periods of time. Gradall excavators compete in the wheeled
excavator category and three size classes in the crawler excavator category.
A brief description of Gradall excavator models is as follows:
G3WD Series E. This model is a single-engine highway speed excavator
purchased primarily by state and local government agencies. The mobility and
versatility of this product are its primary market strengths since it enables
the user to do the work of three machines -- an excavator, grader and wheeled
loader. The Company's ability to customize this product to meet the
specifications required by government agency bid contracts gives it a particular
competitive advantage.
XL Series. The Company formally introduced the XL Series in March 1993 to
enhance its competitive position in the larger market segment of conventional
crawler excavators. The XL Series products compete in the 11-14 ton, 19-21 ton
and 24-28 ton size classes which in the aggregate constitute approximately 43%
of the entire crawler excavator market. The XL Series products combine the
versatility of the Gradall telescopic boom technology with the performance of
high-pressure hydraulics. The XL Series products have more than twice the
productivity and efficiency of the Gradall models they replaced.
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XL2000 Series. This model was introduced in March 1996 and competes in the
11-14 ton class which represents approximately 11% of the total crawler
excavator market. This model is designed to meet the needs of residential
and general contractors. In addition, the Company's plans for the XL2000
Series include a rough-terrain wheeled version and special industrial
versions for use in mines and steel mills, respectively.
XL4000 Series. This model competes in the 19-21 ton class which represents
approximately 23% of the total crawler excavator market. The XL4000 Series
is available in both wheeled and crawler versions. This model is widely
used by municipalities and general contractors.
XL5000 Series. This model competes in the 24-28 ton class traditionally
dominated by conventional crawler knuckle-boom excavators. This class
accounts for approximately 9% of the total crawler excavator market. The XL
5000 Series is the largest high-pressure hydraulic excavator manufactured
by the Company and is available in both wheeled and crawler versions. It is
well-accepted among infrastructure and highway contractors.
In addition to the above-mentioned models which are primarily used in
construction applications, the Company offers excavators in both wheeled and
crawler versions which are used in industrial applications such as mines and
steel mills, respectively. Certain specialized Gradall crawler models are the
accepted standard in the steel industry for cleaning furnaces and ladles and for
other steel mill applications. Gradall excavators have also been specially
designed for mine scaling applications at limestone and salt mines.
The primary features of Gradall excavators are:
Telescopic boom. The rotating, telescopic boom is well-known for its
versatility and strength. The unique design is excellent for production work
such as trenching and earth moving as well as precision work including finished
grading and clean-up.
Wheeled carriers. The Company's highway speed, wheeled carriers are
designed and manufactured by Gradall to meet the needs for a reliable and
durable carrier. They are offered in two, four or six-wheel drive
configurations.
Remote control, single cab operation. All Gradall wheeled excavators are
designed with two cabs -- one for the operation of the carrier and the other for
the operation of the excavator. They are engineered so that one operator can
control the carrier by remote control from the excavator cab. This allows for
greater versatility and adds significantly to the productivity of the machine.
Crawler undercarriages. Gradall crawler undercarriages are specifically
designed and manufactured by the Company to provide the speed and stability
requirements of XL Series hydraulics and increased productivity.
Options/attachments. In addition to a variety of standard features, Gradall
also offers specialized options as requested by customers including air
conditioning, work lights, vandal covers and special auxiliary hydraulics.
Gradall recently announced the introduction of the "telestick" boom attachment
which extends the reach of the XL4000 and XL5000 Series excavators approximately
50% to 45'5" and 50'9", respectively.
Material Handlers
All Gradall material handlers are renowned for their maneuverability,
versatility and dependability. Gradall material handlers are typically used for
lifting, transporting and placing a variety of materials such as bricks, blocks,
lumber, drywall, structural steel and roofing materials at their point of use or
storage. The Company manufactures five basic models of material handlers in
three size classes.
A brief description of Gradall material handler models is as follows:
522/524. The 522/524 competes in the 6-7,000 lbs. class which represents
approximately 55% of the total material handler market. It is available in both
two-section and three-section booms which provide a maximum lift height of 24'
and 32', respectively. This model is very cost efficient and is ideally suited
for less demanding applications.
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<PAGE> 27
534C-6. The 534C-6 is the most popular Gradall material handler. It also
competes in the 6-7,000 lbs. class and has a maximum lift height of 36'. This
model is very well-accepted among mason and roofing contractors.
534C-9. The 534C-9 competes in the 8-9,000 lbs. class which represents
approximately 30% of the market and has a maximum lift height of 40'. This model
was introduced in the fall of 1994 and has a strong appeal to framing
contractors.
534C-10. The 534C-10 competes in the 10,000 lbs. and over class which
represents approximately 7% of the market. It has a maximum lift height of 40'
and is ideally suited for operations requiring heavy lifting. This model has
stabilizers as standard equipment to increase its overall capacity at full
reach.
544C. The 544C was introduced in March 1996 and also competes in the 10,000
lbs. and over class. It is one of the industry's largest material handlers and
has a maximum lift height of 55'. This model permits working on buildings as
high as six stories and also includes stabilizers as standard equipment.
The primary features of Gradall material handlers are:
90 degree rear-pivot steering. This is the key feature of a Gradall
material handler which provides excellent maneuverability by allowing the
machines to turn within a tight radius. The design keeps the forks and the
load inside the turning radius while providing the ability to maneuver the
vehicle in tight areas.
Strong and versatile boom. Gradall material handlers feature one of the
industry's strongest booms. The Gradall boom is capable of handling a variety of
attachments which leads to a high degree of versatility. In addition, Gradall
has a proprietary design to facilitate switching the attachments called
QuickSwitch(TM).
Low profile. A significant advantage of the Gradall material handler is its
low overall height. The vehicle can move under doorways as low as eight feet
while maintaining excellent ground clearance.
Hydrostatic drive. Hydrostatic drive provides the benefits of easier,
no-shift operations, inching capability, quick accelerations and a smooth, even
ride.
Stability. Gradall material handlers operate with the industry's longest
wheelbase and shortest overall length which increase their capacity and
stability. Their engine is mid-mounted within the frame providing uniform weight
distribution and improved visibility.
Service Parts
In addition to engineering, manufacturing and marketing hydraulic
excavators and material handlers, the Company produces and sells related service
parts. This is an important source of revenue and profitability for the Company.
Since the Company's products are kept operational for years with parts and
service support, each Gradall product that enters the market provides the
Company with a potential long-term revenue source. Sales of service parts
typically generate high gross margins and historically have been less sensitive
to industry cycles.
In order to increase sales of service parts in the face of growing
competition, the Company focuses on parts availability, marketing and sales
activities. As a part of this focus, the Company has implemented the Gradall On
Line Distributor ("GOLD") computer system which links the Company and its
distributors to facilitate communications regarding orders, availability and
other information involving Gradall service parts. The Company emphasizes the
importance of stocking and marketing service parts and has developed a delivery
system to provide quick shipment of emergency and unit down parts. The Company
provides same day shipment on unit down orders and promotes distributor
incentives for stock orders.
Specialized Machines
Gradall has the ability to modify its products to suit the specific needs
of its customers. This ability to produce specialized machines is a part of
Gradall's overall strategy to serve specialty, higher margin markets within the
construction equipment industry. Over 35% of all Gradall excavators are modified
from standard models, and approximately 10% of all Gradall material handlers are
customized with add-on and/or special
25
<PAGE> 28
attachments. Gradall is able to design and produce specialized machines while
meeting the delivery schedule of its customers. Some of the specialized machines
developed by the Company are now being marketed as standard models; for example,
special excavators created for mine scaling, steel mills and other special
industrial applications have become Gradall standard models.
MARKETING & DISTRIBUTION
The Company primarily markets and distributes its products through a
network of independent distributors and rental companies who, in turn, sell or
rent the products to end-users. The Company also sells directly through its own
marketing staff to certain major accounts as well as to customers located
outside the United States. Gradall believes that its distribution network is
among the strongest in the industry and is a core strength of its business. The
Company plans to continue to enhance its distribution network by producing
unique new products, providing marketing and sales support through its regional
sales managers, and by providing technical and service support through its
district service managers.
Gradall excavators are primarily used by general contractors and government
agencies. Gradall material handlers are customarily used by residential,
non-residential and institutional building contractors. Since these are distinct
user bases, the Company markets excavators and material handlers and their
related service parts through two separate distribution networks. The Company's
excavator distribution network is comprised of approximately 41 independent
distributors at approximately 141 locations in North America. The Company's
material handler distribution network is composed of approximately 40
independent distributors at approximately 120 locations. In addition, Gradall
material handlers are available at national rental companies at over 129
locations. No single distributor or rental company accounted for more than 10%
of the Company's sales in 1995.
The Company believes that its ongoing distributor support and training
programs help enhance the competitiveness and increase the strength of its
distribution network. The Company supports the sales, service and rental
activities of its distributors with product advertising, sales literature,
product training and major trade show participation. The independent
distribution network is serviced by the Company's five regional sales managers
for excavators and six regional sales managers for material handlers. Each
regional sales manager is also responsible for developing new distributors
within his region.
The Company provides its distributors with product financing through
agreements with third party financing companies. Such financings include a
Wholesale Floor Plan for distributors and a Retail Finance Plan for end-users,
each with reduced interest rates subsidized by the Company, and a Rental Plan
for distributors.
The Company supports the servicing of its products through a field service
organization consisting of four district service managers located throughout the
United States. The district service managers provide service training and
technical support to the distributors, and act as a liaison among customers,
distributors and the Company on service related matters. The district service
managers are also involved in service parts marketing, sales call support and
product demonstrations. In addition, the Company has three service
representatives at the New Philadelphia Facility who are responsible for
fulfilling the Company's commitment to product reliability.
MANUFACTURING
The Company fabricates, welds, machines and assembles the chassis,
telescopic booms, attachments and many component parts for its excavators and
material handlers. The goals of the Company's manufacturing operation are
quality, efficiency, productivity, cost control and on-time delivery. The
Company strives to develop its manufacturing capacity, productivity and quality
through automation and technology, material control, productivity incentives for
employees and quality programs.
Automation and technology. In 1995, Gradall invested $4.2 million in
capital expenditures and initiated a multi-year capital expenditure program
designed to increase production efficiency, promote labor productivity, augment
material utilization and increase output. Gradall plans to invest in excess of
$4 million in capital
26
<PAGE> 29
improvements in each of 1996 and 1997. Thus far, capital improvements have
included robotic welding systems, laser cutting machines, oxygen assist plasma
cutting machines and direct computer-controlled equipment designed for cellular
production. Planned expenditures will include additional robotic welding
systems, laser cutting machines, oxygen assist plasma cutting machines and a
large computerized boring machine. Gradall believes that the recently completed
capital expenditures, which have reduced production costs, expanded plant
capacity and improved quality, and planned capital expenditures, should benefit
profit margins in the future.
Material control. The Company has instituted and continues to institute
material control improvements. These improvements include the introduction of
just-in-time inventory management, the relocation of certain inventory to the
shop floor to support cell manufacturing, the implementation of set-up reduction
programs and the reduction and control of obsolete and surplus inventory.
Productivity incentives. The Company operates a productivity sharing plan
for its unionized, hourly employees. The plan is an Improshare plan called
"Gainsharing." Gainsharing is a group incentive program that is calculated from
a company-wide measure of productivity. The productivity of the plant is
measured against a base period. Each employee receives a gainshare bonus based
upon the percentage increase in productivity. In 1995, such bonuses averaged 16%
of hourly wages. The Company has an active labor management cooperative
committee which is supported by employee positive action teams. These teams
implement changes in the manufacturing processes which improve quality and
productivity which in turn support the Gainsharing program.
Quality programs. The Company has implemented comprehensive quality
programs, including the following:
Statistical process control. The Company maintains control charts in
machining, welding and assembly as well as a pre-shipment quality audit
program on finished machines. The Company plans to continue expanding the
use of statistical process control charts.
Quality feedback/warranty reduction. Gradall reviews critical quality
issues on an ongoing basis and initiates corrective actions. A computerized
warranty system captures early warning reports from field service managers
as well as details of warranty claims which provide additional input to the
quality feedback program.
Supplier quality assurance. The Company monitors supplier quality through a
computer system which records and tracks reports on defective material
allowing the Company to execute corrective action measures.
Gradall's commitment to automation and technology, material control,
productivity incentives for employees and quality programs have improved the
capacity, productivity and quality of the Company's manufacturing operations.
From 1993 to 1995, the Company increased its unit production by 75% with only a
27% increase in its workforce. The Company's total cost of quality (defined as
warranty, rework and scrap expenses) declined from 2.6% of sales in 1993 to 2.0%
of sales in 1995.
ENGINEERING AND DESIGN
Gradall believes that its engineering and design capabilities are among the
Company's major strengths. The engineering and design functions are closely
integrated with the Company's manufacturing and marketing activities. This
allows the Company to integrate new production technology with specific needs of
customers, resulting in expanded market opportunities and increased
profitability for the Company. In 1995, more than 35% of the excavators and 10%
of the material handlers sold by Gradall were customized to meet end-users'
specific requirements.
The Company's manufacturing engineers are involved in both product design
and implementation of capital improvements in order to maximize manufacturing
processes and efficiencies. In addition, the implementation of "concurrent
engineering," in which personnel from engineering, manufacturing, materials
27
<PAGE> 30
procurement and marketing are simultaneously engaged in new product development
programs, has led to faster new product development time, reduced costs and
improved quality.
Gradall has made significant investments in its engineering systems, which
currently includes a computer-aided design (CAD) system with finite element
analysis (FEA) and three-dimensional solids design capabilities. This system has
greatly expanded Gradall's design capabilities and has significantly reduced the
time required for engineering and design functions.
COMPETITION
The markets in which the Company operates are highly competitive. The
Company faces competition in each of its product lines from a number of
different manufacturers, some of which have greater financial and other
resources than the Company. The principal competitive factors affecting the
markets for the Company's products include performance, functionality, price,
brand recognition, customer service and support, and product availability.
The excavator market may be divided into two product categories of
track-mounted "crawler" excavators (which is further divided into several size
classes) and wheel-mounted "wheeled" excavators, which constitute approximately
96% and 4% of the total market for excavators, respectively. The conventional
crawler excavator market has been traditionally dominated by knuckle-boom
technology. The leading producers of conventional crawler excavators are Case
Corp., Caterpillar Inc., Deere & Co. and Komatsu, Ltd. The Company manufactures
telescopic boom crawler excavators in three size classes -- 11-14 tons, 19-21
tons and 24-28 tons -- which in 1995 accounted for approximately 11%, 23% and 9%
of the total crawler excavator market, respectively, for a total of
approximately 43%. Gradall's XL Series excavators are designed to appeal to
niche markets in these size classes which require the versatility of the Gradall
telescopic boom technology with the performance of high-pressure hydraulics. The
remainder of the crawler excavator market is represented by size classes which
are smaller or larger than the sizes currently manufactured by the Company.
Gradall is a leading manufacturer of wheeled telescopic boom excavators.
Based on industry data, the Company estimates that its market share of all
wheeled excavators is 50-55% and that its market share of highway speed,
telescopic boom excavators is 85-90%. The Company has only one competitor in the
highway speed, telescopic boom excavator market.
The rough-terrain variable reach material handler market is divided into
several size classes. The Company manufactures and markets material handlers in
three size classes -- 6-7,000 lbs., 8-9,000 lbs. and 10,000 lbs. and
over -- which in the aggregate represent over 90% of the total market for
material handlers. Based on industry data, the Company estimates that its market
share of all material handlers is 17-20%. Other than Gradall, the principal
producers of variable reach material handlers are JCB Inc., Lull Industries,
Inc. and Trak International, Inc. No manufacturer has a market share in excess
of 25%.
28
<PAGE> 31
SUPPLIERS
The Company purchases component parts and raw materials from a variety of
manufacturers, the most significant of which are set forth below:
<TABLE>
<CAPTION>
SUPPLIER COMPONENTS
-----------------------------------------------------------------
<S> <C>
Rexroth Hydraulics
Rockwell International Axles
Cummins Engine Engines
Bethlehem Steel Steel
Parker Hannifin Hydraulic components
Iowa Industrial Hydraulics Cylinders
Robinson Steel Steel
Auburn Gear Torque hubs
Firestone/Bridgestone Tires
Kurdziel Industries Counterweights
</TABLE>
The Company selects suppliers that can provide the lowest cost, highest
quality and best product availability. The quality and timely delivery of the
Company's supplies are important to the Company's overall product quality.
Whenever possible, the Company attempts to establish long-term purchasing
agreements to control cost, quality and availability, and identify alternative
sources of supply to protect its manufacturing process against the
unavailability of component parts and raw materials.
FACILITIES
The Company operates from a single company-owned facility in New
Philadelphia, Ohio. The facility contains 429,320 square feet and is located on
a 66 1/2 acre site. The facility accommodates the Company's corporate offices,
manufacturing operations and warehouse.
EMPLOYEES
As of March 31, 1996, Gradall employed 590 people -- 395 hourly and 195
salaried. The Company's hourly employees are represented by the International
Association of Machinists and Aerospace Workers and are currently working under
a three-year contract which will expire in March 1997. In the history of the
Company, there have been two strikes by the union employees -- the first in 1975
and the second in 1994 in connection with the negotiation of the current
contract. There can be no assurance that the Company will be able to negotiate
satisfactory contracts with the union in the future or that the Company's union
employees will not participate in any work stoppage which could have an adverse
effect on the operations of the Company.
ENVIRONMENTAL REGULATION
The Company is subject to various federal, state and local environmental
laws and regulations, including those governing discharges into the air and
water, as well as the handling and disposal of solid and hazardous wastes.
Pursuant to these laws and regulations, the Company may also be required from
time to time to remediate environmental contamination associated with releases
of hazardous substances. The Company has made and will continue to make capital
and other expenditures to comply with such environmental laws and regulations.
Such expenditures presently are not material and although there can be no
assurances, the Company currently anticipates that such expenditures will not be
material in the future.
29
<PAGE> 32
LEGAL PROCEEDINGS
Due to the nature of its products, the Company may be subject to
significant claims for product liability. The Company is a party to various
lawsuits seeking damages for alleged product liability arising from the use of
its products. The Company currently maintains product liability insurance with
an annual aggregate limit of $6 million subject to a self-insurance retention in
the amount of $225,000 per claim. There can be no assurance that the Company's
insurance policy would be adequate to cover potential product liability claims.
A successful claim against the Company in excess of the Company's insurance
coverage could have an adverse effect on the financial results of the Company.
In each of the fiscal years ended December 31, 1995, 1994 and 1993, the
Company's product liability costs for any claim have not exceeded its
self-insurance retention amount.
In addition to product liability claims, the Company is a defendant in a
complaint filed in the Superior Court of Los Angeles County, California on
January 14, 1994 by one of its distributors. The complaint alleges that the
Company discriminated in pricing and distributing its product to the detriment
of the plaintiff, and seeks $4.5 million in compensatory damages, unspecified
punitive damages and other relief. The Company is vigorously defending the case
and believes that the results of the litigation will not have a material adverse
effect on the operations or financial condition of the Company.
30
<PAGE> 33
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the Company's
executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ ------------- -----------------------------------
<S> <C> <C>
Barry L. Phillips(1)(2)....... 54 President and Director
David S. Williams............. 55 Vice President, Marketing & Sales
and Director
Joseph H. Keller.............. 49 Vice President, Engineering
James C. Cahill............... 43 Vice President, Manufacturing
Bruce A. Jonker............... 54 Vice President, Chief Financial
Officer and Treasurer
Sangwoo Ahn(1)(2)............. 57 Director and Chairman of the Board
John A. Morgan(3)............. 65 Director
Perry J. Lewis(2)(3).......... 58 Director
William C. Ughetta, 35 Director
Jr.(1)(3)...................
Jack D. Rutherford(1)......... 62 Director
Ernest Green(4)............... 58 Director
</TABLE>
- ---------------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
(4) To be elected prior to the consummation of the Offering.
Mr. Phillips has been a director of the Company since 1995 and has served
as President of The Gradall Company since 1985. Prior to joining the Company,
Mr. Phillips spent 26 years with International Harvester and was the plant
manager of its Farmall Plant in Rock Island, Illinois.
Mr. Williams has been a director of the Company since October 1995 and has
served as Vice President, Marketing and Sales of The Gradall Company since 1986.
Prior to that, Mr. Williams served in various positions at International
Harvester, including General Sales Manager.
Mr. Keller joined The Gradall Company in 1981 and has served as Vice
President, Engineering and Secretary since 1987.
Mr. Cahill joined The Gradall Company in 1982 and has served as Vice
President, Manufacturing since October 1992.
Mr. Jonker joined The Gradall Company in 1973 and has served as Vice
President, Chief Financial Officer and Treasurer since June 1994.
Mr. Ahn was a Co-Chairman of the Board from October 1995 to March 1996 and
has been Chairman of the Board since March 1996. Mr. Ahn is a founding partner
of Morgan Lewis Githens & Ahn ("MLGA"), a privately-owned international
investment banking and leveraged buyout firm which was founded in 1982. Mr. Ahn
has served as a general partner of MLGAL Partners L.P. ("MLGAL"), a Connecticut
limited partnership and the general partner of MLGA Fund II, L.P. ("Fund II"),
since its formation in 1987. Mr. Ahn also serves on the Board of Directors of
Haynes International, Inc., Kaneb Pipeline Partners, L.P., Kaneb Services, Inc.,
PAR Technology Corporation, Quaker Fabric Corporation, Stuart Entertainment,
Inc. and ITI Technologies, Inc.
31
<PAGE> 34
Mr. Morgan has been a director of the Company since 1995. Mr. Morgan is a
founding partner of MLGA and has served as a general partner of MLGAL since its
formation. Mr. Morgan also serves on the Board of Directors of TriMas
Corporation, Flight Safety International, MascoTech, Inc., Masco Corp., Allied
Digital Technologies, Inc., Haynes International, Inc. and McDermott
International Incorporated.
Mr. Lewis has been a director of the Company since 1995. Mr. Lewis is a
founding partner of MLGA and has served as a general partner of MLGAL since its
formation. Mr. Lewis also serves on the Board of Directors of Aon Corporation,
Evergreen Media Corporation, Tyler Corporation, Quaker Fabric Corporation,
Stuart Entertainment, Inc., Haynes International, Inc. and ITI Technologies,
Inc.
Mr. Ughetta has been a director of the Company since 1995. Mr. Ughetta has
been a general partner of MLGA and MLGAL since 1994. Prior to that, Mr. Ughetta
served as a Vice President of MLGA and MLGAL from 1990 to 1994. Mr. Ughetta also
serves on the Board of Directors of ITI Technologies, Inc.
Mr. Rutherford has been a director of the Company since its formation in
1985. Mr. Rutherford has served as Chairman of the Board and Chief Executive
Officer of the Company from 1985 to October 1995 and as Co-Chairman of the Board
from October 1995 until March 1996. He has served as President and Vice Chairman
of ICM Krebsoge, Inc., a manufacturer of component parts for the automotive
industry, since January 1993. Mr. Rutherford serves as Vice Chairman of Magna
LLC, a holding company whose operating subsidiary manufactures hydraulic
cylinders, pumps and valves. Mr. Rutherford also serves on the Board of
Directors of Code Alarm, Inc.
Mr. Green has been selected to serve as a director of the Company and will
be elected prior to the consummation of the Offering. Mr. Green is the founder
of, and since its foundation in 1981, has served as President and Chief
Executive Officer of EGI, Inc., a manufacturer of automotive components. He is
also President of Florida Production Engineering, Inc., a subsidiary of EGI,
Inc. Mr. Green also serves on the Board of Directors of Accordia, Inc., Bank
One, Dayton, N.A., DP&L Inc., Duriron Company, Inc. and Eaton Corporation.
Directors who are not officers or employees of the Company will receive
$1,000 per attended meeting and $20,000 per annum for serving as directors of
the Company.
Each director is elected for a term of one year. Each director, except Mr.
Green, has been nominated and elected pursuant to the terms of a shareholders
agreement. The provisions of the shareholders agreement which relate to the
nomination and election of directors will terminate upon the closing of this
Offering.
32
<PAGE> 35
EXECUTIVE COMPENSATION
The following table provides information relating to compensation for the
year ended December 31, 1995 for the Chief Executive Officer and the other four
most highly compensated executive officers of the Company (collectively, the
"Named Executive Officers").
1995 SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
- ------------------------------ -------- ------- ------------------ ------------
<S> <C> <C> <C> <C>
Barry L. Phillips, President $165,666 $99,000 28,373 $ 18,290(2)
David S. Williams, Vice 139,524 75,000 25,220 12,534(3)
President, Marketing and
Sales
Joseph H. Keller, Jr., Vice 88,806 50,000 6,305 5,139(4)
President, Engineering
James C. Cahill, Vice 80,681 55,500 12,610 5,064(4)
President, Manufacturing
Bruce A. Jonker, Vice 78,792 55,500 12,610 5,064(4)
President and Chief
Financial Officer
</TABLE>
- ---------------
(1) Under rules promulgated by the Securities and Exchange Commission, since the
Company was not a reporting company during the three immediately preceding
fiscal years, only the information with respect to the most recent completed
fiscal year is reported in the Summary Compensation Table.
(2) Includes $2,534 the Company contributed on behalf of Mr. Phillips to its
Supplemental Executive Retirement Plan, $10,226 in life insurance premiums
the Company paid pursuant to a split-dollar life insurance agreement with
Mr. Phillips and $5,530 in life insurance premiums the Company paid pursuant
to a deferred compensation agreement with Mr. Phillips.
(3) Includes $2,534 the Company contributed on behalf of Mr. Williams to its
Supplemental Executive Retirement Plan and $10,000 in life insurance
premiums the Company paid pursuant to a deferred compensation agreement with
Mr. Williams.
(4) Represents the amount the Company contributed on behalf of the Named
Executive Officer to its Supplemental Executive Retirement Plan.
STOCK OPTION PLAN
Effective as of October 13, 1995, the Company adopted a Stock Option Plan
(the "Option Plan") under which incentive stock options intended to qualify
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
may be granted. Officers and key employees of the Company are entitled to
participate in the Option Plan. The Option Plan is administered by a committee
designated by the Board of Directors which selects the optionees and determines:
(i) the number of shares of Common Stock subject to each option; (ii) the
vesting schedule of the option; (iii) the exercise price, which cannot be less
than 100% of the estimated fair value of the Common Stock on the date of grant;
and (iv) the duration of the option, which cannot exceed 10 years. The Option
Plan does not provide for the grant of stock appreciation rights. A total of
315,226 shares of Common Stock have been reserved for issuance under the Option
Plan and, as of December 31, 1995, options covering 132,406 shares of Common
Stock were outstanding under the Option Plan, none of which are currently
exercisable.
The following table provides information relating to stock options granted
to the Named Executive Officers for the year ended December 31, 1995.
33
<PAGE> 36
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-----------------------------------------------------
% OF TOTAL VALUE AT ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES OR BASE TERM
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------
NAME GRANTED(1) YEAR ($/SH)(2) DATE 5%($) 10%($)
- ------------------------- ---------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Barry L. Phillips........ 28,373 21% $2.71 10/12/05 $ 48,441 $ 122,256
David S. Williams........ 25,220 19 2.71 10/12/05 43,058 108,673
James C. Cahill.......... 12,610 10 2.71 10/12/05 21,529 54,335
Bruce A. Jonker.......... 12,610 10 2.71 10/12/05 21,529 54,335
Joseph H. Keller, Jr..... 6,305 5 2.71 10/12/05 10,765 27,168
</TABLE>
- ---------------
(1) All options become exercisable in three equal annual installments commencing
on October 13, 1996.
(2) Pursuant to the Option Plan, the exercise price of options outstanding under
the Option Plan is the estimated fair market value of the shares of Common
Stock on the date of grant as determined by the Board of Directors. Reflects
estimated fair market value based upon the per share consideration of each
executive's investment in shares of the Common Stock in connection with the
1995 Recapitalization.
STOCK OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTIONS VALUES
The following table provides information relating to the number and value
of securities underlying unexercised stock options held by the Named Executive
Officers as of December 31, 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT FISCAL YEAR- END(1)
-----------------------------
NAME EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Barry L. Phillips................................................... 0 28,373
David S. Williams................................................... 0 25,220
James C. Cahill..................................................... 0 12,610
Bruce A. Jonker..................................................... 0 12,610
Joseph H. Keller, Jr................................................ 0 6,305
</TABLE>
- ---------------
(1) None of the options granted under the Option Plan is currently exercisable.
Therefore, no options were exercised during the fiscal year ended December
31, 1995, nor were any options exercisable on December 31, 1995. Pursuant to
the Option Plan, the exercise price of any option is the estimated fair
market value of the shares of Common Stock at the date of the grant, as
determined by the Board of Directors. All of the outstanding options were
granted on October 13, 1995, and their estimated fair market value is based
upon the per share consideration of each executive's investment in shares of
the Common Stock in connection with the 1995 Recapitalization. The Company
believes that the fair market value of the shares of Common Stock on
December 31, 1995 was the same as their estimated fair market value on
October 13, 1995. Therefore, no options granted under the Option Plan were
"In-the-Money" at December 31, 1995.
34
<PAGE> 37
PENSION PLAN
Under The Gradall Company Employees' Retirement Plan (the "Retirement
Plan"), benefits are payable to all eligible employees of the Company, other
than employees who participate in a separate retirement plan for bargaining unit
employees. The pension plan table below sets forth the estimated annual benefit,
computed as a straight-life annuity, payable under the Retirement Plan and at
the normal retirement age of 65:
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$125,000 $ 18,751 $ 25,001 $ 31,251 $ 37,502 $ 43,751
150,000 22,500 30,000 37,500 45,000 52,500
175,000 22,500 30,000 37,500 45,000 52,500
200,000 22,500 30,000 37,500 45,000 52,500
225,000 22,500 30,000 37,500 45,000 52,500
250,000 22,500 30,000 37,500 45,000 52,500
</TABLE>
The Retirement Plan provides a benefit, based upon years of service with
the Company since October 1983, and upon final average base compensation (i.e.,
salary only) for the five highest consecutive calendar years of the ten years
preceding retirement. The benefits under the Retirement Plan are not subject to
any deduction for Social Security or other amounts. The credited years of
service at December 31, 1995 for the Named Executive Officers were as follows:
Mr. Phillips, 10; Mr. Williams, 10; Mr. Cahill, 12; Mr. Jonker, 12; and Mr.
Keller, 12. The Company has also adopted a non-qualified supplemental retirement
plan for certain officers and key employees, including Messrs. Cahill, Jonker
and Keller (the "Restoration Plan"). The Restoration Plan provides an additional
benefit to participants retiring before age 65, and is intended to minimize the
effect of revised actuarial reduction factors utilized in calculating normal
benefits under certain provisions of the Code and the Employee Retirement Income
Security Act of 1974.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Mr. Phillips and
Mr. Williams. Mr. Phillips' agreement provides for the continuation of his
employment as President at an annual salary of $166,000. Mr. Williams' agreement
provides for the continuation of his employment as Vice President, Marketing and
Sales at an annual salary of $140,000. The salaries of Mr. Phillips and Mr.
Williams may be increased from time to time at the discretion of the Company.
The term of each agreement is for a period of one year expiring in October 1996.
The term is automatically extended for successive one-year periods unless
terminated upon the notice required by the agreement. If the Company terminates
either agreement prior to November 1, 1997, for any reason other than "for
cause," death or disability, the Company is required to continue to make all
payments due thereunder for a period of 24 months. If the Company terminates
either agreement after November 1, 1997, the severance period is reduced to 12
months.
The Company has also entered into employment agreements with Messrs.
Keller, Cahill and Jonker which provide for the continuation of their employment
at current salaries and benefit levels, subject to annual increases at the
discretion of the Company. The term of each agreement is for a period of one
year, which automatically renews for successive one-year terms unless terminated
by the Company upon written notice. If the Company terminates the employment of
Messrs. Keller, Cahill or Jonker for any reason other than "for cause," the
Company is required to continue to make all payments due under the employment
agreement for a period of 14 months, subject to offset for amounts earned by the
officer from other employment.
DEFERRED COMPENSATION
The Company maintains a Supplemental Executive Retirement Plan for the
benefit of certain key employees of the Company as selected by the Board of
Directors including each of the Named Executive Officers (the "SERP"). Pursuant
to the terms of the SERP, participants may elect to defer all or any portion
35
<PAGE> 38
of their compensation and contribute such deferral to the SERP. All participant
deferrals are immediately and fully vested. The Company may make contributions
to the SERP at the discretion of the Board of Directors. Company contributions
are 50% vested after the participant reaches age 55 and are fully vested once
the participant reaches age 60. In addition, Company contributions fully vest
upon the death or disability of the participant or in the event of a change of
control of the Company. If a participant's employment is terminated "for cause,"
all Company contributions allocated to such participant's account are forfeited.
All amounts contributed to the SERP, whether as a result of Company
contributions or participant deferrals have been used to purchase whole life
insurance policies on the life of the participant. As of December 31, 1995, life
insurance policies purchased under the SERP included policies on the lives of
Mr. Phillips in the aggregate face amount of $174,000; Mr. Williams in the
aggregate face amount of $103,573; Mr. Keller in the aggregate face amount of
$199,234; Mr. Cahill in the aggregate face amount of $253,446; and Mr. Jonker in
the aggregate face amount of $138,030. Upon the death of the insured, the entire
proceeds of the policy will be paid to insured's designated beneficiary. The
insured is entitled to receive the policy upon the termination of his employment
as a result of disability or retirement after age 60. The Company's contribution
to the SERP during fiscal 1995 is included in "All Other Compensation" column of
the "Summary Compensation Table" above.
Effective July 1989, the Company entered into a Deferred Compensation
Agreement with Mr. Phillips. Pursuant to this Agreement, upon the termination of
Mr. Phillips' employment with the Company at any time after age 65, the Company
will pay to Mr. Phillips or his designated beneficiary in the event of his
death, the sum of $78,687 per year for fifteen years. Upon the death of Mr.
Phillips while employed by the Company, Mr. Phillips' designated beneficiary is
entitled to receive the death benefit payable under a life insurance policy in
the face amount of $125,000. Upon termination of employment as a result of
disability, Mr. Phillips has the option of receiving the net cash surrender
value of this policy or an assignment of the policy. The Company pays all
premiums due under this policy. Premiums paid by the Company for this life
insurance policy during fiscal 1995, are included in "All Other Compensation"
column of the "Summary Compensation Table" above.
The Company has entered into a Split-Dollar Life Insurance Agreement with
Mr. Phillips with respect to an insurance policy on the life of Mr. Phillips
with a death benefit of $500,000. Pursuant to the terms of the agreement, Mr.
Phillips pays the portion of the premium attributable to the PS-58 cost of the
policy, funded by an off-setting bonus from the Company, and the Company pays
the balance of the premium. Upon the death of Mr. Phillips or the cancellation
of the policy, the Company is entitled to receive the premiums it has paid under
the policy and a portion of the cash value of the policy. The balance of the
policy proceeds will be paid to Mr. Phillips or his designated beneficiary.
Premiums paid by the Company for this life insurance policy during fiscal 1995
are included in "All Other Compensation" column of the "Summary Compensation
Table" above.
Effective July 1989, the Company entered into a Deferred Compensation
Agreement with Mr. Williams. Pursuant to this agreement, upon the termination of
Mr. Williams' employment with the Company at any time after age 60 or as a
result of his disability or death, the Company will pay to Mr. Williams, or his
designated beneficiary in the event of his death, the sum of $30,000 per year
for 15 years. This deferred compensation payment is funded in part through an
insurance policy on the life of Mr. Williams. Mr. Williams contributes $2,469
per year towards the payment of the premium due under this policy, as a deferral
of his compensation. The Company contributes the balance of the premiums due
under the policy which is $10,000 per year. Premiums paid by the Company for
this life insurance policy during fiscal 1995 are included in "All Other
Compensation" column of the "Summary Compensation Table" above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, the Compensation Committee of the Board of Directors consisted
of Sangwoo Ahn and Perry J. Lewis, both of whom are non-employee directors, and
Barry L. Phillips, who is an executive officer of the Company. Mr. Phillips does
not participate in the deliberations of the Compensation Committee concerning
his compensation.
36
<PAGE> 39
1995 RECAPITALIZATION AND CERTAIN TRANSACTIONS
In October 1995, the Company consummated a series of transactions which
resulted in the 1995 Recapitalization. As a result of the 1995 Recapitalization,
Fund II and its affiliates acquired 82.5% of the Company's Common Stock, certain
officers and key employees of Gradall acquired 10% of the Company's Common
Stock, and the percentage ownership of the Company's Common Stock held by the
Existing Stockholders was reduced from 100% to 7.5%. As a part of the 1995
Recapitalization, the Company issued 140 shares of the Preferred Stock to the
Existing Stockholders which represents 100% of the Company's total outstanding
Preferred Stock. In connection with the 1995 Recapitalization, the Company
entered into a securities purchase agreement pursuant to which the Company
issued $10 million of the Senior Subordinated Notes and the Warrants. The
Company also entered into a loan and security agreement (the "Credit Facility")
pursuant to which the Company borrowed $10 million under the Term Loan. In
addition, the Credit Facility provides a revolving line of credit of $22 million
under the Revolver.
In connection with the 1995 Recapitalization, Barry L. Phillips and David
S. Williams exchanged their rights to acquire equity interests in the Company
for 277,000 shares of Common Stock of the Company, a cash payment of $1,800,000
and a tax gross-up of $746,000 in the case of Mr. Phillips, and 138,500 shares
of Common Stock, a cash payment of $900,000 and a tax gross-up payment of
$373,000 in the case of Mr. Williams. In addition, as a part of the 1995
Recapitalization, Bruce A. Jonker and James C. Cahill each received 27,700
shares of Common Stock and tax gross-up payments of $33,750, and Joseph H.
Keller, Jr. received 13,850 shares of Common Stock and a tax gross-up payment of
$16,875. The cash and the gross-up payments made to the Company's executive
officers reduced the redemption price paid to the Existing Stockholders by the
Company. Also in connection with the 1995 Recapitalization, the Company entered
into a shareholders agreement with its existing stockholders which provides in
part for the grant of certain registration rights to them. See "Shares Eligible
for Future Sale." In addition, the Company paid to MLGA a financial advisory fee
of $750,000.
In January 1995, the Company entered into a Supply Agreement with Iowa
Industrial Hydraulics, Inc. ("Iowa"), a wholly owned subsidiary of Magna Holding
Inc. ("Magna"). Prior to the 1995 Recapitalization, Magna was a wholly owned
subsidiary of the Company and, pursuant to the terms of the 1995
Recapitalization, is now owned by the Existing Stockholders, including Mr.
Rutherford who is a director of the Company. The term of the Supply Agreement is
a rolling three year term, subject to either party's right to terminate at the
end of the then current term or for breach. Pursuant to the terms of the Supply
Agreement, the Company purchases hydraulic cylinders from Iowa at agreed prices,
subject to annual increases determined pursuant to a formula. During the fiscal
year ended December 31, 1995, the Company paid Iowa $1,721,265 for products
purchased under the Supply Agreement. The Company believes that the prices and
other terms of the Supply Agreement are no less favorable to the Company than
those which would be available in similar transactions with unaffiliated third
parties.
37
<PAGE> 40
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth beneficial ownership of the shares of Common
Stock as of the date of this Prospectus, and as adjusted to give effect to the
Offering and the cancellation and redemption of the Preferred Stock by (i) each
stockholder known by the Company to be the beneficial owner of more than five
percent of the Common Stock immediately prior to the Offering, (ii) each Selling
Stockholder, (iii) each Director of the Company, (iv) each Named Executive
Officer and (v) all executive officers and directors of the Company as a group.
Unless otherwise indicated, all shares are owned directly and the indicated
owner has sole voting and dispositive power with respect thereto. The Common
Stock constitutes the only class of equity securities of the Company which will
be outstanding after the Offering.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE
OWNED PRIOR TO BENEFICIALLY OWNED
OFFERING(1) NUMBER OF AFTER OFFERING(1)(2)
-------------------- SHARES --------------------
NAME AND ADDRESS NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------ --------- ------ --------- --------- -------
<S> <C> <C> <C> <C> <C>
MLGA Fund II, L.P.(3)......... 4,352,857 72.7% 550,706 3,802,151 46.9%
Barry L. Phillips............. 277,000 4.6 0 277,000 3.4
Jack D. Rutherford............ 207,750 3.5 0 207,750 2.6
David S. Williams............. 138,500 2.3 0 138,500 1.7
James C. Cahill............... 27,700 0.5 0 27,700 0.3
Bruce A. Jonker............... 27,700 0.5 0 27,700 0.3
Joseph H. Keller, Jr.......... 13,850 0.2 0 13,850 0.2
Sangwoo Ahn(3)(4)............. 4,408,678 73.6 550,706 3,857,972 47.5
John A. Morgan(3)(4).......... 4,408,678 73.6 550,706 3,857,972 47.5
Perry J. Lewis(3)(4).......... 4,408,678 73.6 550,706 3,857,972 47.5
William C. Ughetta,
Jr.(3)(4)................... 4,371,026 73.0 550,706 3,820,320 47.1
Ira Starr(3)(4)............... 4,364,932 72.9 550,706 3,814,226 47.0
Mellon Ventures, L.P.......... 220,154 3.7 220,154 0 0.0
Marlborough Capital Investment
Fund, L.P................... 229,140 3.8 229,140 0 0.0
All Fund II affiliates as a
group....................... 4,570,500 76.3 550,706 4,019,794 49.5
All Directors, Director
Nominees and Executive
Officers as a group (10
persons).................... 5,230,989 87.3 550,706 4,680,283 57.7
Total shares outstanding...... 5,989,294 100.0% 8,114,294 100.0%
</TABLE>
- ---------------
(1) Pursuant to the regulations of the Commission, shares are deemed to be
"beneficially owned" by a person if such person directly or indirectly has
or shares the power to vote or dispose of such shares whether or not such
person has any pecuniary interest in such shares or the right to acquire the
power to vote or dispose of such shares within 60 days, including any right
to acquire through the exercise of any option, warrant or right.
(2) Assumes no exercise of the Underwriters' over-allotment option.
(3) The business address for Fund II and Messrs. Ahn, Lewis, Morgan, Starr and
Ughetta is Two Greenwich Plaza, Greenwich, CT 06830.
(4) Includes 4,352,857 shares held by Fund II. As general partners of MLGAL,
which is the general partner of Fund II, Messrs. Ahn, Lewis, Morgan, Starr
and Ughetta may be deemed to be beneficial owners of shares held by Fund II.
Messrs. Ahn, Lewis, Morgan, Starr and Ughetta disclaim beneficial ownership
of the shares held by Fund II.
38
<PAGE> 41
DESCRIPTION OF CAPITAL STOCK
Upon completion of the Offering, the authorized capital stock of the
Company will consist of 18,000,000 shares of Common Stock, par value $.001 per
share, and 2,000,000 shares of Preferred Stock, par value $.001 per share, of
which 8,114,294 shares of Common Stock will be issued and outstanding and no
shares of Preferred Stock will be issued and outstanding. As of May 31, 1996,
132,406 shares of Common Stock were reserved for issuance pursuant to
outstanding options. The Company intends to redeem, with a portion of the net
proceeds of the Offering, all outstanding shares of the Preferred Stock. See
"Use of Proceeds." The following description is a summary of the capital stock
of the Company and is subject to and qualified in its entirety by reference to
the provisions of the Amended and Restated Certificate of Incorporation and the
Amended and Restated Bylaws of the Company, copies of which are included as
exhibits to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
The issued and outstanding shares of Common Stock are, and the shares being
offered by the Company will be, when issued, fully paid and nonassessable. Each
outstanding share of Common Stock is entitled to one vote on all matters
submitted to a vote of stockholders. The holders of outstanding shares of Common
Stock are entitled to receive dividends out of assets legally available therefor
at such times and in such amounts as the Board of Directors may from time to
time determine. See "Dividend Policy." Holders of Common Stock have no
preemptive, conversion, redemption or sinking fund rights. Upon liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive pro rata the assets of the Company which are legally
available for distribution, after payment of all debts and other liabilities,
subject to the prior rights of any Preferred Stock then outstanding. There is no
cumulative voting. Therefore, the holders of a majority of the shares of Common
Stock voted in an election of directors can elect all of the directors then
standing for election, subject to any rights of the holders of any then
outstanding Preferred Stock. See "Risk Factors -- Control by MLGA Fund II, L.P."
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations prescribed
by law, to issue preferred stock in one or more classes or series and to fix the
designations, voting powers, preferences, rights, qualifications, limitations or
restrictions of any such class or series, including dividend rights, dividend
rates, redemption prices and terms, conversion rights and liquidation
preferences of each class or series of Preferred Stock, without any further vote
or action by the stockholders of the Company. The issuance of Preferred Stock by
the Board of Directors could adversely affect the rights of holders of Common
Stock. For example, Preferred Stock could have preferences over the Common Stock
with respect to dividends and in liquidation and (upon conversion or otherwise)
also enjoy all of the rights appurtenant to the Common Stock.
LIMITATION OF LIABILITY; INDEMNIFICATION
As permitted by the Delaware General Corporation Law (as amended from time
to time, the "DGCL"), the Amended and Restated Certificate of Incorporation
provides that directors of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director to the fullest extent permitted by the DGCL (which currently provides
that such liability may be so limited, except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, (iii) under Section 174 of the DGCL, relating to
prohibited dividends or distributions or the repurchase or redemption of stock,
or (iv) for any transaction from which the director derives an improper personal
benefit).
Each person who is or was a party to any action by reason of the fact that
such person is or was a director or officer of the Company shall be indemnified
and held harmless by the Company to the fullest extent permitted by the DGCL.
This right to indemnification also includes the right to have paid by the
Company the expenses incurred in connection with any such proceeding in advance
of its final disposition, to the fullest
39
<PAGE> 42
extent permitted by the DGCL. In addition, the Company may, by action of the
Board of Directors, provide indemnification to such other officers, employees
and agents of the Company to such extent as the Board of Directors determines to
be appropriate under the DGCL.
As a result of this provision, the Company and its stockholders may be
unable to obtain monetary damages from a director for breach of his duty of
care. Although stockholders may continue to seek injunctive or other equitable
relief for an alleged breach of fiduciary duty by a director, stockholders may
not have any effective remedy against the challenged conduct if equitable
remedies are unavailable. The Company also reserves the right to purchase and
maintain directors' and officers' liability insurance.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to Section 203 of the DGCL which, subject to certain
exceptions, prohibits a Delaware corporation from engaging in a business
combination (as defined therein) with an "interested stockholder" (defined
generally as any person who beneficially owns 15% or more of the outstanding
voting stock of the Company or any person affiliated with such person) for a
period of three years following the date that such stockholder became an
interested stockholder, unless (i) prior to such date the board of directors of
the corporation approved either the business combination or the transaction that
resulted in the stockholder becoming an interested stockholder; (ii) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation at the time the transaction commenced (excluding
for purposes of determining the number of shares outstanding those shares owned
(a) by directors who are also officers of the corporation and (b) by employee
stock plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer); or (iii) on or subsequent to such date the business
combination is approved by the board of directors of the corporation and
authorized at a meeting of stockholders by the affirmative vote of at least
66 2/3% of the outstanding voting stock of the corporation not owned by the
interested stockholder.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C., 450 West 33rd Street, New York, NY 10001.
40
<PAGE> 43
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
8,114,294 shares of Common Stock. Of these shares, the 3,125,000 shares of
Common Stock sold in the Offering (3,593,750 shares if the Underwriters'
over-allotment option is exercised in full) will be freely tradeable without
restriction or further registration under the Securities Act, unless such shares
are owned by "affiliates" of the Company as that term is defined in Rule 144
under the Securities Act. The remaining 4,989,294 shares of Common Stock
(4,520,544 shares if the Underwriters' over-allotment option is exercised in
full) are "restricted securities" as that term is defined under Rule 144 and,
accordingly, may not be sold unless they are registered under the Securities Act
or are sold pursuant an applicable exemption from registration, including Rule
144. Holders of the 4,989,294 shares of Common Stock (4,520,544 shares if the
Underwriters' over-allotment option is exercised in full) constituting
"restricted securities" have entered into a lock-up agreement with the
Underwriters pursuant to which they have agreed not to sell or otherwise dispose
of any shares of such stock for a period of 180 days after the date of this
Prospectus without the prior written consent of Dillon, Read & Co. Inc. which
may, in its sole discretion and at any time without prior notice, release all or
any portion of the shares of Common Stock subject to such lock-up agreement. See
"Description of Capital Stock" and "Underwriting."
In connection with the 1995 Recapitalization, the Company entered into a
shareholders agreement with its existing stockholders which provides in part for
the grant of registration rights to the holders of the "restricted securities."
Pursuant to these registration rights, Fund II and its affiliates may require
the Company to file one or more registration statements with respect to shares
of Common Stock held by them, at any time and from time to time. The Existing
Shareholders may require the Company to file a registration statement with
respect to shares of Common Stock held by them at any time after one year from
the date of this Prospectus, which registration statement may include shares of
Common Stock held by certain officers and key employees of the Company, at the
option of such officers and key employees. In addition to these "demand"
registration rights, each of Fund II and the Existing Stockholders have the
right to have shares of Common Stock held by them included in any registration
statement filed by the Company.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for at least two years (including the holding period of any prior owner
except an affiliate) is entitled to sell in "broker's transactions" or to market
makers, within any three-month period commencing 90 days after the date of this
Prospectus, a number of shares that does not exceed the greater of (i) 1% of the
then outstanding shares of the Common Stock (approximately 81,143 shares
immediately after the Offering) or (ii) generally, the average weekly trading
volume in the Common Stock during the four calendar weeks preceding the filing
of a Form 144 with respect to such sale, and subject to certain other
limitations and restrictions. In addition, a person who is not deemed to have
been an affiliate of the Company at any time during the three months preceding a
sale, and who has beneficially owned the shares proposed to be sold for at least
three years, would be entitled to sell such shares under Rule 144(k) without
regard to the volume and other requirements described above.
Prior to the Offering, there has not been any public market for the Common
Stock. No prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial additional
amounts of Common Stock in the public market, or the perception that such sales
could occur, could adversely affect the prevailing market price of the Common
Stock.
41
<PAGE> 44
UNDERWRITING
The names of the Underwriters of the shares of Common Stock offered hereby
and the aggregate number of shares which each has severally agreed to purchase
from the Company and the Selling Stockholders, subject to the terms and
conditions specified in the Underwriting Agreement, are as follows:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Dillon, Read & Co. Inc..................................................
McDonald & Company Securities, Inc......................................
---------
Total.........................................................
========
</TABLE>
The Managing Underwriters are Dillon, Read & Co. Inc. and McDonald &
Company Securities, Inc.
The Underwriters are committed to purchase all of the shares of Common
Stock offered hereby, if any are so purchased. The Underwriting Agreement
contains certain provisions whereby, if any Underwriter defaults in its
obligation to purchase such shares, and the aggregate obligations of the
Underwriters so defaulting do not exceed ten percent of the shares offered
hereby, some or all of the remaining Underwriters must assume such obligations.
The Underwriters propose to offer the shares of Common Stock directly to
the public initially at the offering price per share set forth on the cover page
of this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
re-allow, concessions not in excess of $ per share to certain other dealers.
The offering of the shares is made for delivery when, as and if accepted by the
Underwriters and subject to prior sale and withdrawal, cancellation or
modification of the offer without notice. The Underwriters reserve the right to
reject any order for the purchase of the shares. After the public offering of
the Common Stock, the public offering price and the concessions may be changed
by the Managing Underwriters.
The Selling Stockholders have granted to the Underwriters an option for 30
days from the date of this Prospectus to purchase up to 468,750 additional
shares of Common Stock at the initial public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriters may exercise such option only to cover over-allotments of the
Common Stock offered hereby. To the extent the Underwriters exercise this
option, each Underwriter will be obligated, subject to certain conditions, to
purchase the number of additional shares of Common Stock proportionate to such
Underwriter's initial commitment.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities under the Securities Act, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
The Company, the Selling Stockholders and the other stockholders of the
Company prior to the Offering have agreed, subject to certain exceptions, not to
sell, contract to sell, grant any option to sell, or otherwise dispose of,
directly or indirectly, any shares of Common Stock or securities convertible
into or exchangeable or exercisable for Common Stock or warrants or other rights
to purchase Common Stock or permit the registration of Common Stock, for a
period of 180 days from the date of this Prospectus, without the prior written
consent of Dillon, Read & Co. Inc.
Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the Common Stock has
been determined by negotiation among the Company, the Selling Stockholders and
the Managing Underwriters. Factors considered in determining the initial public
offering price were prevailing market conditions, the state of the Company's
development, recent financial results of the Company, the future prospects of
the Company and its industry, market valuations of securities of companies
engaged in activities deemed by the Managing Underwriters to be similar to those
of the Company and other factors deemed relevant.
The Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.
42
<PAGE> 45
EXPERTS
The consolidated financial statements of the Company as of December 31,
1995 and for the one-year period ended December 31, 1995 included in this
Prospectus and the related financial statement schedules included elsewhere in
the registration statement have been audited by Coopers & Lybrand L.L.P.
("Coopers"), independent auditors, as stated in their reports appearing herein
and elsewhere in the registration statement, and have been so included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of the Company as of December 31,
1994 and for the two-year period ended December 31, 1994 included in this
Prospectus and the related financial statement schedules included elsewhere in
the registration statement have been audited by Rea & Associates, Inc. ("Rea"),
independent auditors, as stated in their reports appearing herein and elsewhere
in the registration statement, and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
CHANGE IN ACCOUNTANTS
In connection with the 1995 Recapitalization, in October 1995, Coopers was
engaged as the Company's independent accountants. Prior to October 1995, Rea had
been the Company's independent accountants. The decision to change independent
accountants was approved by the Company's Board of Directors. In the period from
January 1, 1994 through October 1995, Rea issued no audit report on any of the
Company's financial statements which contained an adverse opinion or a
disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope or accounting principles, and there were no disagreements with Rea on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for the Company by Black, McCuskey, Souers & Arbaugh, Canton,
Ohio and for the Underwriters by Davis Polk & Wardwell, New York, New York.
ADDITIONAL INFORMATION
Prior to the Offering, the Company has not been subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (together with any amendments thereto,
the "Registration Statement") under the Securities Act with respect to the
shares being offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain portions of which have been omitted as permitted by
the Rules and Regulations of the Commission. Statements contained in this
Prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete, and in each instance in which a copy of
such contract or other document has been filed as an exhibit to the Registration
Statement, reference is made to such copy and each such statement is qualified
in all respects by such reference.
As a result of this Offering, the Company will be subject to the
informational requirements of the Exchange Act, and, in accordance therewith,
will file reports and other information with the Commission. A copy of the
Registration Statement, the exhibits and schedules forming a part thereof and
the reports and other information filed by the Company in accordance with the
Exchange Act may be inspected without charge at the offices of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 and at certain regional offices
of the Commission located at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 13th Floor, 7 World Trade
Center, New York, New York 10048. Copies of such material may also be obtained
from the Public Reference Section of the Commission, Washington, D.C. 20549,
upon payment of the fees prescribed by the Commission. Such material may also be
accessed electronically by means of the Commission's home page on the Internet
at http://www.sec.gov.
43
<PAGE> 46
GRADALL INDUSTRIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants on the Consolidated Balance Sheet as of December 31,
1995 and the Consolidated Statements of Income, Changes in Stockholders' Equity and
Cash Flows for the one year in the period ended December 31, 1995................... F-2
Report of Independent Accountants on the Consolidated Balance Sheet as of December 31,
1994 and the Consolidated Statements of Income, Changes in Stockholders' Equity and
Cash Flows for the two years in the period ended December 31, 1994.................. F-3
Consolidated Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996
(unaudited)......................................................................... F-4
Consolidated Statements of Income for the years ended December 31, 1993, 1994 and 1995
and the three months ended March 31, 1995 and 1996 (unaudited)...................... F-6
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1993, 1994 and 1995 and the three months ended March 31, 1996
(unaudited)......................................................................... F-7
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and the three months ended March 31, 1995 and 1996 (unaudited)................. F-8
Notes to the Consolidated Financial Statements........................................ F-10
</TABLE>
F-1
<PAGE> 47
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Gradall Industries, Inc.
We have audited the accompanying consolidated balance sheet of Gradall
Industries, Inc. (formerly ICM Industries, Inc.) and Subsidiaries as of December
31, 1995 and the related consolidated statements of income, stockholders'
equity, cash flows and financial statement schedule (listed in Item 16(b) of
this Form S-1) for the year then ended. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Gradall Industries, Inc. and Subsidiaries as of December 31, 1995,
and the consolidated results of their operations and their cash flows for the
year then ended in conformity with generally accepted accounting principles. In
addition, in our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L.L.P.
Cleveland, Ohio
March 11, 1996
F-2
<PAGE> 48
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Gradall Industries, Inc.
We have audited the accompanying balance sheet of Gradall Industries, Inc.
and Subsidiaries (formerly ICM Industries, Inc. and Subsidiaries) as of December
31, 1994 and the related consolidated statements of income, retained earnings,
cash flows and financial statement schedule (listed in Item 16(b) of this Form
S-1) for the year then ended, and also the statements of income, retained
earnings, cash flows and financial statement schedule (listed in Item 16(b) of
this Form S-1) for the year ended December 31, 1993. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1994 and 1993 consolidated financial statements
referred to above present fairly, in all material respects, the consolidated
financial position of Gradall Industries, Inc. and Subsidiaries as of December
31, 1994, and the consolidated results of their operations and their cash flows
for the year then ended, as well as the consolidated results of their operations
and their cash flows for the year ended December 31, 1993, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
As discussed in Note 1, the Company was recapitalized in 1995. At that time
certain subsidiaries of the company were transferred to former shareholders.
Accordingly, the accompanying financial statements exclude these subsidiaries.
Rea & Associates, Inc.
New Philadelphia, Ohio
June 17, 1996
F-3
<PAGE> 49
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- ------- MARCH 31,
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash................................................. $ 160 $ 1,537 $ 2,206
Accounts receivable - trade, net of allowance for
doubtful accounts of $33, $62 and $52.............. 11,659 12,151 17,911
Inventories.......................................... 14,892 18,510 17,688
Prepaid expenses and deferred charges................ 272 429 310
Deferred income taxes................................ 803 1,371 1,371
------- ------- -----------
Total current assets............................ 27,786 33,998 39,486
Deferred income taxes..................................... 4,550 5,143 5,217
Property, plant and equipment, net........................ 7,106 10,619 10,466
Other assets:
Deferred financing costs, net of accumulated
amortization....................................... 36 1,573 1,493
Other................................................ 755 691 905
------- ------- -----------
Total other assets.............................. 791 2,264 2,398
------- ------- -----------
Total assets.................................... $40,233 $52,024 $57,567
======= ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 50
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- ------- MARCH 31,
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Capital lease obligation, current portion............ $ 87 $ 172 $ 175
Long-term debt, current portion...................... 7,701 1,350 1,800
Accounts payable -- trade............................ 10,329 14,672 12,197
Accrued other expenses:
Salaries........................................ 1,350 514 738
Legal........................................... 315 1,256 1,365
Vacation........................................ 996 1,050 1,267
Warranty........................................ 1,066 1,272 1,353
Income taxes.................................... 434 (2,156) 1,434
Other........................................... 3,145 5,133 4,659
------- ------- -----------
Total current liabilities....................... 25,423 23,263 24,988
------- ------- -----------
Long term obligations:
Capital lease obligation, net of current portion..... 330 619 574
Long-term debt, net of current portion............... 3,116 35,781 37,591
Accrued post-retirement benefit cost................. 13,045 13,824 14,043
Other long term liabilities.......................... 1,453 1,656 1,656
------- ------- -----------
Total long term obligations..................... 17,944 51,880 53,864
------- ------- -----------
Total liabilities............................... 43,367 75,143 78,852
------- ------- -----------
Stockholders' equity:
Common shares, no par value; 2,200 shares authorized;
1,000 issued and outstanding in 1995............... 1 1
Common shares, no par value; 1,000 shares authorized;
200 shares issued and outstanding in 1994
Preferred shares, noncumulative, par value $.01 per
share, 300 shares authorized; 140 issued and
outstanding in 1995................................ 2,000 2,000
Additional paid-in capital........................... 11,999 11,999
Additional paid-in capital -- warrants............... 1,000 1,000
Accumulated deficit.................................. (3,134) (38,119) (36,285)
------- ------- -----------
Total stockholders' (deficit)................... (3,134) (23,119) (21,285)
------- ------- -----------
Total liabilities and stockholders' equity...... $40,233 $52,024 $57,567
======= ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 51
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------ ------------------
1993 1994 1995 1995 1996
------- ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales................................... $72,208 $88,820 $118,438 $30,453 $34,137
Cost of sales............................... 59,274 71,280 92,637 24,027 26,467
------- ------- -------- ------- -------
Gross profit........................... 12,934 17,540 25,801 6,426 7,670
Operating expenses:
Engineering............................ 1,848 2,123 2,504 601 752
Selling and marketing.................. 4,232 4,728 5,365 1,258 1,586
Administrative......................... 5,075 4,618 5,138 949 1,177
------- ------- -------- ------- -------
Total operating expenses.......... 11,155 11,469 13,007 2,808 3,515
------- ------- -------- ------- -------
Operating income.................. 1,779 6,071 12,794 3,618 4,155
Other expense (income):
Amortization of FAS 106 gain........... (3,626)
Interest expense....................... 1,055 1,146 1,642 257 1,018
Other.................................. (549) 234 865 219 141
------- ------- -------- ------- -------
Net other expense (income)........ 506 (2,246) 2,507 476 1,159
------- ------- -------- ------- -------
Income before provision for
taxes........................... 1,273 8,317 10,287 3,142 2,996
Income tax provision........................ 550 3,152 3,680 1,125 1,162
------- ------- -------- ------- -------
Net income before change in
accounting...................... 723 5,165 6,607 2,017 1,834
Change in accounting for post-retirement
benefits, net of taxes of $6,009.......... 9,014
------- ------- -------- ------- -------
Net income (loss)................. $(8,291) $ 5,165 $ 6,607 $ 2,017 $ 1,834
======= ======= ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 52
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL ADDITIONAL
COMMON PREFERRED PAID-IN PAID-IN ACCUMULATED
STOCK STOCK CAPITAL WARRANTS DEFICIT TOTAL
------ --------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1992................ $ (35) $ (35)
Net loss............................ (8,291) (8,291)
--
--------- ---------- ---------- ----------- -----------
Balance December 31, 1993................ (8,326) (8,326)
Net income.......................... 5,165 5,165
Pension adjustment.................. 27 27
--
--------- ---------- ---------- ----------- -----------
Balance December 31, 1994................ (3,134) (3,134)
Net income.......................... 6,607 6,607
Stock dividend...................... $1 (1)
Issuance of 825 shares.............. 1 $ 10,499 10,500
Issuance of 100 shares to
employees......................... 1,500 1,500
Redemption of 825 shares............ (1) (39,591) (39,592)
Issuance of 81.1 common stock
warrants.......................... $1,000 1,000
Issuance of 140 preferred shares.... $ 2,000 (2,000)
--
--------- ---------- ---------- ----------- -----------
Balance December 31, 1995................ 1 2,000 11,999 1,000 (38,119) (23,119)
Net income.......................... 1,834 1,834
--
--------- ---------- ---------- ----------- -----------
Balance March 31, 1996 (unaudited)....... $1 $ 2,000 $ 11,999 $1,000 $ (36,285) $ (21,285)
====== ======= ======= ======= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 53
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------- -------------------
1993 1994 1995 1995 1996
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................. $ (8,291) $ 5,165 $ 6,607 $ 2,017 $ 1,834
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Post-retirement benefit transition
obligation................................. 16,130 (3,085) 779 195 219
Depreciation and amortization................ 1,111 945 1,206 257 434
Pension and other compensation accruals...... 27
Deferred income taxes........................ (6,137) 992 (1,161) (66) (74)
Equity loss on investment.................... 14 43
Loss on sale of property, plant and
equipment.................................. (14) (13) 41
(Increase) in accounts receivable............ (1,339) (1,338) (492) (2,114) (5,760)
(Increase) in inventory...................... (2,126) (2,906) (3,618) 644 822
(Increase) decrease in prepaid expenses...... (175) 48 (157) 125 119
Decrease (increase) in other assets.......... (105) 10 13 (35) (214)
Increase (decrease) in accounts payable and
accrued expenses........................... (350) 5,804 4,106 2,634 1,272
Increase (decrease) in accrued other
long-term liabilities...................... 946 (579) 203 (6)
-------- ------- ------- ------- -------
Net cash provided by (used in) operating
activities................................. (350) 5,084 7,570 3,651 (1,348)
-------- ------- ------- ------- -------
Cash flows from investing activities:
Proceeds from sale of property, plant and
equipment....................................... 58 21 30
Purchase of property, plant and equipment......... (534) (1,214) (4,189) (1,083) (201)
Investment in joint venture....................... (100)
-------- ------- ------- ------- -------
Net cash used in investing activities........ (476) (1,293) (4,159) (1,083) (201)
-------- ------- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE> 54
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------- -------------------
1993 1994 1995 1995 1996
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Issuance of 825 common shares..................... 10,500
Issuance of 100 common shares to employees........ 1,500
Net borrowings under lines of credits............. 1,415 (3,461) (1,679) 2,260
Proceeds from note payable........................ 2,448
Redemption of 825 common shares................... (39,592)
New debt incurred in connection with the
recapitalization, including $1 million of common
stock warrants.................................. 38,941
Debt repaid in the recapitalization transaction... (10,802)
Recapitalization expenses......................... (1,654)
Repayments on capital leases...................... (24) (86) (102) (19) (42)
Other debt repayments............................. (86) (3,026) (825)
-------- ------- ------- ------- -------
Net cash provided by (used in) financing
activities................................. 1,305 (4,125) (2,034) (1,698) 2,218
-------- ------- ------- ------- -------
Net increase (decrease) in cash.............. 479 (334) 1,377 870 669
-------- ------- ------- ------- -------
Cash, beginning of period......................... 15 494 160 160 1,537
-------- ------- ------- ------- -------
Cash, end of period............................... $ 494 $ 160 $ 1,537 $ 1,030 $ 2,206
======== ======= ======= ======= =======
Supplemental disclosure:
Cash paid for:
Income taxes............................ $ 89 $ 1,273 $ 4,460
======== ======= =======
Interest................................ $ 867 $ 858 $ 1,029
======== ======= =======
Other:
Amounts financed through capital leases........... $ 318 $ 430 $ 476
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE> 55
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION:
Gradall Industries, Inc. (the Company), formerly ICM Industries Inc. (ICM),
is a holding company. The consolidated financial statements include the Company
and its wholly-owned subsidiaries, The Gradall Company and Gradall Investment
Company.
The Gradall Company manufactures and sells excavating and materials
handling equipment to public and private sector customers throughout the world.
On September 15, 1995, ICM entered into a Recapitalization Agreement (the
"Recapitalization" or the "Agreement"), which was effective October 13, 1995,
under which ICM (a) issued common shares comprising an 82.5% common equity
interest to MLGA Fund II, L.P. and partners for a price of $10.5 million; (b)
redeemed a portion of the common shares owned by Jack D. Rutherford and David T.
Shelby at a purchase price of $44.5 million, less costs and expenses of the
transaction, certain payments to officers and employees, amounts required to
retire existing indebtedness of The Gradall Company, and further adjusted as
required in the Agreement for working capital, income taxes, property additions
and cash balances as of the effective date of the transaction; (c) issued 140
shares of Preferred Stock with a liquidation preference of $2 million to Messrs.
Rutherford and Shelby; (d) issued common shares representing 10% of its
outstanding common stock to certain officers and employees, and (e) distributed
certain non Gradall investments to Messrs. Rutherford and Shelby pursuant to a
plan of partial liquidation.
The Recapitalization was financed under a Loan and Security Agreement with
Heller Financial, Inc. for a $10 million term loan repayable in installments
through September 30, 2000 and up to $22 million in revolving loan commitments
for a period of five years, along with a Securities Purchase Agreement with The
Marlborough Capital Investment Fund, L.P. and Mellon Ventures, Inc. for $10
million of 12.5% Senior Subordinated Notes due October 31, 2003 and warrants for
81.1 shares of common stock. These transactions are being accounted for as a
leveraged recapitalization under which the existing basis of accounting will be
continued, and assets and liabilities of the continuing business are being
carried forward. Under the Agreement the name of ICM has been changed to Gradall
Industries, Inc.
Sources and uses of cash in connection with these transactions are
summarized below:
<TABLE>
<S> <C>
Sources of Cash:
Purchase of 825 shares by MLGA Fund II, L.P............. $10,500
Purchase of 100 shares by employees..................... 1,500
Borrowing from Heller Financial, Inc. - Term Loan....... 10,000
Borrowing from Heller Financial, Inc. - Revolvers....... 17,941
12.5% Senior Subordinated Notes......................... 10,000
Company funds........................................... 2,809
-------------
$52,750
==========
Uses of cash:
Repayment of State of Ohio debt......................... $ 1,323
Repayment of Bank One debt, including accrued interest
of $43................................................ 9,482
Acquisition of 825 shares from Rutherford and Shelby.... 39,592
Financing and other transaction costs................... 2,353
-------------
$52,750
==========
</TABLE>
The purchase price is to be further adjusted based on the actual tax
liabilities as of the closing date including consideration of any taxes
resulting from the distribution of the non-Gradall investments to Messrs.
F-10
<PAGE> 56
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
Rutherford and Shelby. Any adjustments are not expected to have a material
impact on the accompanying financial statements.
Former wholly-owned subsidiaries of ICM, Magna Power and International
Consulting Management were transferred to Messrs. Rutherford and Shelby in
connection with the Recapitalization described above. For purposes of these
consolidated financial statements, this spin-off transaction has been treated as
a change in the reporting entity and these entities have been excluded from the
accompanying financial statements for all periods presented on the basis that
these companies operated in different industries, were autonomous and had only
incidental transactions with the Company. Management fees to these former
subsidiaries of $630, $550 and $288 for the years ended December 31, 1993, 1994
and 1995, respectively, are included in the accompanying consolidated statements
of income.
The following table summarizes the October 12, 1995 book values of the
companies transferred and excluded from these financial statements:
<TABLE>
<S> <C>
Cash......................................................... $ 944
Accounts receivable.......................................... 5,976
Inventory.................................................... 6,948
Property and equipment....................................... 3,350
Other........................................................ 579
-------------
$17,797
==========
Accounts Payable............................................. $ 3,229
Accrued liabilities.......................................... 3,044
Debt......................................................... 10,789
Net assets................................................... 735
-------------
$17,797
==========
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation: The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and related notes. Actual results may differ from those estimates.
Revenue Recognition: The Company's revenue recognition policy is to
recognize revenue when products are shipped.
Inventories: Inventories are stated at cost not in excess of market value
using the last-in, first-out (LIFO) method of inventory costing. Inventory cost
includes materials, direct labor, manufacturing overhead, and outside service
costs. Market value is determined by comparison with recent purchases or
realizable value.
Property, Plant and Equipment: Expenditures for property, plant and
equipment and for renewals and betterments which extend the originally estimated
economic lives of assets are capitalized at cost. Expenditures for maintenance
and repairs are charged to expense. Items which are sold, retired, or otherwise
disposed of are removed from the asset and accumulated depreciation accounts and
any gains or losses are reflected in income. The Company's depreciation and
amortization methods are as follows:
F-11
<PAGE> 57
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DESCRIPTION USEFUL LIFE METHOD
- --------------------------------------------- ------------ --------------
<S> <C> <C>
Machinery and equipment 3-10 years Straight-line
Buildings and improvements 10-24 years Straight-line
Furniture and fixtures 3-10 years Straight-line
</TABLE>
Cash: Cash represents unrestricted cash balances held in various financial
institutions.
Patents: The cost of patents is being amortized on a straight-line basis
over the remaining legal life of the patents.
Deferred Financing Costs: Costs incurred to obtain financing have been
capitalized and are being amortized over the life of the respective financing
arrangements.
Income Taxes: The Company follows the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement 109").
Deferred income taxes arise from reporting certain items of income and expense
for tax purposes in a different period than for financial reporting purposes.
The principal difference relates to accounting for post-retirement health
benefits.
Fair Value of Financial Instruments: The Company adopted Statement of
Financial Accounting Standards (SFAS) No. 107, "Disclosures About Fair Value of
Financial Instruments," at December 31, 1995. The Company's financial
instruments, as defined in SFAS No. 107, consist principally of cash, accounts
receivable, accounts payable and accrued liabilities in which the fair value of
these financial instruments approximates the carrying value. The Company
recently issued new debt as a result of the Recapitalization and therefore, the
fair value of the debt approximates carrying value.
Unaudited Interim Financial Information: The unaudited interim financial
information as of March 31, 1996 and for the three months ended March 31, 1995
and 1996 has been prepared on the same basis as the audited financial
statements. In the opinion of management, such unaudited information includes
all adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of the interim information. Operating results for the three
months ended March 31, 1996 are not necessarily indicative of the results that
may be expected for the entire year ending December 31, 1996.
Accounting Pronouncements: Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," is effective for the year ending December 31, 1996.
In the opinion of management, this statement will not materially impact the
Company's financial position or results of operations.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation," is effective for the year ending December 31, 1996. The
Company has not decided how it intends to apply the accounting and disclosure
provisions of this statement.
F-12
<PAGE> 58
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
3. INVENTORIES:
Inventories were comprised of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- -------
<S> <C> <C>
Raw materials...................... $ 1,120 $ 936
Work in process.................... 15,761 16,585
Finished goods..................... 3,216 6,150
------- -------
20,097 23,671
LIFO reserve....................... (5,205) (5,161)
------- -------
Total inventory.................... $14,892 $18,510
======= =======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
The major classes of property, plant and equipment are summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- -------
<S> <C> <C>
Land............................... $ 513 $ 513
Machinery and equipment............ 11,057 14,001
Buildings and improvements......... 4,914 5,291
Furniture and fixtures............. 1,196 1,340
Construction in progress........... 445 670
------- -------
18,125 21,815
Less: accumulated depreciation..... (11,019) (11,196)
------- -------
Net property, plant and
equipment................... $ 7,106 $10,619
======= =======
</TABLE>
5. LONG-TERM DEBT:
Long-term debt at December 31, 1994 and 1995 included:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Term loan.......................... $ 2,449 $10,000
Revolving credit................... 6,958 18,100
12.5% Senior subordinated notes,
net of discount of $968,719
related to warrants.............. -- 9,031
Notes payable...................... 1,410 --
------- -------
10,817 37,131
Less current portion............... 7,701 1,350
------- -------
$ 3,116 $35,781
======= =======
</TABLE>
The Recapitalization was financed under a Loan and Security Agreement with
Heller Financial, Inc. which provided for a $10 million term loan repayable in
installments through September 30, 2000 and up to $22 million in revolving loan
commitments for a period of five years, along with a Securities Purchase
F-13
<PAGE> 59
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
Agreement with The Marlborough Capital Investment Fund, L.P. and Mellon
Ventures, Inc. for $10 million of 12.5% Senior Subordinated Notes due October
31, 2003 and warrants for 81.1 shares of common stock.
Aggregate maturities of long-term borrowings over the next five years are
as follows: 1996 - $1,350; 1997 - $1,800; 1998 - $1,800; 1999 -$1,800; 2000 -
$21,350.
Interest on the Senior Subordinated Notes is payable quarterly commencing
January 31, 1996, and at maturity at 12.5%. The revolving line of credit bears
interest at either LIBOR plus 2.75% or prime plus .75%. The term loan bears
interest at either LIBOR plus 3.00% or prime plus 1.00%. At December 31, 1995
the prime rate was 8.5% and LIBOR was 5.74% and the actual interest rates in
effect for the revolving line of credit was 8.79% and for the term debt was
9.02%.
The terms of the certain financing agreements contain, among other
provisions, requirements for maintaining defined levels of minimum earnings
before income tax, depreciation and amortization, capital expenditures and
various financial ratios as defined. The financing agreements are collateralized
by substantially all the assets of the Company.
All of long-term debt outstanding at December 31, 1994 was repaid in
connection with the recapitalization transaction described in Note 1.
6. LEASE OBLIGATIONS:
The Company leases certain machinery and equipment under capital leases
expiring beginning in the year 1998. The assets and liabilities under capital
leases are recorded at the original purchase cost. The assets are depreciated
over their estimated productive lives. Depreciation of assets under capital
leases is included in depreciation expense.
The following is a summary of property held under capital leases:
<TABLE>
<S> <C>
Machinery and equipment.............................. $1,020
Less accumulated depreciation........................ 128
-------
$892
======
</TABLE>
The following is a summary of future minimum payments under capitalized
leases that have remaining noncancelable lease terms in excess of one year at
December 31, 1995:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-------------------------------------------------------
<S> <C>
1996.............................................. $236
1997.............................................. 221
1998.............................................. 236
1999.............................................. 97
2000.............................................. 171
-----
Total minimum lease payments........................... 961
Interest............................................... 170
-----
Liability under capital lease payments................. 791
Current portion........................................ 172
-----
Long-term capitalized lease obligation................. $619
====
</TABLE>
F-14
<PAGE> 60
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
7. EMPLOYEE BENEFIT PLANS:
Pension Plans: Substantially all employees are covered by pension plans
which provide for monthly pension payments to eligible former employees who have
retired. The Company sponsors two plans, one for members of the collective
bargaining unit and one for salaried and other eligible employees.
Benefits paid under the collective bargaining unit plan are based on a
benefit multiplier times years of credited service, reduced by benefits under a
prior plan. Such prior plan benefits are guaranteed under the terms of group
annuity contracts. Benefits paid under the salary plan are based on the greater
of a benefit multiplier times years of credited service or a percentage of
pre-retirement earnings. Pension costs are funded as actuarially determined and
to the extent cash contributions are deductible for federal income tax purposes.
The collective bargaining unit plan uses the entry age normal actuarial cost
method to determine annual contributions to the plan. The salary plan uses the
unit credit actuarial cost method to determine contributions.
The components of net periodic pension cost for the years ended December
31, 1993, 1994 and 1995 were as follows:
<TABLE>
<CAPTION>
1995
1993 1994 ----------------------------
-------- -------- COLLECTIVE
COMBINED COMBINED BARGAINING
PLANS PLANS UNIT PLAN SALARIED PLAN
-------- -------- ---------- -------------
<S> <C> <C> <C> <C>
Service cost................................... $545 $611 $297 $ 269
Interest cost.................................. 490 554 388 256
Actual return of plan assets................... (304) 50 (777) (622)
Net amortization and deferral.................. (115) (473) 539 404
-------- -------- ---------- ------
Total pension cost............................. $616 $742 $447 $ 307
======= ======= ======== ==========
</TABLE>
The funded status of the plans as of December 31, 1994 and 1995 was as
follows:
<TABLE>
<CAPTION>
1994 1995
--------------------------------- ---------------------------------
COLLECTIVE COLLECTIVE
BARGAINING UNIT BARGAINING UNIT
PLAN SALARIED PLAN PLAN SALARIED PLAN
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Accumulated benefit obligation....... $ 4,438 $ 2,186 $ 5,608 $ 2,837
=========== ========== =========== ==========
Projected benefit obligation......... $ 4,438 $ 2,955 $ 5,608 $ 4,011
Plan assets at fair value, primarily
stock and bond funds............... 3,178 2,634 4,275 3,287
------- ------------- ------- -------------
Projected benefit obligation in
excess of plan assets.............. 1,260 321 1,333 724
Unrecognized net asset............... -- 71 -- 1
Unrecognized net loss................ 774 10 1,103 232
Unrecognized prior service cost...... 23 40 20 128
------- ------------- ------- -------------
Pension liability recognized in
accrued other current
liabilities........................ $ 463 $ 200 $ 210 $ 363
=========== ========== =========== ==========
</TABLE>
F-15
<PAGE> 61
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
The actuarial assumptions used were as follows:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Discount rate......................................... 8.5% 7.5%
Rate of increase in compensation levels............... 4.5% 4.5%
Expected long-term rate of return on assets........... 8.5% 8.5%
</TABLE>
Statement of Financial Accounting Standards No. 87 contains a provision
which requires the recognition of a liability (including unfunded accrued
pension costs) that is at least equal to the unfunded accumulated benefit
obligation (the excess of the accumulated benefit obligation over the fair value
of plan assets). Recognition of an additional minimum liability is required if
an unfunded accumulated benefit exists and the liability already recognized as
unfunded accrued pension cost is less than the unfunded accumulated benefit
obligation. The additional minimum liability of $797 and $1,123 at December 31,
1994 and 1995, respectively, has been included in other long-term liabilities
and an intangible pension asset of $23 and $20 at December 31, 1994 and 1995,
respectively, has been recorded in an amount not exceeding the amount of
unrecognized prior service cost.
Savings and Investment Plan: Substantially all employees are eligible to
participate in a savings and investment plan. The Company sponsors two plans,
one for members of the collective bargaining unit and one for salaried and other
eligible employees. The plans provide for contributions by employees, through
salary reductions, and for a matching contribution by the Company based on a
rate determined for each plan year by the Board of Directors of the Company. The
plans also provide for a discretionary contribution by the Company.
Deferred Compensation Program: The Company has a deferred compensation
program under which certain employees may elect to postpone receipt of a portion
of their earnings. The amounts so deferred are deposited in a trust account, but
remain assets of the Company. The trustees of the program are officers of the
Company.
Profit Sharing Plan: The Company maintains a profit sharing plan covering
union and salaried employees. The amount of the profit sharing bonus is
determined by the Company's return on sales and is calculated based upon the
wages of eligible employees.
Post-Retirement Benefits: The Company provides eligible retired employees
with health care and life insurance benefits. These benefits are provided on a
non-contributory basis for life insurance and contributory basis for medical
coverage. Currently, the Company does not pre-fund these benefits.
The components of periodic net post-retirement benefit cost for the years
ended December 31, 1993, 1994 and 1995 were as follows:
<TABLE>
<CAPTION>
1993 1995 1994
------ ------- ------
<S> <C> <C> <C>
Service cost..................................... $ 460 $ 328 $ 393
Interest cost.................................... 1,181 916 1,098
Amortization of gain............................. -- (3,626) --
------ ------- ------
Net periodic post-retirement benefit cost... $1,641 $(2,382) $1,491
====== ======= ======
</TABLE>
F-16
<PAGE> 62
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
The following table displays the plans' funded status at December 31, 1994
and 1995 based on the most recent actuarial analysis at December 31, 1994 and
1995:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Accumulated post-retirement benefit obligations:
Retirees........................................ $ 4,734 $ 6,943
Fully-eligible active plan participants......... 4,004 4,006
Other active plan participants.................. 3,062 4,683
------- -------
Total...................................... $11,800 $15,632
======= =======
Plan assets at fair value....................... $ -- $ --
Accumulated post-retirement benefit obligation
in excess of assets........................... 11,800 15,632
Unrecognized net actuarial (loss) gain.......... 1,245 (1,808)
------- -------
Accrued post-retirement benefit cost....... $13,045 $13,824
======= =======
</TABLE>
The large income amount shown in 1994 is the result of a change in the
estimated medical inflation rate assumption and the Company's decision to fully
amortize this gain into the current year financial statements. The gain in
amortization in 1994 is included in other income (expense).
For measurement purposes, as of December 31, 1994 an 8% annual rate
increase in the per capita cost of covered health care benefits was assumed
through the year 1999; the rate was assumed to decrease gradually to 5% by 2012
and remain constant thereafter. Increasing the assumed health care cost trend
rates by one percentage point for each future year would increase the
Accumulated Post-Retirement Benefit Obligation as of December 31, 1994 by $2,220
and the Service Cost and Interest Cost components of the Net Periodic Post-
Retirement Cost by $195.
The discount rate utilized in determining the Accumulated Post-Retirement
Benefit Obligation was 8.5% for 1994. The discount rate used to calculate the
Net Periodic Post-Retirement Benefit Cost was 7.5% for 1994.
For measurement purposes, as of December 31, 1995 an 8% annual rate in the
per capita cost of covered health care benefits was assumed through the first
year gradually decreasing to 5% by 2011 and remaining constant thereafter.
Increasing the assumed health care cost trend rates by one percentage point for
each future year would increase the Accumulated Post-Retirement Benefit
Obligation to $1,750 at December 31, 1995.
The discount rate utilized in determining the Accumulated Post-Retirement
Benefit Obligation was 7.5%.
8. INCOME TAXES:
The provision for income taxes for the years ended December 31, 1993, 1994
and 1995 consisted of the following:
<TABLE>
<CAPTION>
1993 1994 1995
---- ------ ------
<S> <C> <C> <C>
Federal........................................ $363 $1,842 $3,888
State.......................................... 89 384 849
Deferred....................................... 98 926 (1,057)
---- ------ ------
$550 $3,152 $3,680
==== ====== ======
</TABLE>
F-17
<PAGE> 63
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
The Company's effective tax rate differed from the federal statutory rate
as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ------ ------
<S> <C> <C> <C>
Federal statutory rate......................... 34.0% 34.0% 34.0%
Effect of state and local taxes................ 4.6 3.0 4.8
Change in tax liability........................ 4.6 -- (3.0)
Other.......................................... -- 0.9 --
---- ------ ------
43.2% 37.9% 35.8%
==== ====== ======
</TABLE>
The components of the net deferred tax benefits (liabilities) as of
December 31, 1994 and 1995 were as follows:
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Current:
Inventories....................................... $ (796) $ (813)
Accrued expenses.................................. 1,599 2,184
------ ------
$ 803 $1,371
====== ======
Long-term:
Basis of property and equipment................... (1,271) (1,352)
Post-retirement benefits liability................ 5,355 5,646
Other............................................. 466 849
------ ------
$4,550 $5,143
====== ======
</TABLE>
The sources of timing differences and related deferred tax effects were as
follows:
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -------
<S> <C> <C> <C>
Accrued expenses.............................. $(149) $(444) $ (577)
Post-retirement benefits liability............ 447 1,049 (308)
Depreciation.................................. 59 29 84
Inventory..................................... 24 (27) 20
Other......................................... (283) 319 (276)
----- ----- -------
$ 98 $ 926 $(1,057)
===== ===== =======
</TABLE>
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.
9. CAPITAL STOCK:
The Company is authorized to issue one class of common stock.
The Company is authorized to issue shares of Series A preferred stock in
which each share has one vote with a fixed aggregate of 12% of the total vote.
The holders of this preferred stock will vote together with the holders of the
Company's common stock on all matters submitted to the Company's stockholders.
Holders may require the Company to redeem preferred shares proportionately to
any reduction in shares held by MLGA Fund II, L.P.
F-18
<PAGE> 64
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
Outstanding warrants give the holders the right to acquire 81.1 shares of
the Company at a nominal exercise price. The number of shares issuable and the
exercise price of the warrants are subject to adjustment in accordance with
antidilution provisions of the agreement. The warrants expire on October 31,
2005.
10. STOCK OPTIONS:
On October 13, 1995, the stockholders approved an incentive stock option
program under which 56.9 shares of the Company's common stock are reserved for
grants to key employees. The option price is to be determined by the Plan
Administrator, but shall not be less than the fair market value of the stock at
the time of the grant. On October 13, 1995, 23.9 options were granted under the
plan. These options vest one-third annually over a three-year period and are
exercisable for up to 10 years at an exercise price of $15,000 per share.
11. CONTINGENCIES:
The Company was involved in certain claims and litigation related to its
operations. Based upon the facts known at this time, management is of the
opinion that the ultimate outcome of all such claims and litigation will not
have a material adverse effect on the financial condition or results of
operations of the Company.
The Company is a defendant in a civil action filed by one of the Company's
distributors in which the plaintiff alleges that the Company discriminated in
pricing and product distribution to the detriment of the plaintiff and seeks
$4.5 million in compensatory damages, unspecified punitive damages and other
relief. The Company is vigorously defending the case and believes that the
results of the litigation will not have a material adverse effect on the
operations or financial condition of the Company.
F-19
<PAGE> 65
- -------------------------------------------------------------
- -------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, SHARES OF
COMMON STOCK IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE THEREOF.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 6
The Company................................ 9
Use of Proceeds............................ 10
Dividend Policy............................ 10
Capitalization............................. 11
Dilution................................... 12
Selected Consolidated Financial Data....... 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 14
Business................................... 20
Management................................. 31
1995 Recapitalization and Certain
Transactions............................. 37
Principal and Selling Stockholders......... 38
Description of Capital Stock............... 39
Shares Eligible for Future Sale............ 41
Underwriting............................... 42
Experts.................................... 43
Change in Accountants...................... 43
Legal Matters.............................. 43
Additional Information..................... 43
Index to Consolidated Financial
Statements............................... F-1
</TABLE>
---------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
GRADALL INDUSTRIES, INC.
---------------------------
3,125,000 SHARES
COMMON STOCK
PROSPECTUS
, 1996
---------------------------
DILLON, READ & CO. INC.
MCDONALD & COMPANY
SECURITIES, INC.
- -------------------------------------------------------------
- -------------------------------------------------------------
<PAGE> 66
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
An itemized statement of the estimated amount of the expenses, other than
underwriting discounts and commissions, incurred and to be incurred in
connection with the issuance and distribution of the securities registered
pursuant to this Registration Statement is as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee...................... $ 21,067
Nasdaq listing fee....................................................... 37,786
NASD filing fee.......................................................... 6,610
Printing and engraving expenses..........................................
Accounting fees and expenses.............................................
Legal fees and expenses..................................................
Transfer Agent fees and expenses.........................................
Blue Sky fees and expenses and legal fees................................ 20,000
Miscellaneous............................................................
--------
Total.......................................................... $
========
</TABLE>
- ---------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, as amended, provides
with regard to indemnification of directors and officers as follows:
145. Indemnification of Officers, Directors, Employees and Agents;
Insurance. (a) A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
II-1
<PAGE> 67
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw,
II-2
<PAGE> 68
agreement, vote of stockholders or disinterested directors, or otherwise.
The Court of Chancery may summarily determine a corporation's obligation to
advance expenses (including attorneys' fees).
Section 102(b)(7) of the Delaware General Corporation Law, as amended,
provides in regard to the limitation of liability of directors and officers as
follows:
(b) In addition to the matters required to be set forth in the
certificate of incorporation by subsection (a) of this section, the
certificate of incorporation may also contain any or all of the following
matters:
* * *
(7) A provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that such provision shall
not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under section 174 of this
title; or (iv) for any transaction from which the director derived an
improper personal benefit. No such provision shall eliminate or limit the
liability of a director for any act or omission occurring prior to the date
when such provision becomes effective. All references in this paragraph to
a director shall also be deemed to refer (x) to a member of the governing
body of a corporation which is not authorized to issue capital stock, and
(y) to such other person or persons, if any, who, pursuant to a provision
of the certificate of incorporation in accordance with Section 141(a) of
this title, exercise or perform any of the powers or duties otherwise
conferred or imposed upon the board of directors by this title.
Article Seventh of the Amended and Restated Certificate of Incorporation of
the Company provides with regard to indemnification of directors and officers as
follows:
SEVENTH: The Corporation shall, to the full extent permitted by
Section 145 of the Delaware General Corporation Law, as amended from time
to time, indemnify all persons whom it may indemnify pursuant thereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
No securities of the registrant have been issued or sold by the registrant
within the past three years, except as follows*:
(1) On October 10, 1995, the registrant issued 743 shares of Common
Stock to its existing stockholders in connection with a one to 4.715 stock
split declared by the board of directors of the registrant and effected
through a stock dividend.
(2) On October 11, 1995, the registrant issued 140 shares of Series A
Preferred Stock to its existing stockholders in connection with a stock
dividend declared by the board of directors of the registrant.
(3) On October 12, 1995, the registrant sold 825 shares of Common
Stock to MLGA Fund II, L.P. for a consideration of $10,500,000.
(4) On October 12, 1995, the registrant issued warrants to purchase an
aggregate of 81.1 shares of Common Stock to two institutional investors for
an aggregate consideration of $968,719.
(5) On October 12, 1995, the registrant issued an aggregate of 75
shares of Common Stock to two executive officers of the registrant in
accordance with the terms of a Recapitalization Agreement, by and between
the registrant, MLGA Fund II, L.P. and its existing stockholders (the
"Recapitalization Agreement"), in exchange for the executive officers'
surrender of their rights to acquire a substantially equivalent equity
interest in the registrant.
(6) On October 12, 1995, the registrant issued an aggregate of 25
shares of Common Stock to eight executive officers and key employees of the
registrant and its subsidiary in accordance with the terms of the
Recapitalization Agreement. No consideration was paid to the registrant by
the executive officers and key employees for these shares of Common Stock.
II-3
<PAGE> 69
(7) On October 13, 1995, the registrant issued options to purchase an
aggregate of 23.9 shares of Common Stock to a group of 13 executive
officers and key employees of the registrant and its subsidiary pursuant to
the terms of its 1995 Stock Option Plan.
- ---------------
* Does not give effect to a 5,540-for-1 split of the Company's Common Stock
to be effected immediately prior to the consummation of the Offering.
Exemption from registration under the Securities Act was claimed with
respect to the transactions described in paragraphs (3), (4) and (5) above under
Section 4(2) of the Securities Act as transactions by the issuer not involving
any public offering and with respect to the transactions described in paragraphs
(1), (2), (6) and (7) as transactions not involving a sale of securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) List of Exhibits
The list of exhibits is incorporated herein by reference to the Index to
Exhibits on page E-1.
(b) Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that:
(1) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise,
the Company has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(3) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(4) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 70
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Gradall
Industries, Inc. has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New
Philadelphia, State of Ohio, on this 25th day of June, 1996.
GRADALL INDUSTRIES, INC.
By: /s/ BARRY L. PHILLIPS
Name: Barry L. Phillips
Title: President
POWER OF ATTORNEY
The Registrant and each person whose signature appears below constitutes
and appoints Bruce A. Jonker, Barry L. Phillips and William C. Ughetta, Jr., and
any agent for service named in this Registration Statement and each of them,
his, her or its true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him, her or it and in his, her, or its
name, place and stead, in any and all capacities, to sign and file (i) any and
all amendments (including post-effective amendments) to this Registration
Statement, with all exhibits thereto, and other documents in connection
therewith, and (ii) a registration statement, and any and all amendments
thereto, relating to the offering covered hereby filed pursuant to Rule 462(b)
under the Securities Act of 1933, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and things requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he, she, or it might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ BARRY L. PHILLIPS President (Principal Executive June 25, 1996
Officer) and Director
/s/ BRUCE A. JONKER Vice President, Chief Financial June 25, 1996
Officer and Treasurer (Principal
Financial Officer and Principal
Accounting Officer)
/s/ DAVID S. WILLIAMS Director June 25, 1996
/s/ SANGWOO AHN Director June 25, 1996
/s/ JOHN A. MORGAN Director June 25, 1996
/s/ PERRY J. LEWIS Director June 25, 1996
/s/ WILLIAM C. UGHETTA, JR. Director June 25, 1996
/s/ JACK D. RUTHERFORD Director June 25, 1996
</TABLE>
II-5
<PAGE> 71
GRADALL INDUSTRIES, INC.
SCHEDULE II
VALUATION AND QUALIFICATION ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------------------------------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
LIFO Inventory Reserve:
Year ended December 31, 1993.......... $4,723 $ 2 $ 4,725
Year ended December 31, 1994.......... 4,725 480 5,205
Year ended December 31, 1995.......... 5,205 (44) 5,161
Allowance for Doubtful Accounts:
Year ended December 31, 1993.......... 95 29 $ 56(a) $ 18(b)
107(c) 55
Year ended December 31, 1994.......... 55 0 34(a) 23(b)
33(c) 33
Year ended December 31, 1995.......... 33 12 43(a) 4(b)
22(c) 62
Allowance for Inventory Obsolescence:
Year ended December 31, 1993.......... 658 212 212(d) 658
Year ended December 31, 1994.......... 658 591 291(d) 958
Year ended December 31, 1995.......... 958 527 629(d) 856
</TABLE>
- ---------------
(a) Late fees assessed and fully reserved.
(b) Doubtful accounts written off.
(c) Revenue recognized from late fees collected.
(d) Write off of obsolete inventories.
S-1
<PAGE> 72
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------- ----------
<S> <C> <C>
1.01 Form of Underwriting Agreement*
3.01 Form of Amended and Restated Certificate of Incorporation of the
Registrant*
3.02 Amended and Restated Bylaws of the Registrant
4.01 Specimen Certificate for the Common Stock, par value $.001 per share, of
the Registrant*
5.01 Opinion of Black, McCuskey, Souers & Arbaugh*
10.01 Recapitalization Agreement dated as of September 15, 1995 among ICM
Industries, Inc., MLGA Fund II, L.P., Jack D. Rutherford and David T.
Shelby (excluding exhibits and schedules)
10.02 Amendment to Recapitalization Agreement, dated as of October 12, 1995
10.03 Amended and Restated Shareholders Agreement dated as of , 1996*
10.04 Amended and Restated Employment Agreement dated October 13, 1995 between
The Gradall Company and Barry L. Phillips
10.05 Amended and Restated Employment Agreement dated October 13, 1995 between
The Gradall Company and David S. Williams
10.06 Deferred Compensation Agreement dated July 19, 1989 between The Gradall
Company and Barry L. Phillips
10.07 Amended and Restated Deferred Compensation Agreement dated August 30,
1995 between The Gradall Company and David S. Williams
10.08 Split-Dollar Life Insurance Agreement dated as of August 30, 1995 between
The Gradall Company and Barry L. Phillips
10.09 Gradall Industries, Inc. 1995 Stock Option Plan
10.10 Employment Agreement dated as of November 1, 1995 between The Gradall
Company and Bruce A. Jonker
10.11 Employment Agreement dated as of November 1, 1995 between The Gradall
Company and Joseph H. Keller, Jr.
10.12 Employment Agreement dated as of November 1, 1995 between The Gradall
Company and James C. Cahill
10.13 The Gradall Company Amended and Restated Supplemental Executive
Retirement Plan
10.14 The Gradall Company Benefit Restoration Plan
10.15 Loan and Security Agreement dated as of October 13, 1995, among Gradall
Investment Company, The Gradall Company, Gradall Industries, Inc. and
Heller Financial, Inc., as agent (excluding exhibits and schedules)
10.16 Supply Agreement between The Gradall Company and Iowa Industrial
Hydraulics, Inc., dated January 1, 1995 (excluding exhibits)
21.01 Subsidiaries of the Registrant
23.01 Consent of Coopers & Lybrand L.L.P.
23.02 Consent of Rea & Associates, Inc.*
23.03 Consent of Black, McCuskey, Souers & Arbaugh (included in their opinion
filed as Exhibit 5.01)
23.04 Consent of Ernest Green
24.01 Powers of Attorney of certain officers and directors of the Registrant
(filed herewith on the signature page)
27.01 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
E-1
<PAGE> 1
EXHIBIT 3.02
BYLAWS
OF
GRADALL INDUSTRIES, INC.
AMENDED AND RESTATED
AS OF
October 12, 1995
* * * * *
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office shall be in the
City of Dover, in the County of Kent, in the State of Delaware.
Section 2. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
Section 3. BOOKS. The books of the Corporation may
be kept within or without of the State of Delaware as the
Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. TIME AND PLACE OF MEETINGS. All meetings of stockholders
shall be held at such place, either within or without the State of Delaware, on
such date and at such time as may be determined from time to time by the Board
of Directors (or the Chairman in the absence of a designation by the Board of
Directors).
<PAGE> 2
Section 2. ANNUAL MEETINGS. Annual meetings of stockholders shall be
held to elect the Board of Directors and transact such other business as may
properly be brought before the meeting.
Section 3. SPECIAL MEETINGS. Special meetings of stockholders may be
called by the Board of Directors or the chairman of the Board and shall be
called by the Secretary at the request in writing of holders of record of a
majority of the outstanding capital stock of the Corporation entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.
Section 4. NOTICE OF MEETINGS AND ADJOURNED MEETINGS; WAIVERS OF
NOTICE. (a) Whenever stockholders are required or permitted to take any action
at a meeting, a written notice of the meeting shall be given which shall state
the place, date and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
provided by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended ("Delaware Law"), such notice shall be given
not less than 10 nor more than 60 days before the date of the meeting to each
stockholder of record entitled to vote at such meeting. Unless these bylaws
otherwise require, when a meeting is adjourned to another time or place (whether
or not a quorum is present), notice need not be given of the adjourned meeting
if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Corporation may transact any
business which might have been transacted at the original meeting. If the
adjournment is for more than 30 days, or after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
(b) A written waiver of any such notice signed by the person entitled
thereto, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
Section 5. QUORUM. Unless otherwise provided under the certificate of
incorporation or these bylaws and subject to Delaware Law, the presence, in
person or by proxy, of the
2
<PAGE> 3
holders of a majority of the outstanding capital stock of the Corporation
entitled to vote at a meeting of stockholders shall constitute a quorum for the
transaction of business.
Section 6. VOTING. (a) Unless otherwise provided in the certificate of
incorporation and subject to Delaware Law, each stockholder shall be entitled to
one vote for each outstanding share of capital stock of the Corporation held by
such stockholder. Unless otherwise provided in Delaware Law, the certificate of
incorporation or these bylaws, the affirmative vote of a majority of the shares
of capital stock of the Corporation present, in person or by proxy, at a meeting
of stockholders and entitled to vote on the subject matter shall be the act of
the stockholders.
(b) Each stockholder entitled to vote at a meeting of stockholders or
to express consent or dissent to a corporate action in writing without a meeting
may authorize another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period.
Section 7. ACTION BY CONSENT. (a) Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting of stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding capital
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Corporation by
delivery to its registered office in Delaware, its principal place of business,
or an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the
earliest dated consent delivered in the manner required by this Section and
Delaware Law to the Corporation, written
3
<PAGE> 4
consents signed by a sufficient number of holders to take action are delivered
to the Corporation by delivery to its registered office in Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested.
Section 8. ORGANIZATION. At each meeting of stockholders, the Chairman
of the Board, if one shall have been elected, (or in his absence or if one shall
not have been elected, the President) shall act as chairman of the meeting. The
Secretary (or in his absence or inability to act, the person whom the chairman
of the meeting shall appoint secretary of the meeting) shall act as secretary of
the meeting and keep the minutes thereof.
Section 9. ORDER OF BUSINESS. The order of business at all meetings of
stockholders shall be as determined by the chairman of the meeting.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. Except as otherwise provided in Delaware
Law or the certificate of incorporation, the business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors.
Section 2. NUMBER, ELECTION AND TERM OF OFFICE. The number of
directors which shall constitute the whole Board shall be fixed from time to
time by resolution of the Board of Directors but shall not be less than two nor
more than eleven. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 12 of this Article III, and each
director so elected shall hold office until his successor is elected and
qualified or until his earlier death, resignation or removal. Directors need not
be stockholders.
Section 3. QUORUM AND MANNER OF ACTING. Unless the certificate of
incorporation or these bylaws require a greater number, a majority of the total
number of directors shall constitute a quorum for the transaction of business,
and the affirmative vote of a majority of the directors present at meeting at
which a quorum is present shall be the act of the Board of Directors. When a
meeting is adjourned to another time or place (whether or not a quorum is
present), notice
4
<PAGE> 5
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the Board of Directors may transact any business which might have been
transacted at the original meeting. If a quorum shall not be present at any
meeting of the Board of directors the directors present thereat may adjourn the
meeting, from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 4. TIME AND PLACE OF MEETINGS. The Board of Directors shall
hold its meetings at such place, either within or without the State of Delaware,
and at such time as may be determined from time to time by the Board of
Directors (or the Chairman in the absence of a determination by the Board of
Directors).
Section 5. ANNUAL MEETING. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
place either within or without the State of Delaware, on such date and at such
time as shall be specified in a notice thereof given as hereinafter provided in
Section 7 of this Article III or in a waiver of notice thereof signed by any
director who chooses to waive the requirement of notice.
Section 6. REGULAR MEETINGS. After the place and time of regular
meetings of the Board of Directors shall have been determined and notice thereof
shall have been once given to each member of the Board of Directors, regular
meetings may be held without further notice being given.
Section 7. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board or the President and shall
be called by the Chairman of the Board, President or Secretary on the written
request of three directors. Notice of special meetings of the Board of Directors
shall be given to each director at least three days before the date of the
meeting in such manner as is determined by the Board of Directors.
Section 8. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board
5
<PAGE> 6
may designate one or more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of the committee.
Any such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority in
reference to amending the certificate of incorporation, adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the bylaws of the Corporation; and
unless the resolution of the Board of Directors or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Each
committee shall keep regular minutes of its meetings and report the same to the
Board of Directors when required.
Section 9. ACTION BY CONSENT. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 10. TELEPHONIC MEETINGS. Unless otherwise restricted by the
certificate of incorporation or these bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or such committee, as the case may be, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 11. RESIGNATION. Any director may resign at any time by giving
written notice to the Board of Directors or to the Secretary of the Corporation.
The resignation of any director shall take effect upon receipt of notice thereof
or at such later time as shall be specified in such notice; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
6
<PAGE> 7
Section 12. VACANCIES. Unless otherwise provided in the certificate of
incorporation, vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all the stockholders
having the right to vote as a single class may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the certificate of
incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of directors elected by such class
or classes or series thereof then in office, or by a sole remaining director so
elected. Each director so chosen shall hold office until his successor is
elected and qualified, or until his earlier death, resignation or removal. If
there are no directors in office, then an election of directors may be held in
accordance with Delaware Law. Unless otherwise provided in the certificate of
incorporation, when one or more directors shall resign from the Board, effective
at a future date, a majority of the directors then in office, including those
who have so resigned, shall have the power to fill such vacancy or vacancies,
the vote thereon to take effect when such resignation or resignations shall
become effective, and each director so chosen shall hold office as provided in
the filling of other vacancies.
Section 13. REMOVAL. Any director or the entire Board of Directors may
be removed, with or without cause, at any time by the affirmative vote of the
holders of a majority of the outstanding capital stock of the Corporation
entitled to vote and the vacancies thus created may be filled in accordance with
Section 12 of this Article III.
Section 14. COMPENSATION. Unless otherwise restricted by the
certificate of incorporation or these bylaws, the Board of Directors shall have
authority to fix the compensation of directors, including fees and reimbursement
of expenses.
7
<PAGE> 8
ARTICLE IV
OFFICERS
Section 1. PRINCIPAL OFFICERS. The principal officers of the
Corporation shall be a President, one or more Vice Presidents, a Treasurer and a
Secretary who shall have the duty, among other things, to record the proceedings
of the meetings of stockholders and directors in a book kept for that purpose.
The Corporation may also have such other principal officers, including one or
more Controllers, as the Board may in its discretion appoint. One person may
hold the offices and perform the duties of any two or more of said offices,
except that no one person shall hold the offices and perform the duties of
President and Secretary.
Section 2. ELECTION, TERM OF OFFICE AND REMUNERATION. The principal
officers of the Corporation shall be elected annually by the Board of Directors
at the annual meeting thereof. Each such officer shall hold office until his
successor is elected and qualified, or until his earlier death, resignation or
removal. The remuneration of all officers of the Corporation shall be fixed by
the Board of Directors. Any vacancy in any office shall be filled in such manner
as the Board of Directors shall determine.
Section 3. SUBORDINATE OFFICERS. In addition to the principal officers
enumerated in Section 1 of this Article IV, the Corporation may have one or more
Assistant Treasurers, Assistant Secretaries and Assistant Controllers and such
other subordinate officers, agents and employees as the Board of Directors may
deem necessary, each of whom shall hold office for such period as the Board of
Directors may from time to time determine. The Board of Directors may delegate
to any principal officer the power to appoint and to remove any such subordinate
officers, agents or employees.
Section 4. REMOVAL. Except as otherwise permitted with respect to
subordinate officers, any officer may be removed, with or without cause, at any
time, by resolution adopted by the Board of Directors.
Section 5. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors (or to a principal officer if the Board
of Directors has delegated to such principal officer the power to appoint and to
remove such officer). The resignation of any officer shall take effect upon
receipt of notice thereof or at such later time as shall be specified in such
notice; and unless
8
<PAGE> 9
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 6. POWERS AND DUTIES. The officers of the Corporation shall
have such powers and perform such duties incident to each of their respective
offices and such other duties as may from time to time be conferred upon or
assigned to them by the Board of Directors.
ARTICLE V
GENERAL PROVISIONS
Section 1. FIXING THE RECORD DATE. (a) In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than 60 nor less than 10 days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
PROVIDED that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by Delaware Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the Corporation having custody of
the book
9
<PAGE> 10
in which proceedings of meetings of stockholders are recorded. Delivery made to
the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required by
Delaware Law, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than 60 days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
Section 2. DIVIDENDS. Subject to limitations contained in Delaware Law
and the certificate of incorporation, the Board of Directors may declare and pay
dividends upon the shares of capital stock of the Corporation, which dividends
may be paid either in cash, in property or in shares of the capital stock of the
Corporation.
Section 3. FISCAL YEAR. The fiscal year of the Corporation shall
commence on January 1 and end on December 31 of each year.
Section 4. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed, affixed or otherwise reproduced.
Section 5. VOTING OF STOCK OWNED BY THE CORPORATION. The Board of
Directors may authorize any person, on behalf of the Corporation, to attend,
vote at and grant proxies to be used at any meeting of stockholders of any
corporation (except this Corporation) in which the Corporation may hold stock.
10
<PAGE> 11
Section 6. AMENDMENTS. These bylaws or any of them, may be altered,
amended or repealed, or new bylaws may be made, by the stockholders entitled to
vote thereon at any annual or special meeting thereof or by the Board of
Directors.
11
<PAGE> 1
EXHIBIT 10.01
RECAPITALIZATION AGREEMENT
dated as of
September 15, 1995
among
ICM INDUSTRIES, INC.,
MLGA FUND II, L.P.,
JACK D. RUTHERFORD
and
DAVID T. SHELBY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1
DEFINITIONS
<S> <C> <C>
1.1 Definitions....................................................................................... 1
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale of New Shares................................................................... 8
2.2 Redemption of Retired Shares...................................................................... 8
2.3 Closing........................................................................................... 10
2.4 Closing Balance Sheet............................................................................. 11
2.5 Adjustment of Purchase Price...................................................................... 13
2.6 Escrow Amount..................................................................................... 14
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
3.1 Corporate Existence and Power..................................................................... 15
3.2 Corporate Authorization........................................................................... 15
3.3 Governmental Authorization........................................................................ 15
3.4 Non-Contravention................................................................................. 15
3.5 Capitalization.................................................................................... 16
3.6 Ownership of Shares; Issuance of New Shares....................................................... 17
3.7 Subsidiaries...................................................................................... 17
3.8 Financial Statements.............................................................................. 18
3.9 Absence of Certain Changes........................................................................ 19
3.10 No Undisclosed Material Liabilities............................................................... 20
3.11 Material Contracts................................................................................ 21
3.12 Litigation........................................................................................ 22
3.13 Laws, Court Orders and Permits; No Defaults....................................................... 22
3.14 Properties........................................................................................ 23
3.15 Financial Advisory Fees........................................................................... 25
3.16 Environmental Matters............................................................................. 25
3.17 Products.......................................................................................... 26
3.18 Intellectual Property............................................................................. 26
3.19 Insurance Coverage................................................................................ 27
3.20 Inventories....................................................................................... 27
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
3.21 Receivables....................................................................................... 28
3.22 Employees......................................................................................... 28
3.23 Labor Matters..................................................................................... 29
3.24 Employee Benefit Plans............................................................................ 29
3.25 Corporate Activity................................................................................ 32
3.26 Related Party Transactions........................................................................ 33
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
4.1 Existence and Power............................................................................... 33
4.2 Corporate Authorization........................................................................... 33
4.3 Governmental Authorization........................................................................ 34
4.4 Non-Contravention................................................................................. 34
4.5 Purchase for Investment........................................................................... 34
4.6 Litigation........................................................................................ 35
4.7 Finders' Fees..................................................................................... 35
4.8 Capital Commitments............................................................................... 35
ARTICLE 5
COVENANTS OF ICM AND THE STOCKHOLDERS
5.1 Conduct of ICM and its Subsidiaries............................................................... 35
5.2 Access to Information............................................................................. 37
5.3 Other Offers...................................................................................... 37
5.4 Notices of Certain Events......................................................................... 38
5.5 Noncompetition.................................................................................... 38
ARTICLE 6
COVENANTS OF THE INVESTOR
6.1 Confidentiality................................................................................... 39
6.2 Access............................................................................................ 40
6.3 Environmental Matters............................................................................. 40
6.4 Appraisal......................................................................................... 40
ARTICLE 7
COVENANTS OF THE PARTIES
7.1 Best Efforts...................................................................................... 41
</TABLE>
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<TABLE>
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7.2 Certain Filings................................................................................... 41
7.3 Public Announcements.............................................................................. 41
7.4 Name Change....................................................................................... 41
ARTICLE 8
TAX MATTERS
8.1 Tax Definitions................................................................................... 42
8.2 Tax Representations............................................................................... 44
8.3 Covenants......................................................................................... 46
8.4 Cooperation on Tax Matters........................................................................ 46
8.5 Tax Indemnification............................................................................... 47
8.6 Purchase Price Adjustment and Interest............................................................ 51
8.7 Termination of Existing Tax Sharing Agreements.................................................... 51
ARTICLE 9
CONDITIONS TO CLOSING
9.1 Conditions to Obligations of the Investor and the
Stockholders.................................................................................. 51
9.2 Conditions to Obligation of the Investor.......................................................... 52
9.3 Conditions to Obligation of the Stockholders...................................................... 54
ARTICLE 10
SURVIVAL; INDEMNIFICATION
10.1 Survival......................................................................................... 55
10.2 Indemnification Generally........................................................................ 56
10.3 Environmental Liabilities........................................................................ 57
10.4 Product Liabilities.............................................................................. 59
10.5 Other Businesses................................................................................. 61
10.6 Restructuring.................................................................................... 61
10.7 Additional Matters............................................................................... 61
10.8 Procedures; Other................................................................................ 62
10.9 Stockholders' Obligations........................................................................ 63
ARTICLE 11
TERMINATION
11.1 Grounds for Termination.......................................................................... 64
11.2 Effect of Termination............................................................................ 64
</TABLE>
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<TABLE>
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ARTICLE 12
MISCELLANEOUS
<S> <C> <C>
12.1 Notices.......................................................................................... 65
12.2 Amendments and Waivers........................................................................... 66
12.3 Expenses......................................................................................... 66
12.4 Successors and Assigns........................................................................... 66
12.5 Governing Law.................................................................................... 66
12.6 Arbitration...................................................................................... 66
12.7 WAIVER OF JURY TRIAL............................................................................. 67
12.8 Counterparts; Third Party Beneficiaries.......................................................... 67
12.9 Entire Agreement................................................................................. 67
12.10 Headings......................................................................................... 67
12.11 Legal Fees....................................................................................... 67
12.12 Severability..................................................................................... 68
12.13 Recitals......................................................................................... 68
EXHIBIT A Stockholder and Investor Share Information
EXHIBIT B Manager Share Information
EXHIBIT C Escrow Agreement
EXHIBIT D Preferred Stock Term Sheet
EXHIBIT E Shareholder Agreement Term Sheet
EXHIBIT F Restructuring Transactions
EXHIBIT G Other Payments to Employees
Schedule 3.4 Required Consents
Schedule 3.5 Agreements to be Terminated Prior to Closing
Schedule 3.7 Subsidiaries
Schedule 3.9 Certain Changes
Schedule 3.10 Material Liabilities
Schedule 3.11 Material Contracts
Schedule 3.12 Litigation
Schedule 3.13 Material Licenses, Franchises and Permits
</TABLE>
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<TABLE>
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Schedule 3.14(a) Liens
Schedule 3.14(b) Real Property
Schedule 3.16 Environmental Matters
Schedule 3.18 Intellectual Property Rights
Schedule 3.22 Employees
Schedule 3.24 Employee Benefit Plans
Schedule 3.26 Related Party Obligations
Schedule 5.1 Permitted Capital Leases and Distributions
Schedule 8.2 Tax Representations
</TABLE>
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RECAPITALIZATION AGREEMENT
AGREEMENT dated as of September 15, 1995 among ICM Industries,
Inc., a Delaware corporation ("ICM"), MLGA Fund II, L.P., a Delaware limited
partnership (the "Investor") and Jack D. Rutherford and David T. Shelby
(individually a "Stockholder" and collectively, the "Stockholders").
WHEREAS, the Stockholders are the owners of the number
of shares of Common Stock of ICM set forth in Exhibit A;
WHEREAS, simultaneously with the Closing, certain members of
management and employees of The Gradall Company, an Ohio corporation
("Gradall"), will receive (i) the number of shares of Common Stock of ICM set
forth in Exhibit B and (ii) cash payments in the amounts set forth in Exhibits B
and H;
WHEREAS, on the terms and subject to the conditions set forth
herein, ICM desires to issue to the Investor and the Investor desires to
purchase from ICM, the number of shares of newly issued Common Stock of ICM (the
"New Shares") set forth in Exhibit A; and
WHEREAS, on the terms and subject to the conditions set forth
herein, contemporaneously with the sale of the New Shares to the Investor, the
Stockholders desire to sell to ICM, and ICM desires to purchase from the
Stockholders, the number of shares of Common Stock, as set forth in Exhibit A
(the "Retired Shares"), and after the consummation of such sale, the
Stockholders desire to retain the number of shares of Common Stock and the
number of shares of Preferred Stock set forth in Exhibit A (the "Retained
Shares").
NOW, THEREFORE, in consideration of the foregoing and the
covenants contained herein, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. (a) The following terms, as used
herein, have the following meanings:
"Acquisition Proposal" means any offer or proposal for,
or any indication of interest in, a merger or other business
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combination directly or indirectly involving ICM or any Subsidiary of ICM, or
any acquisition of any equity interest in, or a substantial portion of the
assets of ICM or any Subsidiary of ICM other than the transactions contemplated
by this Agreement; PROVIDED that no such offer, proposal or indication relating
to any such transaction involving solely any Other Business shall be considered
an Acquisition Proposal.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with such Person; PROVIDED that neither ICM nor any Subsidiary shall be
considered an Affiliate of the Stockholders.
"Assumed Indebtedness" means all amounts owing by Gradall
under (i) the Loan and Security Agreement dated as of October 12, 1994 between
Gradall and Bank One, Columbus, NA, as amended on June 12, 1995 (the "Bank One
Credit Facility") and (ii) the Loan Agreement dated as of October 1, 1983
between the Director of Development of the State of Ohio and GBKS Properties,
Inc. (subsequently renamed The Gradall Company) as of the Closing Date,
including, without limitation, the principal amount of all borrowings under such
agreements as of such date, all interest thereon accrued but not paid as of such
date and all other fees or other amounts accrued but not paid as of such date.
"Balance Sheet" means the balance sheet of Gradall and its
Subsidiaries as of December 31, 1994.
"Balance Sheet Date" means December 31, 1994.
"Bank One Lock Box" means the lock box described in Section
4.3.1 of the Loan and Security Agreement dated October 12, 1994 between Gradall
and Bank One, Columbus NA.
"Bankruptcy Code" means the Bankruptcy Code of 1978, as
amended, 11 U.S.C. ss. 101, et.seq.
"Benefit Arrangement" means any employment, severance or
similar contract or arrangement whether or not written or any plan, policy,
fund, program or contract or arrangement (whether or not written) providing for
compensation, bonus, profit-sharing, stock option, or other stock related rights
or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, worker's compensation, supplemental unemployment
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance or other
benefits) that (i) is not an Employee Plan, (ii) is entered into,
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<PAGE> 9
maintained, administered or contributed to, as the case may be, by the
Stockholders, ICM or any Subsidiary of ICM and (iii) covers any employee or
former employee of ICM or any Subsidiary of ICM employed in the United States.
"Capital Expenditure Amount" means an amount equal to (i)
$900,000 MINUS (ii) the amount of cash capital expenditures relating to the
business of Gradall and its Subsidiaries funded by ICM or any Subsidiary of ICM
during the period January 1, 1995 through the Closing.
"Closing Date" means the date of the Closing.
"Common Stock" means the common stock, par value $1.00
per share, of ICM.
"Employee Plan" means any "employee benefit plan", as defined
in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is
maintained, administered or contributed to by ICM or any Subsidiary of ICM and
(iii) covers any employee or former employee of ICM or any Subsidiary of ICM
employed at any time in the United States.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended and the rules and regulations promulgated thereunder.
"ERISA Affiliate" of any entity means any other entity which,
together with such entity, would be treated as a single employer under Section
414 of the Code.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions, whether
now or hereafter in effect, relating to human health, the environment or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment, including without limitation ambient
air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"Environmental Liabilities" means any and all liabilities of
or relating to ICM or any Subsidiary of ICM (including any entity which is, in
whole or in part, a predecessor of ICM or any Subsidiary of ICM), whether vested
or
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unvested, contingent or fixed, actual or potential, known or unknown, which (i)
arise under or relate to matters covered by Environmental Laws (including
without limitation any matters disclosed or required to be disclosed in Schedule
hereto) and (ii) relate to actions occurring or conditions existing on or prior
to the Closing Date. For purposes of this paragraph, the term "Subsidiary" shall
have the meaning set forth in Section 1.1(a) without regard to the proviso
thereto.
"Gradall" has the meaning set forth in the recitals
hereto.
"Gradall Account" means account number 113106 at Bank
One, Columbus NA designated the "Bank One Lock Box".
"Hazardous Substances" means any toxic, radioactive, caustic
or otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics, including, without
limitation, any substance regulated under Environmental Laws.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Initial Public Offering" or "IPO" means the initial sale of
common stock of ICM or any Subsidiary of ICM pursuant to an effective
registration statement under the Securities Act of 1933 (other than a
registration statement on Form S-8 or any successor form).
"Intellectual Property Right" means any trademark, service
mark, trade name, invention, patent, trade secret, copyright, know-how
(including any registrations or applications for registration of any of the
foregoing) or any other similar type of proprietary intellectual property right.
"International Plan" means any employment, severance or
similar contract or arrangement (whether or not written) or any plan, policy,
fund, program or arrangement or contract providing for severance, insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
pension or retirement benefits or for deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits that (i) is
not an Employee Plan or a Benefit Arrangement, (ii) is entered into, maintained,
administered or contributed to by the Stockholders, ICM or any
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Subsidiary of ICM and (iii) covers any employee or former employee of ICM or any
Subsidiary of ICM.
"Investor" has the meaning set forth in the recitals hereto.
"Investor Indemnitee" means the Investor, any of its
Affiliates and, effective upon the Closing, ICM and the Subsidiaries of ICM.
"Lien" means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest, encumbrance or other adverse
claim of any kind in respect of such property or asset. For the purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any property or
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
"Managers" means the members of Gradall management listed in
Exhibit B.
"Material Adverse Effect" means a material adverse effect on
the condition (financial or otherwise), business, assets, results of operations,
or prospects of ICM and the Subsidiaries of ICM, taken as whole.
"Multiemployer Plan" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
"New Shares" has the meaning set forth in the recitals hereto.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Other Business" means (i) any business owned or operated by
ICM or any present or former Affiliate of ICM (or any Person which is, in whole
or in part, a predecessor of ICM or any such Affiliate) as of the date hereof or
at any time prior to the date hereof other than the businesses conducted by
Gradall and its Subsidiaries as of the date hereof and (ii) any Person other
than ICM, ICM Investment Company, Gradall and The Gradall Company FSC, Inc. that
is, or at any time prior to the date hereof was, an Affiliate of Gradall
(including any Person which is, in whole or in part, a predecessor of any such
Affiliate), and "Other Businesses" has a correlative meaning.
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"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, corporation, partnership,
association, trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means the voting preferred stock of ICM, the
principal terms of which are set forth in Exhibit D.
"Redemption Transaction" means the redemption of the
Retired Shares pursuant to Section .
"Regulated Environmental Activity" means any generation,
treatment, storage, recycling, transportation or disposal of any Hazardous
Substance.
"Release" means any discharge, emission or release,
including a Release as defined in CERCLA at 42 U.S.C. ss.9601(22).
The term "Released" has a corresponding meaning.
"Retained Shares" has the meaning set forth in the recitals
hereto.
"Retired Shares" has the meaning set forth in the recitals
hereto.
"SERP" means The Gradall Company Supplemental Executive
Retirement Plan.
"Shareholder Agreement" means the shareholder agreement among
ICM, the Investor, the Stockholders and the Managers to be entered into on the
Closing Date and having terms substantially as set forth in Exhibit E.
"Subsidiary" means, with respect to any Person, any entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; PROVIDED
that, for purposes of this Agreement, the only Subsidiaries of ICM shall be ICM
Investment Company, Gradall and any Subsidiary of Gradall.
"Stockholder" has the meaning set forth in the recitals
hereto.
"Title IV Plan" means an Employee Plan subject to Title IV of
ERISA other than any Multiemployer Plan.
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(b) "To the knowledge" (or any similar phrase) means, with
respect to ICM or any Subsidiary of ICM, to the actual knowledge of such
Person's officers, managers or other executives.
(c) Each of the following terms is defined in the
Section set forth opposite such term:
<TABLE>
<CAPTION>
TERM SECTION
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<S> <C>
1933 Act 4.5
1995 EBIT 10.3
Actual Net Taxes 2.2
Actual Tax Benefits 2.2
Actual Tax Payments 2.2
Allied Agreement 10.3
Bank One Credit Facility 1.1 (a)
Closing 2.3
Closing Balance Sheet 2.4
Closing Working Capital 2.4 (a)
Code 8.1
Competing Business 5.5 (a)(i)
Damages 10.2
Delaware Law 3.2
Disclosed Environmental Liability 10.3
Escrow Agent 2.3 (d)
Escrow Agreement 2.3 (d)
Escrow Amount 2.3 (d)
Estimated Net Taxes 2.2
Estimated Tax Benefit 2.2
Estimated Tax Payments 2.2
Excess Amount 10.3
Excess Net Income Amount 10.7
Federal Taxes 8.1
Final Determination 8.1
Final Working Capital 2.5 (a)
Gradall Intellectual Property Rights 3.18(a)
Hydreco 5.1 (viii)(b)
ICM Securities 3.5 (b)
Indemnified Party 10.8 (a)
Indemnifying Party 10.8 (a)
Load Center Litigation 10.7
Load Center Territory 10.7
Ohio Law 3.2
Post-Closing Tax Period 8.1
Pre-Closing Tax Period 8.1
Product Liability Insurance 10.4
Purchase Price 2.1
Retired Shares Purchase Price 2.2
</TABLE>
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<TABLE>
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Returns 8.2 (a)
Stockholders' Basket 10.2
Subsidiary Securities 3.7 (a)
Tax 8.1
Tax Asset 8.1
Tax Indemnification Period 8.1
Tax Sharing Agreement 8.1
Taxing Authority 8.1
Unaudited Balance Sheet 3.20
Unfunded Liability 3.24(b)
Unknown Environmental Liability 10.3
</TABLE>
ARTICLE 2
PURCHASE AND SALE
2.1 PURCHASE AND SALE OF NEW SHARES. Upon the terms and
subject to the conditions of this Agreement, ICM agrees to issue to the Investor
and the Investor agrees to purchase from ICM, the New Shares at the Closing. The
purchase price for the New Shares (the "Purchase Price") is $10.5 million
($10,500,000) in cash. The New Shares shall evidence ownership by the Investor
of 82.5% of the issued and outstanding Common Stock after taking into account
the consummation of all of the transactions contemplated hereby including the
transactions described in Exhibit F and the Redemption Transaction. The Purchase
Price shall be paid as provided in Section 2.3.
2.2 REDEMPTION OF RETIRED SHARES. (a) Upon the terms and
subject to the conditions of this Agreement, ICM agrees to purchase from the
Stockholders and the Stockholders agree to sell to ICM, the Retired Shares at
the Closing. The purchase price for the Retired Shares (the "Retired Shares
Purchase Price") is $44.5 million ($44,500,000) (i) less the sum of, without
duplication, (A) the aggregate amount of the Assumed Indebtedness, (B) all
financial advisory or other fees of the type referred to in Section 3.15 (except
fees paid to Morgan, Lewis, Githens & Ahn, L.P.) and paid or to be paid by ICM
or any Subsidiary of ICM, (C) all costs and expenses (including legal fees)
incurred by the Stockholders, ICM and the Subsidiaries of ICM in connection with
this Agreement and the transactions contemplated hereby paid or to be paid by
ICM or any Subsidiary of ICM, (D) an amount equal to the Investor's good faith
estimate of the Taxes payable by ICM or any Subsidiary of ICM as a consequence
of the consummation of the transactions referred to in Exhibit F, (E) all
amounts set forth in Exhibit B which are paid to the Managers and the value of
the Common Stock transferred to the Managers (excluding the value of any Common
Stock transferred to Barry Phillips and Dave Williams) by ICM or
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<PAGE> 15
any Subsidiary of ICM and all amounts set forth in Exhibit G which are paid to
employees by ICM or any Subsidiary of ICM, (F) an amount equal to the Investor's
good faith estimate of the Taxes of any of the Other Businesses for which ICM or
any Subsidiary of ICM may be liable (on a several or joint and several basis) in
respect of any Pre-Closing Tax Period commencing on or after January 1, 1995 for
which returns have not been filed on or before Closing reduced by the amount of
any estimated tax payments made theretofore ,(G) an amount equal to the
Investor's good faith estimate of 100% of the federal, state and local income
Taxes and 50% of all other Taxes of ICM and the Subsidiaries of ICM for which
ICM or any Subsidiary of ICM may be liable in respect of any Pre-Closing Tax
Period commencing on or after January 1, 1995 for which returns have not been
filed on or before Closing reduced by the amount of any estimated tax payments
made theretofore and (H) if positive, the Capital Expenditure Amount and (ii)
plus (A) an amount determined in the good faith judgment of the Investor to be
the amount of any Tax benefit to ICM or any Subsidiary of ICM attributable to
deductions, if any, available in any Pre-Closing Tax Period on account of the
payment by ICM or any Subsidiary of ICM of any amount referred to in clauses
(i)(B), (C), (D) and (E) above (the "Estimated Tax Benefit"), (B) if the Capital
Expenditure Amount is negative, the absolute value of the Capital Expenditure
Amount, (C) the excess, if any, of any estimated tax payments over the Taxes as
described in clauses (i)(F) and (G) above, and (D) any funds received in the
Bank One Lock Box before the close of business on the Closing Date and any wire
transfers received and credited to the Gradall Account before the close of
business on the Closing Date which have not been applied to reduce the Assumed
Indebtedness allocable to the Bank One Credit Facility. The amount equal to the
sum of the amounts described in Section 2.2(a)(i)(D), (F) and (G) (the
"Estimated Tax Payments") MINUS Estimated Tax Benefits is referred to herein as
"Estimated Net Taxes". The Retired Shares Purchase Price shall be allocated
equally among the Stockholders. The Retired Shares Purchase Price shall be paid
as provided in Section 2.3, subject to adjustment as provided in Section 2.5.
(b) As promptly as practicable after the filing of the
relevant Tax returns, the Investor shall notify the Stockholders of the actual
amount reflected on such returns of (i) the Taxes (A) payable by ICM or any
Subsidiary of ICM as a consequence of the consummation of the transactions
referred to in Exhibit F and (B) payable by ICM or any of its Subsidiaries with
respect to the Pre-Closing Periods described in clauses (F) and (G) of Section
2.2(a) (the "Actual Tax Payments") and (ii) the Tax benefits received by ICM or
any Subsidiary of ICM as a result of the payment by ICM or any Subsidiary of ICM
of any amount referred to in clauses (i)(B), (C), (D) and (E) of Section 2.2(a)
(the
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"Actual Tax Benefits"). The amount equal to Actual Tax Payments MINUS Actual Tax
Benefits is referred to herein as "Actual Net Taxes". The notice referred to in
the first sentence of this Section 2.2(b) shall also indicate the difference
between Actual Net Taxes and Estimated Net Taxes. If Actual Net Taxes, as
certified by the Investor, exceed Estimated Net Taxes, the Stockholders shall,
within two business days of receipt of the Investor's certification of such
excess, deliver to the Investor, by wire transfer of immediately available funds
to an account designated by the Investor, an amount equal to such excess plus
interest (calculated on a daily basis) at a rate of 6% per annum which interest
shall accrue on a daily basis from and after the Closing Date through the date
of payment. If Estimated Net Taxes exceed Actual Net Taxes as certified by the
Investor, ICM shall, within two business days of delivery of its certification
of such deficiency, deliver to the Stockholders, by wire transfer of immediately
available funds to an account designated by the Stockholders, an amount equal to
such deficiency plus interest (calculated as set forth in the preceding
sentence) at a rate equal to 6% per annum. Notwithstanding such payments, any
further increase or decrease in the taxes payable as a consequence of the
consummation of the transactions referred to in Exhibit F shall constitute a
Loss which shall be indemnified under Section 8.5 hereof.
2.3 CLOSING. The closing (the "Closing") of the issuance of
the New Shares and the purchase and sale of the Retired Shares hereunder shall
take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New
York, New York as soon as possible, but in no event later than 10 business days,
after satisfaction of the conditions set forth in Article 9, or at such other
time or place as the Investor and the Stockholders may agree. At the Closing:
(a) The Investor shall deliver to ICM the Purchase Price in
immediately available funds by wire transfer to an account of ICM with
a bank designated by ICM, by notice to the Investor, not later than two
business days prior to the Closing Date (or if not so designated, then
by certified or official bank check payable in immediately available
funds to the order of ICM in such amount).
(b) ICM shall deliver to the Investor validly issued
certificates for the New Shares registered in the name of the Investor.
(c) ICM shall deliver to the Stockholders the Retired Shares
Purchase Price less an amount equal to the cash amount, if any,
deposited with the Escrow Agent pursuant to Section 2.3(d) in
immediately available funds by wire
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<PAGE> 17
transfer to an account of the Stockholders with a bank designated by
the Stockholders, by notice to ICM and the Investor, not later than two
business days prior to the Closing Date (or if not so designated, then
by certified or official bank check payable in immediately available
funds to the order of the Stockholders in such amount) PROVIDED,
however, that that portion of the Retired Shares Purchase Price
described in Section 2.2(a)(ii)(D) shall be paid as soon as practicable
after the Closing.
(d) The Stockholders shall deliver to the escrow agent (the
"Escrow Agent") named in the Escrow Agreement (as defined below) (i)
either a certified or official bank check in the amount of $3,000,000
in immediately available funds or a $3,000,000 letter of credit, the
terms of which will be satisfactory to the Investor in its sole
discretion for the benefit of the Escrow Agent, (ii) 75 shares of
Common Stock and (iii) 140 shares of Preferred Stock for deposit
pursuant to an Escrow Agreement (the "Escrow Agreement") substantially
in the form of Exhibit C hereto, in each case for the purpose of
securing the Stockholders' obligations hereunder. The Stockholders
shall also give, execute, file and record any notice, financing
statement, continuation statement or other instrument, document or
agreement that the Investor or ICM may consider necessary or desirable
to create, perfect, continue or validate Investor's security interest
in the shares of stock so delivered or to exercise or enforce
Investor's rights with respect to such security interest. The
$3,000,000 cash amount referred to in clause (i), 75 shares of Common
Stock referred to in clause (ii) and 140 shares of Preferred Stock
referred to in clause (iii) are referred to collectively as the "Escrow
Amount".
(e) The Stockholders shall deliver to ICM certificates for the
Retired Shares duly endorsed or accompanied by stock powers duly
endorsed in blank, with any required transfer stamps affixed thereto.
(f) ICM, the Investor, the Stockholders and each of the
Managers shall enter into the Shareholder Agreement.
The transactions and events described in Sections 2.1 and 2.2
shall be deemed to have occurred simultaneously with one another.
2.4 CLOSING BALANCE SHEET. (a) As promptly as practicable, but
no later than 60 days after the Closing Date, the Investor will cause to be
prepared and delivered to the Stockholders the Closing Balance Sheet, together
with an unqualified report of Coopers and Lybrand, LLP thereon, and a
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certificate based on such Closing Balance Sheet setting forth the Investor's
calculation of Closing Working Capital. The Closing Balance Sheet ("Closing
Balance Sheet") shall (x) fairly present the consolidated financial position of
Gradall and its Subsidiaries immediately prior to the Closing on the Closing
Date in accordance with generally accepted accounting principles not including
normal year end adjustments and (y) include line items substantially consistent
with those in the Balance Sheet. "Closing Working Capital" means the excess of
(i) the sum of net accounts receivable, net inventory (calculated with a LIFO
reserve of no less than $5,200,000) and other current assets (excluding any tax
assets) over (ii) the sum of total accounts payable, payroll deductions and
accrued liabilities (excluding any tax liabilities) all as shown on the Closing
Balance Sheet and as certified by the chief financial officer of Gradall in
conformity with generally accepted accounting principles not including normal
year end adjustments and consistent with the past practices of Gradall.
(b) If the Stockholders disagree with the Investor's
calculation of Closing Working Capital delivered pursuant to Section , the
Stockholders may, within 20 days after delivery of the documents referred to in
Section , deliver a notice to the Investor disagreeing with such calculation and
setting forth the Stockholders' calculation of such amount. Any such notice of
disagreement shall specify those items or amounts as to which the Stockholders
disagree, and the Stockholders shall be deemed to have agreed with all other
items and amounts contained in the Closing Balance Sheet and the calculation of
Closing Working Capital delivered pursuant to Section 2.4(a).
(c) If a notice of disagreement shall be delivered pursuant to
Section , the Investor and the Stockholders shall, during the 15 days following
such delivery, use their best efforts to reach agreement on the disputed items
or amounts in order to determine, as may be required, the amount of Closing
Working Capital, which amount shall not be less than the amount thereof shown in
the Investor's calculations delivered pursuant to Section nor more than the
amount thereof shown in the Stockholders' calculation delivered pursuant to
Section . If, during such period, the Investor and the Stockholders are unable
to reach such agreement, they shall promptly thereafter cause independent
accountants of nationally recognized standing reasonably satisfactory to the
Investor and the Stockholders (who shall not have any material relationship with
the Investor or the Stockholders), promptly to review this Agreement and the
disputed items or amounts for the purpose of calculating Closing Working
Capital. In making such calculation, such independent accountants shall consider
only those items or amounts in the Closing Balance Sheet or the Investor's
calculation of Closing
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Working Capital as to which the Stockholders have disagreed. Such independent
accountants shall deliver to the Investor and the Stockholders, as promptly as
practicable, a report setting forth such calculation. Such report shall be final
and binding upon the Investor and the Stockholders. The cost of such review and
report shall be borne (i) by the Investor if the difference between Final
Working Capital and the Investor's calculation of Closing Working Capital
delivered pursuant to Section is greater than the difference between Final
Working Capital and the Stockholders' calculation of Closing Working Capital
delivered pursuant to Section , (ii) by the Stockholders if the first such
difference is less than the second such difference and (iii) otherwise equally
by the Investor and the Stockholders.
(d) The Investor and the Stockholders agree that they will,
and agree to cause their respective independent accountants and ICM and each
Subsidiary to, cooperate and assist in the preparation of the Closing Balance
Sheet and the calculation of Closing Working Capital and in the conduct of the
audits and reviews referred to in this Section, including without limitation,
the making available to the extent necessary of books, records, work papers and
personnel.
2.5 ADJUSTMENT OF PURCHASE PRICE. (a) If Final Working Capital
is less than $11.7 million ($11,700,000), the Stockholders shall pay to ICM, as
a reduction to the Retired Shares Purchase Price, in the manner and with
interest as provided in Section , an amount equal to such shortfall. If Final
Working Capital exceeds $12.3 million ($12,300,000), ICM shall pay to the
Stockholders, an increase to the Retired Shares Purchase Price in the manner and
with interest as provided in Section , an amount equal to such excess. "Final
Working Capital" means the Closing Working Capital (i) as shown in the
Investor's calculation delivered pursuant to Section , if no notice of
disagreement with respect thereto is duly delivered pursuant to Section ; or
(ii) if such a notice of disagreement is delivered, (A) as agreed by the
Investor and the Stockholders pursuant to Section or (B) in the absence of such
agreement, as shown in the independent accountant's calculation delivered
pursuant to Section ; PROVIDED that, in no event shall Final Working Capital be
less than the Investor's calculation of Closing Working Capital delivered
pursuant to Section or more than the Stockholders' calculation of Closing
Working Capital delivered pursuant to Section 2.4(b).
(b) Any payment pursuant to Section shall be made at a
mutually convenient time and place within 10 days after the Final Working
Capital has been determined by delivery by ICM or the Stockholders, as the case
may be, of a certified or
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official bank check payable in immediately available funds to the other party or
by causing such payments to be credited to such account of such other party as
may be designated by such other party. The amount of any payment to be made
pursuant to Section 2.5(a) shall bear interest from and including the Closing
Date to but excluding the date of payment at a rate per annum equal to the rate
of interest announced by Morgan Guaranty Trust Company of New York from time to
time as its base rate in New York City in effect from time to time during the
period from the Closing Date to the date of payment. Such interest shall be
payable at the same time as the payment to which it relates and shall be
calculated daily on the basis of a year of 365 days and the actual number of
days elapsed. Any payment pursuant to Section 2.5(a) made to or by the
Stockholders shall be allocated 50% to Jack D. Rutherford and 50% to David T.
Shelby.
2.6 ESCROW AMOUNT. The Stockholders agree that at the Closing
the Escrow Amount shall be delivered by the Stockholders to the Escrow Agent for
deposit in accordance with the terms of the Escrow Agreement. The Escrow Amount
shall be applied by the Escrow Agent in accordance with the terms of the Escrow
Agreement to pay to any Investor Indemnitee any amounts owing to such Person
under Section 8.5 or Article 10. Any cash amounts (including cash proceeds, if
any, from the sale of shares of stock held in Escrow) remaining on deposit with
the Escrow Agent on or after the expiration of the statute of limitations
applicable to the matters covered in Article 8 (giving effect to any waiver,
mitigation or extension thereof) in excess of any pending claims shall be paid
by the Escrow Agent to the Stockholders, except as otherwise provided in the
Escrow Agreement. The shares of stock remaining on deposit with the Escrow Agent
on the tenth anniversary of the Closing having a fair market value, as
determined by the Board of Directors of Gradall, in excess of any pending claims
shall be delivered by the Escrow Agent to the Stockholders, except as otherwise
provided in the Escrow Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
Each of the Stockholders represents and warrants to the
Investor as of the date hereof and as of the Closing Date (except with respect
to those representations and warranties which speak to a specific date, in which
case as of such specified date), that:
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3.1 CORPORATE EXISTENCE AND POWER. Each of ICM and its
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals, including without limitation those relating to zoning,
planning, building, use, occupancy and similar matters, required to carry on its
business as now conducted except where the failure to have such licenses,
authorizations, permits, consents and approvals would not have a Material
Adverse Effect. Each of ICM and its Subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary except where the failure to be so
qualified would not have a Material Adverse Effect. The Stockholders have
heretofore delivered to Investor true and complete copies of the certificate of
incorporation and bylaws of each of ICM and its Subsidiaries as currently in
effect.
3.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by ICM of this Agreement (including, without limitation, the
execution, delivery and performance of the Shareholder Agreement) are within
ICM's corporate power and have been duly authorized by all necessary corporate
action on the part of ICM. The execution, delivery and performance by each
Stockholder of this Agreement (including, without limitation, the execution,
delivery and performance of the Shareholder Agreement) are within such
Stockholder's powers. This Agreement constitutes and, when executed, the
Shareholder Agreement will constitute a valid and binding agreement of ICM and
each Stockholder enforceable in accordance with its terms, except as (i) the
enforceability hereof may be limited by bankruptcy, insolvency, moratorium or
other similar laws effecting the enforcement of creditor's rights generally and
(ii) the availability of equitable remedies may be limited by equitable
principles of general applicability. Nothing contained in this Section 3.2 or
Section 3.4 shall be considered a representation or warranty as to the validity
or enforceability of the Redemption Transaction under federal or state
fraudulent conveyance or similar laws, the Bankruptcy Code, under the General
Corporation Law of the State of Delaware ("Delaware Law") or under the General
Corporation Law of Ohio ("Ohio Law").
3.3 GOVERNMENTAL AUTHORIZATION. Except for compliance with the
applicable requirements under the HSR Act, the execution, delivery and
performance by the Stockholders and ICM of this Agreement require no action by
or in respect of, or filing with, any governmental body, agency, or official.
3.4 NON-CONTRAVENTION. Subject to the final sentence
of Section 3.2, the execution, delivery and performance by the
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Stockholders and ICM of this Agreement (including, without limitation, the
execution, delivery and performance of the Shareholder Agreement) do not and
will not (i) violate the certificate of incorporation or bylaws of ICM or any
Subsidiary of ICM, (ii) assuming compliance with the matters referred to in
Section violate any applicable law, rule, regulation, judgment, injunction,
order or decree, (iii) except where such failure to obtain consent, inaction or
default would not have a Material Adverse Effect, and except as set forth on
Schedule 3.4, require any consent or other action by any Person under,
constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of ICM or any Subsidiary
of ICM to a loss of any benefit to which ICM or any Subsidiary of ICM are
entitled under any agreement or other instrument binding upon ICM or any
Subsidiary of ICM or any license, franchise, permit or other similar
authorization, including without limitation those relating to zoning, planning,
building, use, occupancy and similar matters held by ICM or any Subsidiary of
ICM or (iv) except for Liens granted by the Investor, ICM or any Subsidiary of
ICM, on or after the Closing, result in the creation or imposition of any Lien
on any asset of ICM or any Subsidiary of ICM.
3.5 CAPITALIZATION. (a) Immediately prior to the Closing,
there will be outstanding, 900 shares of Common Stock and 140 shares of
Preferred Stock. Of the shares of Common Stock to be outstanding immediately
prior to the Closing, such shares will be held as follows: Jack D. Rutherford
(450 shares), David T. Shelby (450 shares). Simultaneously with the Closing, the
following Persons will receive the number of shares stated after their names:
Barry Phillips (50 shares), David Williams (25 shares) and the other Managers
(25 shares in the aggregate).
(b) All outstanding shares of capital stock of ICM have been
duly authorized and validly issued and are fully paid and non-assessable, and
all shares outstanding as of the Closing will have been duly authorized, validly
issued, fully-paid and non-assessable. Except pursuant to the agreements set
forth on Schedule 3.5 (which agreements shall be terminated either prior to the
Closing or on the Closing Date) and except as set forth in this Section , there
are no outstanding (i) shares of capital stock or voting securities of ICM, (ii)
securities of ICM convertible into or exchangeable for shares of capital stock
or voting securities of ICM or (iii) options or other rights to acquire from
ICM, or other obligations of ICM to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of ICM (the items in clauses (i), (ii) and (iii) being referred to
collectively as the "ICM Securities"). There are no outstanding
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obligations of ICM or any Subsidiary of ICM to repurchase, redeem or otherwise
acquire any ICM Securities except for such securities and obligations consented
to by the Investor on or after the Closing Date.
3.6 OWNERSHIP OF SHARES; ISSUANCE OF NEW SHARES. As of the
Closing Date, each Stockholder and each Manager will have full legal right,
power and authority to sell, assign, transfer and convey the shares so owned by
such Stockholder or such Manager in accordance with the terms and subject to the
conditions of this Agreement. As of the Closing Date, each Stockholder and each
Manager will be the record and beneficial owner of the number of shares of
Common Stock listed opposite the name of such Stockholder and such Manager in
Exhibits A and B hereto, free and clear of any Lien and any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of the shares), except for restrictions established pursuant to the
terms of the agreements set forth on Schedule 3.5 (which agreements shall be
terminated either prior to the Closing or on the Closing Date) and the
Shareholder Agreement. The delivery to ICM of the Retired Shares pursuant to the
provisions of this Agreement will transfer to ICM valid title thereto, free and
clear of any Lien and any such limitation or restriction. Upon the issuance by
ICM to the Investor of the New Shares and the payment therefor by the Investor
to ICM, in each case on the terms and subject to the conditions set forth
herein, the New Shares will have been duly authorized and validly issued and
will be fully paid, non-assessable, free of any Lien or any such limitation or
restriction and the issuance thereof shall not have been subject to any
preemptive or similar rights, except for restrictions set forth in the
Shareholder Agreement and except for Liens consented to by the Investor on or
after the Closing.
3.7 SUBSIDIARIES. (a) Each Subsidiary of ICM is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals, including without
limitation those relating to zoning, planning, building, use, occupancy and
similar matters, required to carry on its business as now conducted, is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such qualification is necessary, except where the
failure to be so qualified or to have such licenses, authorizations, permits,
consents and approvals would not have a Material Adverse Effect. All
Subsidiaries (which term, for the purposes of this sentence, shall have the
meaning set forth in Section 1.1(a) hereof without regard to the proviso
thereto) of ICM and their respective jurisdictions of incorporation are
identified on Schedule 3.7.
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(b) All of the outstanding capital stock of, or other voting
securities or ownership interests in, each Subsidiary of ICM is owned by ICM,
directly or indirectly, free and clear of any Lien and free of any other
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other voting securities or
ownership interests), except for restrictions under the agreements set forth on
Schedule 3.5 (which agreements shall be terminated either prior to the Closing
or on the Closing Date). Except for an option held by Barry Phillips to acquire
100 shares of common stock of Gradall (which option will be cancelled
simultaneously with the Closing), there are no outstanding (i) securities of ICM
or any Subsidiary of ICM convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in any Subsidiary of ICM
or (ii) options or other rights to acquire from ICM or any Subsidiary of ICM, or
other obligation of ICM or any Subsidiary of ICM to issue, any capital stock or
other voting securities or ownership interests in, or any securities convertible
into or exchangeable for any capital stock or other voting securities or
ownership interests in, any Subsidiary of ICM (the items in clauses (i) and (ii)
being referred to collectively as the "Subsidiary Securities"). There are no
outstanding obligations of ICM or any Subsidiary of ICM to repurchase, redeem or
otherwise acquire any outstanding Subsidiary Securities.
3.8 FINANCIAL STATEMENTS. The audited balance sheets of
Gradall and its Subsidiaries as of December 31, 1992, December 31, 1993 and
December 31, 1994 and the related consolidated statements of income and cash
flows for each of the years ended December 31, 1992, December 31, 1993 and
December 31, 1994, and the unaudited balance sheet of Gradall and its
Subsidiaries as of July 31, 1995 and the related consolidated statements of
income and cash flows for the period ended July 31, 1995 present fairly, in all
material respects, the consolidated financial position of Gradall and its
Subsidiaries as of the dates thereof and their consolidated results of
operations and changes in consolidated financial position for the periods then
ended in conformity with generally accepted accounting principles applied on a
consistent basis not including normal year end adjustments. The unaudited
balance sheets of ICM and its Subsidiaries as of December 31, 1992, December 31,
1993 and December 31, 1994 and the related consolidated statements of income and
cash flows for each of the years ended December 31, 1992, December 31, 1993 and
December 31, 1994, present fairly, in all material respects, the consolidated
financial position of ICM and its Subsidiaries as of the dates thereof and their
consolidated results of operations and charges in consolidated financial
position, for the periods then ended in conformity with generally accepted
accounting principles applied on a consistent basis (for purposes of this
sentence, the term
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"Subsidiary" shall have the meaning set forth in Section 1.1(a) without regard
to the proviso thereto).
3.9 ABSENCE OF CERTAIN CHANGES. (a) Except as disclosed in
Schedule 3.9 and except as set forth in Exhibit F, since the Balance Sheet Date,
the business of ICM and its Subsidiaries has been conducted in the ordinary
course consistent with past practices and there has not been:
(i) any event, occurrence, development or state of
circumstances or facts which has had or could reasonably be expected to
have a Material Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of
ICM or any Subsidiary of ICM, or any repurchase, redemption or other
acquisition by ICM or any Subsidiary of ICM of any outstanding shares
of capital stock or other securities of, or other ownership interests
in, ICM or any Subsidiary of ICM;
(iii) any amendment of any material term of any outstanding
security of ICM or any Subsidiary of ICM;
(iv) any incurrence, assumption or guarantee by ICM or any
Subsidiary of ICM of any indebtedness for borrowed money except
pursuant to and in accordance with the terms (as such terms are in
effect as of the date hereof) of the Bank One Credit Facility and any
capital lease obligations identified on Schedule 3.9;
(v) any creation or assumption by ICM or any Subsidiary of ICM
of any Lien on any material asset other than in the ordinary course of
business consistent with past practices;
(vi) any making of any loan, advance or capital contributions
to or investment in any Person other than loans, advances or capital
contributions to or investments in Subsidiaries of ICM made in the
ordinary course of business consistent with past practices;
(vii) any damage, destruction or other casualty loss (whether
or not covered by insurance) affecting the business or assets of ICM or
any Subsidiary of ICM which, individually or in the aggregate, has had
or would reasonably be expected to have a Material Adverse Effect;
(viii) any transaction or commitment made, or any
contract or agreement entered into, by ICM or any Subsidiary
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of ICM relating to its assets or business (including the acquisition or
disposition of any assets) or any relinquishment by ICM or any
Subsidiary of ICM of any contract or other right, in either case,
material to ICM and its Subsidiaries, taken as a whole, other than
transactions and commitments in the ordinary course of business
consistent with past practices and those contemplated by this
Agreement;
(ix) any change in any method of accounting or accounting
practice by ICM or any Subsidiary of ICM;
(x) any (A) employment, deferred compensation, severance,
retirement or other similar agreement entered into with any director,
officer or employee of ICM or any Subsidiary of ICM (or any amendment
to any such existing agreement), (B) grant of any severance or
termination pay to any director, officer or employee of ICM or any
Subsidiary of ICM, or (C) change in compensation or other benefits
payable to any director, officer or employee of ICM or any Subsidiary
of ICM pursuant to any severance or retirement plans or policies
thereof; or
(xi) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of ICM or any
Subsidiary of ICM, which employees were not subject to a collective
bargaining agreement at the Balance Sheet Date, or any lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with
respect to any employees of ICM or any Subsidiary of ICM.
(b) ICM and its Subsidiaries have no outstanding indebtedness
for borrowed money other than the Assumed Indebtedness and any capital lease
obligations identified on Schedule 3.9.
3.10 NO UNDISCLOSED MATERIAL LIABILITIES. There are no
liabilities of ICM or any Subsidiary of ICM of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and there
is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability, other than:
(a) liabilities provided for in the Balance Sheet or
disclosed in the notes thereto;
(b) liabilities incurred in the ordinary course of
business consistent with past practice subsequent to the
Balance Sheet Date;
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(c) liabilities disclosed on Schedule ; and
(d) other undisclosed liabilities which, individually or in
the aggregate, are not material to ICM or any Subsidiary, taken as a whole.
3.11 MATERIAL CONTRACTS. (a) Except as disclosed in
Schedule , neither ICM nor any Subsidiary of ICM is a party
to or bound by:
(i) any lease (whether of real or personal property)
providing for annual rentals of $25,000 or more;
(ii) any agreement for the purchase of materials, supplies,
goods, services, equipment or other assets that provides for either (A)
annual payments by ICM and its Subsidiaries of $25,000 or more or (B)
aggregate payments by ICM and its Subsidiaries of $25,000 or more;
(iii) any sales, distribution or other similar agreement
providing for the sale by ICM or any Subsidiary of ICM of materials,
supplies, goods, services, equipment or other assets that provides for
either (A) annual payments to ICM and its Subsidiaries of $25,000 or
more or (B) aggregate payments to ICM and its Subsidiaries of $25,000
or more;
(iv) any partnership, joint venture or other similar
agreement or arrangement;
(v) any agreement relating to the acquisition or
disposition of any business (whether by merger, sale of
stock, sale of assets or otherwise);
(vi) any agreement relating to indebtedness for borrowed money
or the deferred purchase price of property (in either case, whether
incurred, assumed, guaranteed or secured by any asset), except any such
agreement (A) with an aggregate outstanding principal amount not
exceeding $25,000 and which may be prepaid on not more than 30 days
notice without the payment of any penalty and (B) entered into
subsequent to the date of this Agreement as permitted by Section
3.9(iv);
(vii) any license, franchise or similar agreement;
(viii) any agency, dealer, sales representative,
marketing or other similar agreement;
(ix) any agreement that limits the freedom of ICM or
any Subsidiary of ICM to compete in any line of business or
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with any Person or in any area or which would so limit the
freedom of ICM or any such Subsidiary after the Closing
Date;
(x) any agreement with (A) any of the Stockholders or (B) any
Person 5% or more of whose outstanding voting securities are directly
or indirectly owned, controlled or held with power to vote by any of
the Stockholders;
(xi) any agreement with any director or officer of ICM or any
Subsidiary of ICM or with any "associate" or any member of the
"immediate family" (as such terms are respectively defined in Rules
12b-2 and 16a-1 of the 1934 Act) of any such director or officer; or
(xii) any other agreement, commitment, arrangement or plan not
made in the ordinary course of business that is material to ICM and its
Subsidiaries, taken as a whole.
(b) Each agreement, commitment, arrangement or plan disclosed
in any Schedule to this Agreement or required to be disclosed pursuant to this
Section is a valid and binding agreement of ICM or a Subsidiary of ICM, as the
case may be, and is in full force and effect, and neither ICM nor any such
Subsidiary is nor, to the knowledge of ICM, Gradall or either Stockholder, is
any other party thereto in default or breach in any material respect under the
terms of any such agreement, contract, plan, lease, arrangement or commitment.
3.12 LITIGATION. (a) Schedule 3.12 sets forth a list of all
claims, actions, proceedings and investigations against, or to the knowledge of
ICM, Gradall or either Stockholder, threatened against ICM or any Subsidiary of
ICM, in each case as of the date hereof, before any court, arbitrator or
administrative, regulatory or governmental body or authority.
(b) Except as disclosed on Schedule 3.12, there is no action,
suit, investigation or proceeding pending against, or to the knowledge of ICM,
Gradall or either Stockholder threatened against or affecting, either
Stockholder, ICM or any Subsidiary of ICM or any of their respective properties
before any court or arbitrator or any governmental body, agency or official
which if determined or resolved adversely in accordance with the plaintiff's
demands, would reasonably be expected to have a Material Adverse Effect or which
in any manner challenges or seeks to prevent, enjoin, alter or materially delay
the transactions contemplated by this Agreement.
3.13 LAWS, COURT ORDERS AND PERMITS; NO DEFAULTS. (a)
Subject to Section 3.13(c), neither ICM nor any Subsidiary of ICM
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is in violation of, and has not since January 1, 1990 violated, any applicable
law, rule, regulation, judgement, injunction, order or decree except where such
violation would not have a Material Adverse Effect.
(b) ICM and each Subsidiary of ICM has, and Schedule 3.13
correctly describes, each material license, franchise, permit or other similar
authorization, including without limitation those relating to zoning, planning,
building, use, occupancy and similar matters held by ICM and each Subsidiary of
ICM.
(c) Neither ICM nor any Subsidiary of ICM is in default under,
and no condition exists that with notice or lapse of time or both would
constitute a default under, any material agreement or other instrument binding
upon ICM or any Subsidiary of ICM or any license, franchise, permit or other
similar authorization, including without limitation those relating to zoning,
planning, building, use, occupancy and similar matters held by ICM or any
Subsidiary of ICM.
(d) Notwithstanding anything herein to the contrary, the
provisions of this Section 3.13 do not address matters addressed in Sections
3.16, 3.17, 3.18, 3.23, 3.24 and 8.2.
3.14 PROPERTIES. (a) ICM and its Subsidiaries have good and
marketable title to, or in the case of leased property have valid leasehold
interests in, all property and assets (whether real or personal, tangible or
intangible) reflected on the Balance Sheet or acquired after the Balance Sheet
Date. None of such property or assets is subject to any Liens, except:
(i) Liens disclosed in Schedule 3.14(a) (which identifies the
properties or assets affected thereby) and reflected on the Balance
Sheet or the Closing Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good
faith and for which adequate accruals or reserves have been established
on the Balance Sheet or the Closing Balance Sheet;
(iii) Liens of mechanics, laborers, materialmen, suppliers,
warehousemen, landlords and other similar Persons for obligations not
yet due or being contested in good faith and for which adequate
accruals or reserves have been established on the Balance Sheet or the
Closing Balance Sheet;
(iv) Liens that do not secure debt or any other monetary
obligation which do not materially detract from the
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value or materially interfere with any present or intended use of such
property or assets; or
(v) Liens arising after the Balance Sheet Date in the ordinary
course of business consistent with past practices and reflected on the
Closing Balance Sheet.
(b) There are no developments affecting any such property or
assets (whether real or personal) pending or, to the knowledge of ICM, Gradall
or either Stockholder threatened, which might materially detract from the value
of such property or assets or materially interfere with any present or intended
use of any such property or assets.
(c) Each real property owned or leased by ICM or any of its
Subsidiaries is listed in Schedule 3.14(b). With respect to each leased real
property Schedule 3.11 or Schedule 3.14(b) correctly describes the relevant
lease, naming the landlord, the tenant, all amendments and other modifications
thereof, all assignments thereof, the term thereof (including any options to
extend the term) and in all material respects the basic rent thereunder.
(d) To the knowledge of the Stockholders, ICM or any
Subsidiary of ICM, the plants, buildings, structures and equipment located on
each owned real property are in normal operating condition and repair (giving
due account to the age and length of use of same, ordinary wear and tear
excepted) and are suitable in all material respects for their present uses.
(e) To the knowledge of the Stockholders, ICM or any
Subsidiary of ICM, each owned real property currently has (x) access to public
roads directly or by valid and subsisting easements over private property for
ingress to and egress from such owned real property as is reasonably necessary
for the conduct of the Business as presently conducted and (y) water supply,
storm and sanitary sewer facilities, telephone, gas and electrical connections,
drainage and other public utilities as are reasonably necessary for the conduct
of the business as presently conducted at such owned real property, all of which
enter such owned real property in question through public roads or valid and
subsisting easements over private property.
(f) To the knowledge of the Stockholders, ICM or any
Subsidiary of ICM, none of the plants, buildings or other structures located on
an owned real property encroaches in a material respect upon any real property
owned by another Person or upon any easement affecting such owned real property
to the extent that any such encroachment would materially detract from the value
or materially interfere with any present or intended
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use of such owned real property; no structure on any real property owned by
another Person encroaches in a material respect upon any owned real property to
the extent that any such encroachment would materially detract from the value or
materially interfere with any present or intended use of such owned real
property.
3.15 FINANCIAL ADVISORY FEES. Except for McDonald & Company
Securities, Inc., whose fees in an amount of approximately $1,300,000 will be
paid by the Stockholders, or if not paid by the Stockholders prior to Closing,
by Gradall immediately prior to Closing, and Morgan, Lewis, Githens & Ahn, L.P.
and its Affiliates there is no investment banker, financial advisor, broker
immediately prior to Closing, finder or other intermediary which has been
retained by or is authorized to act on behalf of either Stockholder, ICM or any
Subsidiary of ICM who might be entitled to any fee or commission in connection
with the transactions contemplated by this Agreement.
3.16 ENVIRONMENTAL MATTERS. (a) Except as disclosed on
Schedule 3.16,
(i) no notice, notification, demand, request for information,
citation, summons, complaint or order has been issued, no complaint has
been filed, no penalty has been assessed and no investigation or review
is pending, or to ICM, Gradall or either Stockholder's knowledge,
threatened by any governmental entity or other Person with respect to
any (A) alleged violation by ICM or any Subsidiary of ICM of any
Environmental Law or liability thereunder, (B) alleged failure by ICM
or any Subsidiary of ICM to have any permit, certificate, license,
approval, registration or authorization required under any
Environmental Law in connection with the conduct of its business, (C)
Regulated Environmental Activity or (D) Release of Hazardous
Substances;
(ii) no polychlorinated biphenyls, radioactive material, urea
formaldehyde, lead, asbestos, asbestos-containing material or
underground storage tank (active or abandoned) is or has been present
at any property now or previously owned, leased or operated by ICM or
any Subsidiary of ICM; and
(iii) there are no Environmental Liabilities that have had or
may reasonably be expected to have a Material Adverse Effect.
(b) There has been no environmental investigation,
study, audit, test, review or other analysis conducted of which
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ICM, Gradall or either Stockholder has knowledge in relation to the current or
prior business of ICM or any Subsidiary of ICM or any property or facility now
or previously owned or leased by ICM or any Subsidiary of ICM which has not been
delivered to the Investor at least five days prior to the date hereof.
(c) Neither ICM nor any Subsidiary of ICM owns or leases or
has owned or leased any property, or conducts or has conducted any operations,
in New Jersey or Connecticut.
(d) For purposes of this Section, (i) the term "Subsidiary"
shall have the meaning set forth in Section 1.1(a) hereof without regard to the
proviso thereto and (ii) the terms "ICM" and "Subsidiary" shall include any
entity which is, in whole or in part, a predecessor of ICM or any such
Subsidiary (defined as set forth in clause (i) of this Section 3.16(d)).
3.17 PRODUCTS. Each of the products produced or sold by ICM or
any Subsidiary of ICM prior to the Closing Date is, and at all times up to and
including the sale thereof has been (i) in compliance in all material respects
with all applicable federal, state, local and foreign laws and regulations and
(ii) fit for the ordinary purposes for which it is intended to be used. There is
no design defect with respect to any of such products and each of such products
contains adequate warnings, presented in a reasonably prominent manner, in
accordance with applicable laws, rules and regulations and current industry
practice with respect to its use.
3.18 INTELLECTUAL PROPERTY. (a) Schedule contains a list of
all Intellectual Property Rights owned or licensed and used or held for use by
ICM or any Subsidiary of ICM ("Gradall Intellectual Property Rights"),
specifying as to each, as applicable: (i) the nature of such Intellectual
Property Right; (ii) the owner of such Intellectual Property Right; (iii) the
jurisdictions by or in which such Intellectual Property Right is registered or
has been issued or registered or in which an application for such issuance or
registration has been filed, including the respective registration or
application numbers; and (iv) licenses, sublicenses and other agreements as to
which ICM or any Subsidiary of ICM is a party and pursuant to which any Person
is authorized to use such Intellectual Property Right, including the identity of
all parties thereto, a description of the nature and subject matter thereof, the
applicable royalty and the term thereof.
(b) Since January 1, 1990, neither ICM nor any Subsidiary of
ICM has been a defendant in any action, suit, investigation or proceeding
relating to, or otherwise has been notified of, any alleged claim or
infringement of any
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Intellectual Property Rights of any Person other than Gradall and its
Subsidiaries, and to the knowledge of the Stockholders, ICM and its
Subsidiaries, neither ICM nor any of its Subsidiaries has engaged or is engaging
in any such infringement. None of ICM, Gradall or either Stockholder has
knowledge of any continuing infringement by any other Person of any of the
Gradall Intellectual Property Rights. No Gradall Intellectual Property Right is
subject to any outstanding judgment, injunction, order, decree or agreement
restricting the use thereof by ICM or its Subsidiaries or restricting the
licensing thereof by ICM or its Subsidiaries to any Person. Neither ICM nor any
of its Subsidiaries has entered into any agreement to indemnify any other Person
against any charge of infringement of any Intellectual Property Right.
(c) To the knowledge of ICM, Gradall or the Stockholders, none
of the processes and formulae, research and development results and other
know-how of ICM or its Subsidiaries, the value of which to ICM and its
Subsidiaries is contingent upon maintenance of the confidentiality thereof, has
been disclosed by ICM or any Subsidiary of ICM to any Person other than
employees, representatives and agents of ICM and its Subsidiaries all of whom
are bound by written confidentiality agreements substantially in the form
previously disclosed to the Investor except where such disclosure would not have
a Material Adverse Effect.
3.19 INSURANCE COVERAGE. The Stockholders have furnished to
the Investor a list of, and true and complete copies of, all insurance policies
and fidelity bonds relating to the assets, business, operations, employees,
officers or directors of ICM and its Subsidiaries. There is no claim by ICM or
any Subsidiary of ICM pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds or in respect of which such underwriters have reserved their
rights. All premiums payable under all such policies and bonds have been paid
timely and ICM and its Subsidiaries have otherwise complied fully with the terms
and conditions of all such policies and bonds. Such policies of insurance and
bonds (or other policies and bonds providing substantially similar insurance
coverage) remain in full force and effect. The Stockholders do not know of any
threatened termination of, premium increase with respect to, or material
alteration of coverage under, any of such policies or bonds.
3.20 INVENTORIES. The inventories set forth in the Balance
Sheet and on the unaudited balance sheet of Gradall and its Subsidiaries as of
July 31, 1995 (the "Unaudited Balance Sheet") were properly stated therein at
the lesser of cost or
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fair market value determined in accordance with generally accepted accounting
principles (except, with respect to the Unaudited Balance Sheet, not including
normal year end adjustments) consistently maintained and applied by Gradall and
its Subsidiaries. The inventories set forth in the Balance Sheet if recorded
using the FIFO accounting method would have a value, net of reserves, of not
less than $20,097,427 and set forth in the Unaudited Balance Sheet if recorded
using the FIFO accounting method would have a value, net of reserves, of not
less than $18,773,000. Since the Balance Sheet Date, the inventories of Gradall
and its Subsidiaries have been maintained in the ordinary course of business. To
the knowledge of the Stockholders, as determined in the Stockholders' good faith
professional judgment, all such inventory is owned free and clear of all Liens
except for Liens for Assumed Indebtedness. To the knowledge of the Stockholders,
as determined in the Stockholders' good faith professional judgment, all of the
inventory recorded on the Balance Sheet consists of, and all inventory of
Gradall and its Subsidiaries on the Closing Date will consist of, items of a
quality usable or saleable in the normal course of business consistent with past
practices and are and will be in quantities sufficient for the normal operation
of the business of Gradall and its Subsidiaries in accordance with past
practice. For purposes of this Section 3.20, the phrase "normal operation of
business" shall recognize and include Gradall's operating with "past due
material" averaging $1,400,000 in the last quarter of 1994 and $700,000 in 1995
and with "past due shop hours" of 17,000 for internal production components in
1994 and 1995.
3.21 RECEIVABLES. All accounts, notes receivable and other
receivables, net of reserves, reflected on the Balance Sheet (other than
receivables collected since the Balance Sheet Date) and the Unaudited Balance
Sheet (other than receivables collected since the date of Unaudited Balance
Sheet) are, and all accounts and notes receivable arising from or otherwise
relating to the business of ICM and its Subsidiaries at the Closing Date will
be, valid and genuine. All accounts, notes receivable and other receivables, net
of reserves, arising out of or relating to the business of Gradall and its
Subsidiaries at the Balance Sheet Date and the date of the Unaudited Balance
Sheet have been included in the Balance Sheet or the Unaudited Balance Sheet, as
applicable, and all accounts, notes receivable and other receivables, net of
reserves, arising out of or relating to the business of ICM and its Subsidiaries
at the Closing Date will be included in the Closing Balance Sheet, in accordance
with generally accepted accounting principles applied on a consistent basis.
3.22 EMPLOYEES. Schedule sets forth a true and complete list
of (a) the names, titles, annual salaries and other
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compensation of all officers of ICM and its Subsidiaries and all other employees
of ICM and its Subsidiaries whose annual base salary exceeds $50,000 and (b) the
wage rates for non-salaried employees of ICM (by classification). No key
employee of Gradall or its Subsidiaries has indicated to either Stockholder, ICM
or any Subsidiary of ICM that he intends to resign or retire as a result of the
transactions contemplated by this Agreement or otherwise within one year after
the Closing Date.
3.23 LABOR MATTERS. Each of ICM and its Subsidiaries is in
compliance with all currently applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice, failure to comply with which or
engagement in which, as the case may be, would reasonably be expected to have a
Material Adverse Effect. There is no unfair labor practice complaint pending or,
to the knowledge of ICM, Gradall or either Stockholder, threatened against ICM
or any Subsidiary of ICM (with respect to the business of Gradall or any
Subsidiary of Gradall) before the National Labor Relations Board.
3.24 EMPLOYEE BENEFIT PLANS. (a) Schedule identifies each
Employee Plan. The Stockholders have furnished to the Investor copies of the
Employee Plans (and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof together with the three most recent
annual reports (Form 5500 including, if applicable, Schedule B thereto) and the
most recent actuarial valuation report prepared in connection with any Employee
Plan. Schedule identifies each Employee Plan which is (i) a Multiemployer Plan,
(ii) a Title IV Plan or (iii) maintained in connection with any trust described
in Section 501(c)(9) of the Code. The Stockholders have provided the Investor
with complete age, salary, service and related data as of December 31, 1994 for
all employees and former employees covered under any Title IV Plan.
(b) Except as set forth on Schedule 3.24, as of December 31,
1993 the fair market value of the assets of each Title IV Plan (excluding for
these purposes any accrued but unpaid contributions) maintained by or to which
contributions were required to be made by ICM or any Subsidiary of ICM exceeded
the present value of all benefits accrued under such Title IV Plan determined
using the actuarial assumptions utilized by each such Title IV Plan in, and
disclosed in, the audited financial statements for the plan year ended December
31, 1993. As of December 31, 1993, the aggregate unfunded liability of ICM and
any Subsidiary of ICM in respect of all Employee Plans or Benefit Arrangements
described under Sections 4(b)(5) or 401(a)(1) of ERISA (the "Unfunded
Liability"), computed using the actuarial assumptions utilized by each such
Title IV Plan in, and disclosed
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in, the audited financial statements for the plan year ended December 31, 1993
and determined as if all benefits under such plans were vested and payable as of
such date, did not exceed $2,132,079. For purposes of this Section 3.24(b), the
term "Subsidiary" shall have the meaning set forth in Section 1.1(a) hereof
without regard to the proviso thereto. Subject to the accuracy of the foregoing,
notwithstanding anything herein contained to the contrary, the Stockholders
shall not have any obligation or liability hereunder to satisfy or pay the
Unfunded Liability of any such Employee Plan maintained by ICM or any Subsidiary
of ICM; provided, however, this sentence shall not apply with respect to the
Unfunded Liability of any Employee Plan maintained by any Other Business.
(c) No transaction prohibited by Section 406 of ERISA or
Section 4975 of the Code, has occurred with respect to any employee benefit plan
or arrangement which is covered by Title I of ERISA which transaction has or
will cause ICM or any of the Subsidiaries to incur any liability under ERISA,
the Code or otherwise, excluding transactions effected pursuant to and in
compliance with a statutory or administrative exemption. No "accumulated funding
deficiency", as defined in Section 412 of the Code, has been incurred with
respect to any Employee Plan subject to such Section 412, whether or not waived.
With respect to any plan subject to Title IV of ERISA, no "reportable event",
within the meaning of Section 4043 of ERISA, other than a "reportable event"
that will not have a Material Adverse Effect, and no event described in Section
4062 or 4063 of ERISA, has occurred in connection with any Employee Plan.
Neither ICM nor any Subsidiary nor any ERISA Affiliate of ICM or any Subsidiary
has (i) engaged in, or is a successor or parent corporation to an entity that
has engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA or
(ii) incurred, or reasonably expects to incur prior to the Closing Date, (A) any
liability under Title IV of ERISA arising in connection with the termination of,
or a complete or partial withdrawal from, any plan covered or previously covered
by Title IV of ERISA or (B) any liability under Section 4971 of the Code that in
either case could become a liability of ICM or any Subsidiary or the Investor or
any of its ERISA Affiliates after the Closing Date. No condition exists that (i)
could constitute grounds for termination by the PBGC of any employee benefit
plan that is subject to Title IV of ERISA that is maintained by ICM, any
Subsidiary or any of their ERISA Affiliates or (ii) presents a material risk of
complete or partial withdrawal from any multiemployer plan, as defined in
Section 3(37) of ERISA, which could result in ICM, any Subsidiary or the
Investor or any ERISA Affiliate of any of them incurring a withdrawal liability
within the meaning of Section 4201 of ERISA. The assets of ICM and all of the
Subsidiaries are not now, nor will they after the passage of time be, subject to
any lien
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imposed under Code Section 412(n) by reason of a failure of any of the
Stockholders, the Managers, their Affiliates, ICM or any Subsidiary to make
timely installments or other payments required under Code Section 412. If a
"complete withdrawal" by the Stockholders, the Managers, and all of their ERISA
Affiliates were to occur as of the Closing Date with respect to all
Multiemployer Plans, none of ICM, any Subsidiary or any of their ERISA
Affiliates would incur any material withdrawal liability under Title IV of
ERISA.
(d) Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period since its adoption; each trust created under any such Plan is exempt from
tax under Section 501(a) of the Code and has been so exempt since its creation.
The Stockholders have provided the Investor with the most recent determination
letter of the Internal Revenue Service relating to each such Employee Plan or,
if no determination letter has been obtained, a request for such a letter or
letters has been filed and is pending and the Stockholders have provided the
Investor with copies of each such pending request together with copies of all
correspondence relating thereto. Each Employee Plan has been maintained in
substantial compliance with its terms and with the requirements prescribed by
any and all applicable statutes, orders, rules and regulations, including but
not limited to ERISA and the Code.
(e) Schedule identifies each Benefit Arrangement. The
Stockholders have furnished to the Investor copies or descriptions of each
Benefit Arrangement (and, if applicable, related trust agreements) and all
amendments thereto and written interpretations thereof. Each Benefit Arrangement
has been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules and
regulations and has been maintained in good standing with applicable regulatory
authorities. Each "welfare plan" (as such term is defined in Section 3(1) of
ERISA) of ICM and its Subsidiaries may be amended or terminated by ICM or its
Subsidiaries on or at any time after the Closing Date, subject to the applicable
provisions of the collective bargaining agreements identified on Schedule 3.24.
(f) Except as set forth on Schedule 3.24, neither ICM nor any
Subsidiary has any current or projected liability in respect of post-employment
or post-retirement health or medical or life insurance benefits for retired,
former or current employees of ICM or any Subsidiary, except as required to
avoid excise tax under Section 4980B of the Code.
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(g) There has been no amendment to, written interpretation of
or announcement (whether or not written) by the Stockholders, the Managers, or
any of their Affiliates or ICM or any Subsidiary relating to, or change in
employee participation or coverage under, any Employee Plan or Benefit
Arrangement that would increase materially the expense of maintaining such
Employee Plan or Benefit Arrangement above the level of the expense incurred in
respect thereof for the most recent fiscal year ended prior to the date hereof.
(h) There is no contract, plan or arrangement (written or
otherwise) covering any employee or former employee of ICM or any Subsidiary
that, individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to the terms of Section 280G of the Code.
(i) There has been no failure of a group health plan (as
defined in Section 5000(b)(1) of the Code) to meet the requirements of Code
Section 4980B(f) with respect to a qualified beneficiary (as defined in Section
4980B(g)). Neither ICM nor any of the Subsidiaries has contributed to a
nonconforming group health plan (as defined in Section 5000(c)) and no ERISA
Affiliate of ICM or any of the Subsidiaries has incurred a tax under Section
5000(a) which is or could become a liability of ICM or any of the Subsidiaries.
(j) None of the Stockholders, ICM or any Subsidiary has at any
time maintained, administered or contributed to any International Plan.
(k) Except as set forth on Schedule 3.24 or Exhibits B or H,
no employee or former employee of ICM or any Subsidiary will become entitled to
any bonus, retirement, severance, job security or similar benefit or enhanced
such benefit (including acceleration of vesting or exercise of an incentive
award) as a result of the transactions contemplated hereby.
(l) The SERP is unfunded for purposes of ERISA and all
participants in the SERP are, for purposes of ERISA, either members of a select
group of management employees or are highly compensated employees.
(m) As of the date hereof, the maximum aggregate accrued
liability under the Gradall Company Benefit Restoration Plan (effective as of
August 30, 1995) does not exceed $180,000.
3.25 CORPORATE ACTIVITY. Neither ICM nor ICM Investment
Company has engaged in any operations or conducted any other activities other
than the ownership of stock in its Subsidiaries and related matters.
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3.26 RELATED PARTY TRANSACTIONS. Schedule 3.26 contains a
complete list of all amounts greater than $5,000 owed by or to ICM or any
Subsidiary of ICM on the Balance Sheet Date in respect of any contract,
arrangement or transaction between (a) ICM or any Subsidiary of ICM, on the one
hand, and either of the Stockholders, on the other hand, or (b) ICM or any
Subsidiary of ICM, on the one hand, and any known Affiliate of either of the
Stockholders, any relative of either of the Stockholders or any known Affiliate
of any relative of either of the Stockholders, on the other hand. Except as set
forth in Schedule 3.26, since the Balance Sheet Date, there has not been any
accrual of liability in an amount greater than $5,000 by ICM or any Subsidiary
of ICM to either of the Stockholders, any of their Affiliates, any relative of
either of the Stockholders or any Affiliate of any relative of either of the
Stockholders or other transaction between ICM or any Subsidiary of ICM and
either of the Stockholders, any of their Affiliates, any relative of either of
the Stockholders or any Affiliate of any relative of either of the Stockholders.
Notwithstanding the foregoing, each transaction which is to survive the Closing
and is described in this Section 3.26 has been conducted on an arm's-length
basis as though the parties involved were dealing with an unrelated third party.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Stockholders as of
the date hereof and as of the Closing Date that:
4.1 EXISTENCE AND POWER. The Investor is a limited partnership
duly organized, validly existing and in good standing under the laws of Delaware
and has all legal powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted.
4.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by the Investor of this Agreement (including without limitation, the
execution, delivery and performance of the Shareholder Agreement) are within the
legal powers of the Investor and have been duly authorized by all necessary
legal action on the part of the Investor. This Agreement constitutes and, when
executed, the Shareholder Agreement will constitute a valid and binding
agreement of the Investor and is enforceable in accordance with its terms except
as (i) the enforceability hereof may be limited by bankruptcy, insolvency,
moratorium or other similar laws effecting the enforcement of creditors' rights
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generally and (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability. Nothing contained in this Section
4.2 or Section 4.4 shall be considered a representation or warranty as to the
validity or enforceability of the Redemption Transaction under federal or state
fraudulent conveyance law or similar laws, the Bankruptcy Code, under Delaware
Law or under Ohio Law.
4.3 GOVERNMENTAL AUTHORIZATION. Except for compliance with the
applicable requirements under the HSR Act, the execution, delivery and
performance by the Investor of this Agreement require no action by or in respect
of, or filing with, any governmental body, agency or official.
4.4 NON-CONTRAVENTION. Subject to the final sentence of
Section 4.2, the execution, delivery and performance by the Investor of this
Agreement (including without limitation, the execution, delivery and performance
of the Shareholder Agreement) do not and will not (i) violate the limited
partnership agreement of the Investor or the Certificate of Limited Partnership
of the Investor, (ii) assuming compliance with the matters referred to in
Section 9.1(ii), violate any applicable law, rule, regulation, judgment,
injunction, order or decree or (iii) require the consent or any other action by
any Person, or constitute a default under, any agreement or instrument binding
upon the Investor. The Redemption Transaction will not violate the Certificate
of Incorporation or the Bylaws of ICM as in effect on the Closing Date, without
regard to the application of Delaware Law or Ohio Law to such documents.
4.5 PURCHASE FOR INVESTMENT. The Investor understands that the
New Shares have not been registered under the Securities Act of 1933 (the "1933
Act") or under any state securities act by reason of their contemplated issuance
in a transaction exempt from the registration and prospectus delivery
requirements of the 1933 Act and by reason of their contemplated issuance in a
transaction within specific exemptions under applicable state securities laws.
The Investor is purchasing the New Shares for investment for its own account and
not with a view to, or for sale in connection with, any distribution, transfer
or resale thereof. The Investor (either alone or together with its advisors) (i)
has sufficient knowledge and experience in financial and business matters so as
to be capable of evaluating the merits and risks of its investments in the New
Shares and is capable of bearing the economic risks of such investment; (ii) as
of the Closing Date, will have been furnished with such documentation as it will
have requested concerning its investment in the New Shares; (iii) as of the
Closing Date, will have carefully reviewed such documentation and will
understand and have evaluated the merits and risks of an investment in the New
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Shares; (iv) as of the Closing Date, will have been provided an opportunity to
ask questions of and receive answers from the Stockholders and from the
executive officers of ICM and its Subsidiaries concerning an investment in the
New Shares; and (v) understands that it may not sell or otherwise transfer the
New Shares without (a) registration under the 1933 Act and applicable state
laws, or (b) compliance with an exemption from the requirements of registration
under the 1933 Act and such applicable state laws.
4.6 LITIGATION. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Investor threatened
against or affecting, the Investor before any court or arbitrator or any
governmental body, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement.
4.7 FINDERS' FEES. Except for Morgan, Lewis, Githens & Ahn,
L.P. and its Affiliates, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of the
Investor who might be entitled to any fee or commission in connection with the
transactions contemplated by this Agreement.
4.8 CAPITAL COMMITMENTS. As of the date hereof and immediately
prior to the Closing, the Investor shall have received from its limited partners
an aggregate amount of $10.5 million for the purpose of acquiring the New Shares
on the terms and subject to the conditions set forth in this Agreement.
ARTICLE 5
COVENANTS OF ICM AND THE STOCKHOLDERS
Each of ICM and the Stockholders covenants and agrees that:
5.1 CONDUCT OF ICM AND ITS SUBSIDIARIES. (a) From the date
hereof until the Closing Date, each of ICM and its Subsidiaries will conduct its
business in the ordinary course consistent with past practice and will use
reasonable efforts to preserve intact its business organizations and
relationships with third parties and to keep available the services of its
present officers and employees. Without limiting the generality of the
foregoing, from the date hereof until the Closing Date, neither ICM nor any
Subsidiary of ICM will, except as may be necessary in connection with the
consummation of the transactions set forth in Exhibit F or as otherwise
contemplated by this Agreement:
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(i) adopt or propose any change in its certificate of
incorporation or bylaws;
(ii) merge or consolidate with any other Person or acquire a
material amount of assets of any other Person;
(iii) sell, lease, license or otherwise dispose of any
material assets or property except (A) pursuant to existing contracts
or commitments and (B) in the ordinary course consistent with past
practice;
(iv) enter into any capital or similar lease or arrangement
except as set forth on Schedule 5.1;
(v) incur any indebtedness for borrowed money except
Assumed Indebtedness;
(vi) declare, set aside or pay any dividend or otherwise make any
distribution with respect to any shares of capital stock of ICM or any
Subsidiary of ICM, or repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other securities of, or other
ownership interests in, ICM or any Subsidiary of ICM except as shown on
Schedule 5.1;
(vii) except for the payment of $62,500 in respect of the July 31,
1995 management fee to be paid by Gradall to ICM prior to Closing, set
aside or pay any amount to either of the Stockholders, any Affiliate of
either of the Stockholders, any relative of either of the Stockholders
or any Affiliate of any relative of either of the Stockholders, except
as set forth on Schedule 5.1; or
(viii) agree or commit to do any of the foregoing.
Neither ICM nor any Subsidiary of ICM will (A) take or agree or commit to take
any action that would make any representation and warranty of the Stockholders
hereunder inaccurate in any respect at, or as of any time prior to, the Closing
Date or (B) omit or agree or commit to omit to take any action necessary to
prevent any such representation or warranty from being inaccurate in any respect
at any such time.
(b) From the date hereof until no earlier than the later of (i) the day
following the consummation of the distribution by ICM to its shareholders of the
stock of Hydreco, Inc. ("Hydreco") and of the entire beneficial interest in any
corporation or other entity which holds a direct or indirect interest in
Hydreco, or (ii) the date on which Magna Holdings, Inc. is no longer a member of
any group which includes ICM or any Subsidiary for the
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purposes of calculation of any Tax liability, neither ICM nor any Subsidiary of
ICM will agree, or commit to enter into, or allow any of the Other Businesses to
commit to or to enter into any agreement to convey or otherwise dispose of any
real property owned by Hydreco, Inc.
5.2 ACCESS TO INFORMATION. From the date hereof until the
Closing Date, ICM will (or will cause its Subsidiaries to), during regular
business hours and upon reasonable notice, (i) give the Investor, its counsel,
financial advisors, auditors and other authorized representatives reasonable
access to the offices, properties, books and records of ICM and its
Subsidiaries, (ii) furnish to the Investor, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information relating to ICM and the Subsidiaries as such Persons may
reasonably request and (iii) instruct the employees, counsel and financial
advisors of ICM and its Subsidiaries to cooperate with the Investor in its
investigation of ICM and its Subsidiaries. No investigation by the Investor or
other information received by the Investor shall operate as a waiver or
otherwise affect any representation, warranty or agreement given or made by the
Stockholders hereunder. Notwithstanding the foregoing, the Investor shall not
have access to personnel records of ICM and to its Subsidiaries relating to
individual performance or evaluation records, medical histories or other
information which in ICM's good faith opinion is sensitive or the disclosure of
which could subject ICM or any Subsidiary to risk of liability. For purposes of
this Section 5.2, the term "Subsidiary" shall have the meaning set forth in
Section 1.1(a) hereof without regard to the proviso thereto.
5.3 OTHER OFFERS. The Stockholders, ICM, each Subsidiary of
ICM and the officers, directors, employees and other agents of the Stockholders,
ICM or any Subsidiary of ICM, will not, directly or indirectly, (i) take any
action to solicit, initiate or encourage an Acquisition Proposal or (ii) engage
in negotiations with, or disclose any nonpublic information relating to the
Stockholders, ICM or any Subsidiary of ICM or afford access to the properties,
books or records of the Stockholders, ICM or any Subsidiary of ICM to any Person
that may be considering making, or has made, an Acquisition Proposal. The
Stockholders, ICM or any Subsidiary of ICM will promptly notify the Investor
after receipt of any Acquisition Proposal or any indication that any Person is
considering making an Acquisition Proposal or any request for nonpublic
information relating to the Stockholders, ICM or any Subsidiary of ICM or for
access to the properties, books or records of the Stockholders, ICM or any
Subsidiary of ICM by any Person that may be considering making, or has made, an
Acquisition Proposal, and any such Person
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receiving any such Acquisition Proposal, indication or request will keep the
Investor fully informed of the status and details of such Acquisition Proposal,
indication or request.
5.4 NOTICES OF CERTAIN EVENTS. The Stockholders, ICM
and the Subsidiaries of ICM shall promptly notify the Investor
of:
(i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental
or regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge threatened against, relating
to or involving or otherwise affecting any Stockholder, Manager, ICM or
any Subsidiary that, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Section or that
relate to the consummation of the transactions contemplated by this
Agreement.
5.5 NONCOMPETITION. (a) Each of the Stockholders agrees that
for a period of five full years from the Closing Date, he shall not:
(i) engage, either directly or indirectly, as a principal or
for its own account or solely or jointly with others, or as a
stockholder in any corporation or joint stock association, in any
business that directly or indirectly competes (a "Competing Business")
with any business operated by Gradall or any Subsidiary of Gradall as
it exists on the Closing Date; PROVIDED that nothing herein shall
prohibit the acquisition by such Stockholder of a diversified company
having not more than 10% of its sales (based on its latest published
annual audited financial statements) attributable to any Competing
Business; or
(ii) employ or solicit, or receive or accept the performance
of services by any current employee of Gradall or any Subsidiary of
Gradall.
(b) If any provision contained in this Section shall for any
reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Section, but this Section
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shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. It is the intention of the parties that if any of
the restrictions or covenants contained herein is held to cover a geographic
area or to be for a length of time which is not permitted by applicable law, or
in any way construed to be too broad or to any extent invalid, such provision
shall not be construed to be null, void and of no effect, but to the extent such
provision would be valid or enforceable under applicable law, a court of
competent jurisdiction shall construe and interpret or reform this Section to
provide for a covenant having the maximum enforceable geographic area, time
period and other provisions (not greater than those contained herein) as shall
be valid and enforceable under such applicable law. The Stockholders acknowledge
that the Investor would be irreparably harmed by any breach of this Section and
that there would be no adequate remedy at law or in damages to compensate
Investor for any such breach. The Stockholders agree that the Investor shall be
entitled to injunctive relief requiring specific performance by the Stockholders
of this Section, and the Stockholders consent to the entry thereof.
ARTICLE 6
COVENANTS OF THE INVESTOR
The Investor covenants and agrees that:
6.1 CONFIDENTIALITY. Prior to the Closing Date and after any
termination of this Agreement, the Investor and its Affiliates will hold, and
will use their best efforts to cause their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law, all confidential documents and information
concerning ICM and its Subsidiaries furnished to the Investor or its Affiliates
in connection with the transactions contemplated by this Agreement, except to
the extent that such information can be shown to have been (i) previously known
on a nonconfidential basis by the Investor, (ii) in the public domain through no
fault of the Investor or (iii) later lawfully acquired by the Investor from
sources that are not bound by any confidentiality obligation with respect to
such information other than any Stockholder, ICM or any Subsidiary of ICM;
PROVIDED that the Investor may disclose such information to its officers,
directors, employees, accountants, counsel, consultants, advisors and agents in
connection with the transactions contemplated by this Agreement and to its
lenders in connection with obtaining the financing for the transactions
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contemplated by this Agreement so long as such Persons are informed by the
Investor of the confidential nature of such information and are directed by the
Investor to treat such information confidentially. The obligation of the
Investor and its Affiliates to hold any such information in confidence shall be
satisfied if they exercise reasonable care with respect to such information. If
this Agreement is terminated, the Investor and its Affiliates will, and will use
their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or deliver to
the Stockholders, upon request, all documents and other materials, and all
copies thereof, obtained by the Investor or its Affiliates or on their behalf
from the Stockholders, ICM or any Subsidiary in connection with this Agreement
that are subject to such confidence.
6.2 ACCESS. The Investor will cause ICM and its Subsidiaries,
on and after the Closing Date, to afford promptly to each Stockholder and his
agents reasonable access to its properties, books, records, employees and
auditors to the extent necessary to permit such Stockholder to determine any
matter relating to its rights and obligations hereunder or to any period ending
on or before the Closing Date and will retain such books and records until the
later of (i) the fifth anniversary of the Closing Date and (ii) the expiration
of the statute of limitations in respect of any Pre-Closing Tax Periods
including any extension thereof. Such Stockholder will hold, and will use its
best efforts to cause its officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law,
all confidential documents and information concerning ICM and its Subsidiaries
provided to it pursuant to this Section.
6.3 ENVIRONMENTAL MATTERS. The Investor hereby agrees to
reimburse ICM for any damage to property or personal injury at the Gradall
facility located in New Philadelphia, Ohio caused by the activities of the
environmental consultant in the course of conducting the environmental
assessment referred to in Section 9.2(ii). The provisions of this Section 6.3
shall terminate upon the consummation of the Closing.
6.4 APPRAISAL. The Investor hereby agrees to use its best
efforts to engage and pay an appraisal firm to perform the appraisal described
in Section 9.1(iii).
ARTICLE 7
COVENANTS OF THE PARTIES
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Each of the parties hereto covenants and agrees that:
7.1 BEST EFFORTS. Subject to the terms and conditions of this
Agreement, the parties will use their reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. Each of the Stockholders and the Investor agree
to cause ICM and its Subsidiaries to execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions as
may be necessary or desirable in order to consummate or implement expeditiously
the transactions contemplated by this Agreement. Without limiting the generality
of the foregoing, the Investor will use its reasonable best efforts to obtain
all financing required to consummate the transactions contemplated by this
Agreement.
7.2 CERTAIN FILINGS. The parties shall cooperate with one
another (i) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (ii) in taking such actions or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.
7.3 PUBLIC ANNOUNCEMENTS. The parties agree to consult with
each other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except as
may be required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release or make any such
public statement prior to such consultation.
7.4 NAME CHANGE. The parties understand that, prior to the
Closing, the Stockholders may elect to change the names of ICM and ICM
Investment Company to new names reasonably acceptable to Investor and that, if
the Stockholders so elect, the Stockholders will retain all right, title and
interest to the names "ICM Industries, Inc.", "ICM Investment Co." and any
similar names containing the phrase "ICM".
7.5 CLOSING. The parties agree to use their
reasonable efforts to consummate the transactions contemplated
hereby on or before September 30, 1995.
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ARTICLE 8
TAX MATTERS
8.1 TAX DEFINITIONS. The following terms, as used
herein, have the following meanings:
"Code" means the Internal Revenue Code of 1986, as
amended.
"Deferred Taxes" means the deferred tax liability for
accounting purposes which is reflected on the Closing Balance Sheet as a line
item among liabilities or as a liability in a footnote disclosure.
"Federal Tax" means any Tax imposed under Subtitle A of
the Code.
"Final Determination" shall mean (i) with respect to Federal
Taxes, a "determination" as defined in Section 1313(a) of the Code or execution
of an Internal Revenue Service Form 870AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns or
appeals from adverse determinations) or (ii) the payment of Tax by the Investor,
ICM or any Subsidiary or any of their Affiliates, whichever is responsible for
payment of such Tax under applicable law, with respect to any item disallowed or
adjusted by a Taxing Authority, provided that such responsible party determines
that no action should be taken to recoup such payment and the other party
agrees.
"Post-Closing Tax Period" means any Tax period beginning on or
after the close of business on the Closing Date and those days which follow the
Closing Date and are included in the Tax period which begins before the Closing
Date and ends after the Closing Date.
"Pre-Closing Tax Period" means any Tax period ending on or
before the close of business on the Closing Date and those days which precede
and include the Closing Date and are included in the Tax period which begins
before the Closing Date and ends after the Closing Date.
"Tax" means (i) any tax imposed under Subtitle A of the Code
and any net income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, value added,
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transfer, franchise, profits, license, withholding on amounts paid to or by ICM
or any Subsidiary, payroll, employment, excise including the golden parachute
excise tax imposed by Section 4999 of the Code and the greenmail excise tax
imposed by Section 5881 of the Code, severance, stamp, capital stock,
occupation, property, environmental or windfall profit tax, premium, custom,
duty or other tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest, penalty, addition to tax or
additional amount imposed by any governmental authority (a "Taxing Authority")
responsible for the imposition of any such tax (domestic or foreign), (ii)
liability of ICM or any Subsidiary for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated, consolidated,
combined or unitary group including the entities conducting the Other
Businesses, or being a party to any agreement or arrangement whereby liability
of ICM or any Subsidiary for payments of such amounts was determined or taken
into account with reference to the liability of any other person including the
entities conducting the Other Businesses for any period during the Tax
Indemnification Period, and (iii) liability of ICM or any Subsidiary for the
payment of any amounts as a result of being party to any Tax Sharing Agreement
or with respect to the payment of any amounts of the type described in (i) or
(ii) as a result of any express or implied obligation to indemnify any other
Person.
"Tax Asset" means any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any other
credit or tax attribute which could reduce Taxes (including without limitation
deductions and credits related to alternative minimum Taxes).
"Tax Indemnification Period", means (i) with respect to any
Tax described in clause (i) of the definition of "Tax", any Pre-Closing Tax
Period of ICM or any Subsidiary, (ii) with respect to any Tax described in
clause (ii) of the definition of "Tax", any Pre-Closing Tax Period of ICM or any
Subsidiary, and (iii) with respect to any Tax described in clause (iii) of the
definition of "Tax", the survival period of the obligation under the applicable
contract or arrangement.
"Tax Sharing Agreements" means all existing Tax sharing
agreements or arrangements (whether or not written) binding ICM or any
Subsidiary (including without limitation the [insert name of tax sharing
agreement currently in effect] dated [insert date] and any agreements or
arrangements which afford any other person the benefit of any Tax Asset of ICM
or any Subsidiary, afford ICM or any Subsidiary the benefit of any Tax Asset of
any other person or require or permit the transfer or assignment of income,
revenues, receipts, or gains).
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For purposes of this Article 8, the term "Subsidiary" shall
have the meaning set forth in 1.1(a) hereof without regard to the proviso
thereto.
8.2 TAX REPRESENTATIONS. The Stockholders represent and
warrant to the Investor as of the date hereof and as of the Closing Date that:
(a) Except as set forth in the Balance Sheet (including the
notes thereto) or on Schedule 8.2, (i) all Tax returns, statements, reports and
forms (including estimated tax or information returns and reports) required to
be filed with any Taxing Authority with respect to any Pre-Closing Tax Period by
or on behalf of ICM or any Subsidiary (collectively, the "Returns"), have, to
the extent required to be filed on or before the date hereof, been filed when
due in accordance with all applicable laws; (ii) as of the time of filing, the
Returns correctly reflected the facts regarding the income, business, assets,
operations, activities and status of ICM, the Subsidiaries and any other
information required to be shown therein; (iii) all Taxes shown as due and
payable on the Returns that have been filed have been timely paid, or withheld
and remitted to the appropriate Taxing Authority; (iv) except to the extent
taken into account in the determination of the Retired Shares Purchase Price
under Section 2.2, the charges, accruals and reserves for Taxes with respect to
ICM and the Subsidiaries for any Pre-Closing Tax Period (including any
Pre-Closing Tax Period for which no Return has yet been filed) reflected on the
books of ICM and the Subsidiaries (excluding any provision for deferred income
taxes) are adequate to cover such Taxes; (v) all Returns filed with respect to
Tax years of ICM and the Subsidiaries through the Tax year ended December 31,
1990 have been examined and closed or are Returns with respect to which the
applicable period for assessment under applicable law, after giving effect to
extensions or waivers, has expired; (vi) neither ICM nor any Subsidiary is
delinquent in the payment of any Tax or has requested any extension of time
within which to file any Return and has not yet filed such Return or is late in
the filing of any Return after giving effect to any allowable extension for
filing such Return; (vii) neither ICM nor any Subsidiary (or any member of any
affiliated, consolidated, combined or unitary group of which ICM or any
Subsidiary has been a member) has granted any extension or waiver of the statute
of limitations period applicable to any Return, which period (after giving
effect to such extension or waiver) has not yet expired; (viii) there is no
claim, audit, action, suit, proceeding, or investigation now pending against or
with respect to ICM or any Subsidiary in respect of any Tax or Tax Asset or any
issue which the IRS has indicated an intention to examine of which an officer of
ICM or a Subsidiary of ICM is aware by reason of his participation in
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industry groups or other trade associations, which is present in any returns
filed by ICM or a Subsidiary of ICM; (ix) there are no requests for rulings or
determinations in respect of any Tax or Tax Asset pending between ICM or any
Subsidiary and any Taxing Authority; (x) neither ICM nor any Subsidiary owns any
interest in real property in the State of New York or in any other jurisdiction
in which a Tax is imposed on the transfer of a controlling interest in an entity
that owns any interest in real property; (xi) none of the property owned or used
by ICM or any Subsidiary is subject to a tax benefit transfer lease executed in
accordance with Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended; (xii) except as disclosed on Schedule 8.2, none of the property owned
or used by ICM or any Subsidiary is subject to a lease, other than a "true"
lease for federal income tax purposes; (xiii) none of the property owned by ICM
or any Subsidiary is "tax-exempt use property" within the meaning of Section
168(h) of the Code; (xiv) none of the Stockholders, the Managers and ICM and any
Subsidiary, nor any other person on behalf of ICM or any Subsidiary, has entered
into nor will it enter into any agreement or consent pursuant to Section 341(f)
of the Code; (xv) there are no liens for Taxes upon the assets of ICM or any
Subsidiary except liens for current Taxes not yet due; (xvi) except as disclosed
on Schedule 8.2, neither ICM nor any Subsidiary will be required to include any
adjustment in taxable income for any Post-Closing Tax Period under Section
481(c) of the Code (or any similar provision of the Tax laws of any
jurisdiction) as a result of a change in method of accounting for a Pre-Closing
Tax Period or pursuant to the provisions of any agreement entered into with any
Taxing Authority with regard to the Tax liability of ICM or any Subsidiary for
any Pre-Closing Tax Period; (xvii) the quantity of inventory acquired or
produced by ICM or any Subsidiary during the last month of each Tax period
ending on or before December 31, 1994 and included in inventory on the last day
of such Tax period does not exceed 15 percent of the average quantity acquired
or produced during the preceding twelve months of such Tax period; (xviii)
neither ICM nor any Subsidiary has participated in any arrangement whereby any
income, revenues, receipts, gain, loss or Tax Asset of ICM or any Subsidiary was
determined or taken into account for Tax purposes with reference to or in
conjunction with any income, revenues, receipts, gain, loss, asset, liability or
Tax Asset of any person other than ICM or any Subsidiary; (xix) except for the
tax sharing agreement described in Section 8.1 hereof, neither ICM nor any
Subsidiary is currently under any contractual obligation to pay any amounts of
the type described in clause (ii) or (iii) of the definition of "Tax"; (xx) a
protective carryover election has been filed in connection with each transaction
consummated by ICM or any Subsidiary prior to January 20, 1994 that constituted
a "qualified stock purchase" within the meaning of Section 338 of
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the Code; and (xxi) all information set forth in the notes to the Balance Sheet
relating to Tax matters is true and complete.
(b) Schedule 8.2 contains a list of all jurisdictions (whether
foreign or domestic) to which any Tax is properly payable by ICM or any
Subsidiary; provided, however for purposes of this subsection (b), the term
"Subsidiary" shall have the meaning set forth in Section 1.1(a) hereof.
8.3 COVENANTS. (a) Without the prior written consent of the
Investor, neither ICM nor any Subsidiary shall make or change any tax election,
change any annual tax accounting period, adopt or change any method of tax
accounting, file any amended Return, enter into any closing agreement, settle
any Tax claim or assessment, surrender any right to claim a Tax refund, consent
to any extension or waiver of the limitations period applicable to any Tax claim
or assessment or take or omit to take any other action, if any such action or
omission would have the effect of materially increasing the Tax liability or
materially reducing any Tax Asset of ICM or any Subsidiary.
(b) All Returns not required to be filed on or before the date
hereof (i) will to the extent required to be filed on or before the Closing
Date, be filed when due in accordance with all applicable laws and (ii) as of
the time of filing, will correctly reflect the facts regarding the income,
business, assets, operations, activities and status of ICM, the Subsidiaries and
any other information required to be shown therein.
(c) Neither ICM nor any Subsidiary shall reserve any amount
for or make any payment of Taxes to any person or any Taxing Authority, except
for such Taxes as are due or payable or have been properly estimated in
accordance with applicable law as applied in a manner consistent with past
practice of ICM.
(d) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees (including any penalties
and interest) incurred in connection with this Agreement (including any real
property transfer tax and any similar Tax) shall be paid by ICM when due, and
ICM will, at its own expense, file all necessary Tax returns and other
documentation with respect to all such Taxes and fees, and, if required by
applicable law, Investor will, and will cause its Affiliates to, join in the
execution of any such Tax returns and other documentation.
8.4 COOPERATION ON TAX MATTERS. (a) ICM, the Investor and the
Stockholders shall cooperate fully, as and to the extent reasonably requested by
the other parties, in connection with the preparation and filing of any Tax
return,
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statement, report or form (including any report required pursuant to Section
6043 of the Code and all Treasury Regulations promulgated thereunder), any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. ICM and the Stockholders agree (i) to retain all
books and records with respect to Tax matters pertinent to ICM and the
Subsidiaries relating to any Pre-Closing Tax Period, and to abide by all record
retention agreements entered into with any Taxing Authority, and (ii) to give
the other party reasonable written notice prior to destroying or discarding any
such books and records and, if the other party so requests, the Stockholders
shall allow the Investor or ICM to take possession of such books and records.
(b) The Investor and the Stockholders further agree, upon
request, to use all reasonable efforts to obtain any certificate or other
document from any governmental authority or customer of ICM or any Subsidiary or
any other person as may be necessary to mitigate, reduce or eliminate any Tax
that could be imposed (including but not limited to with respect to the
transactions contemplated hereby).
8.5 TAX INDEMNIFICATION. (a) The Stockholders hereby indemnify
ICM against and agree to hold ICM harmless from any (x) Tax of ICM or any
Subsidiary or any entity conducting any Other Business related to the Tax
Indemnification Period in excess of the amount reflected in reserves on ICM's
Closing Balance Sheet (excluding any provision for Deferred Taxes) reduced by
the Offset in a Post-Closing Tax Period, as defined in the last two sentences of
this subparagraph, as a consequence of an adjustment which increases the Tax
liability of ICM or any Subsidiary (as such term is defined in Section 1.1(a)
hereof) for any PreClosing Tax Period, (y) Tax of ICM or any Subsidiary or any
entity conducting any Other Business resulting from a breach of the provisions
of Section 8.3(a), and (z) liabilities, costs, expenses (including, without
limitation, reasonable expenses of investigation and attorneys' fees and
expenses), losses, damages, assessments, settlements or judgments arising out of
or incident to the imposition, assessment or assertion of any Tax described in
(x) or (y) including those incurred in the contest in good faith in appropriate
proceedings relating to the imposition, assessment or assertion of any such Tax,
and any liability as transferee (the sum of (x) as computed without taking
account of the Offset, (y), and (z) being referred to herein as a "Loss"). Any
amounts taken into account in the determination of the
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Retired Shares Purchase Price (including any amounts paid pursuant to Section
2.2(a)(i)(F) and (G)) shall not constitute a Loss under this Section. The
Offset(s) shall be equal to benefits realized from any credits, deductions or
exclusions which are available to ICM or any Subsidiary (as such term is defined
in Section 1.1(a) hereof) and shall be computed, from time to time, on the basis
of Tax returns filed by ICM for any Post-Closing Period, taking into account
audit adjustments thereof, and shall be promptly paid over to the Stockholders
if they have previously paid all amounts due under this paragraph. The amount(s)
realized shall be equal to the difference between the Tax payable during each
Post-Closing Period and the Tax which would have been payable if such credit,
deduction or exclusion had not been available.
(b) For purposes of this Section, in the case of any Taxes
that are imposed on a periodic basis and are payable for a Tax period that
includes (but does not end on) the Closing Date, the portion of such Tax related
to the portion of such Tax period ending on and including the Closing Date shall
(x) in the case of any Taxes other than gross receipts, sales or use Taxes and
Taxes based upon or related to income, be deemed to be the amount of such Tax
for the entire Tax period multiplied by a fraction the numerator of which is the
number of days in the Tax period ending on and including the Closing Date and
the denominator of which is the number of days in the entire Tax period, and (y)
in the case of any Tax based upon or related to income and any gross receipts,
sales or use Tax, be deemed equal to the amount which would be payable if the
relevant Tax period ended on and included the Closing Date. The portion of any
credits relating to a Tax period that begins before and ends after the Closing
Date shall be determined as though the relevant Tax period ended on and included
the Closing Date. All determinations necessary to give effect to the foregoing
allocations shall be made in a manner consistent with prior practice of ICM and
the Subsidiaries. For purposes of Section 2.2(a)(i)(F) and (G) the income taxes
described in this Section 8.5(b) shall be computed as provided in clause (y).
(c) Upon payment by ICM of any Loss, the Stockholders shall
discharge their obligation to indemnify ICM against such Loss by paying to ICM
an amount equal to the amount of such Loss.
(d) Any payment pursuant to sub-Sections (a),(b) and (c) of
this Section 8.5 shall be made not later than 30 days after receipt by the
Stockholders of written notice from ICM stating that any Loss has been paid and
the amount thereof and of the indemnity payment requested.
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(e) ICM agrees to give prompt notice to the Stockholders of
any Loss or the assertion of any claim, or the commencement of any suit, action
or proceeding in respect of which indemnity may be sought hereunder which ICM
deems to be within the ambit of Section 8.5(a) (specifying with reasonable
particularity the basis therefor) and will give the Stockholders such
information with respect thereto as the Stockholders may reasonably request. The
Stockholders may, at their own expense, (i) participate in and, upon notice to
ICM, assume the defense of any such suit, action or proceeding (including any
Tax audit); PROVIDED that (i) the Stockholders' counsel is reasonably
satisfactory to ICM, (ii) the Stockholders shall thereafter consult with ICM
upon ICM's reasonable request for such consultation from time to time with
respect to such suit, action or proceeding (including any Tax audit) and (iii)
the Stockholders shall not, without ICM's consent, agree to any settlement with
respect to any Tax if such settlement could adversely affect the Tax liability
of ICM or any Subsidiary for any Post-Closing Period. If the Stockholders assume
such defense, (i) ICM shall have the right (but not the duty) to participate in
the defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Stockholders and (ii) the Stockholders shall not assert
that the Loss, or any portion thereof, with respect to which ICM seeks
indemnification is not within the ambit of Section 8.5(a). If the Stockholders
elect not to assume such defense, ICM may pay, compromise or contest the Tax at
issue. The Stockholders shall be liable for the fees and expenses of counsel
employed by ICM for any period during which the Stockholders have not assumed
the defense thereof. Whether or not the Stockholders choose to defend or
prosecute any claim, all of the parties hereto shall cooperate in the defense or
prosecution thereof.
(f) The Stockholders shall not be liable under subSections (a)
and (c) of this Section 8.5 with respect to any Tax resulting from a claim or
demand the defense of which the Stockholders were not offered the opportunity to
assume as provided under Section 8.5(e) to the extent the Stockholders'
liability under this Section is adversely affected as a result thereof. No
investigation by ICM or any of its Affiliates at or prior to the Closing Date
shall relieve the Stockholders of any liability hereunder.
(g) ICM hereby indemnifies the Stockholders against and agrees
to hold the Stockholders harmless from any (x) Tax imposed on income of ICM
earned after the Closing Date and (y) liabilities, costs, expenses (including,
without limitation, reasonable expenses of investigation and attorneys' fees and
expenses), losses, damages, assessments, settlements or judgments arising out of
or incident to the imposition, assessment or
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assertion of any Tax described in (x) including those incurred in the contest in
good faith in appropriate proceedings relating to the imposition, assessment or
assertion of any such Tax, and any liability as transferee (the sum of (x), and
(y) being referred to herein as a "Stockholders' Loss").
(h) Upon payment by the Stockholders of any Stockholders'
Loss, ICM shall discharge its obligation to indemnify the Stockholders against
such Stockholders' Loss by paying to the Stockholders an amount equal to the
amount of such Stockholders' Loss.
(i) Any payment pursuant to sub-Sections (g) and (h) of this
Section 8.5 shall be made not later than 30 days after receipt by ICM of written
notice from the Stockholders stating that any Stockholders' Loss has been paid
and the amount thereof and of the indemnity payment requested. Any such payment
that is not made when due shall bear interest at the rate per annum determined
from time to time under the provisions of Section 6621(a)(2) of the Code for
each day until paid.
(j) The Stockholders agree to give prompt notice to ICM of any
Stockholders' Loss or the assertion of any claim, or the commencement of any
suit, action or proceeding in respect of which indemnity may be sought hereunder
which the Stockholders deem to be within the ambit of Section 8.5(g) (specifying
with reasonable particularity the basis therefor) and will give ICM such
information with respect thereto as ICM may reasonably request. ICM may, at its
own expense, (i) participate in and, upon notice to the Stockholders, assume the
defense of any such suit, action or proceeding (including any Tax audit);
provided that (i) ICM's counsel is reasonably satisfactory to the Stockholders,
(ii) ICM shall thereafter consult with the Stockholders upon the Stockholders'
reasonable request for such consultation from time to time with respect to such
suit, action or proceeding (including any Tax audit) and (iii) ICM shall not,
without the Stockholders consent, agree to any settlement with respect to any
Tax if such settlement could adversely affect the Tax liability of the
Stockholders for any Pre-Closing Period. If ICM assumes such defense, (i) the
Stockholders shall have the right (but not the duty) to participate in the
defense thereof and to employ counsel, at their own expense, separate from the
counsel employed by ICM and (ii) ICM shall not assert that the Stockholders'
Loss, or any portion thereof, with respect to which the Stockholders seek
indemnification is not within the ambit of Section 8.5(g). If ICM elects not to
assume such defense, the Stockholders may pay, compromise or contest the Tax at
issue. ICM shall be liable for the fees and expenses of counsel employed by the
Stockholders for any period during which ICM has not assumed the defense
thereof. Whether or not ICM chooses to
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defend or prosecute any claim, all of the parties hereto shall cooperate in the
defense or prosecution thereof.
(k) ICM shall not be liable under sub-Sections (g) and (h) of
this Section 8.5 with respect to any Tax resulting from a claim or demand the
defense of which ICM was not offered the opportunity to assume as provided under
Section 8.5(j) to the extent ICM's liability under this Section is adversely
affected as a result thereof.
8.6 PURCHASE PRICE ADJUSTMENT AND INTEREST. Any amount paid by
the Stockholders under Section 8.5 will be treated as a capital contribution
unless a Final Determination causes any such amount not to constitute a capital
contribution for Federal Tax purposes. In the event of such a Final
Determination, the Stockholders shall pay an amount that reflects the
hypothetical Tax consequences of the receipt or accrual of such payment, using
the maximum statutory rate (or rates, in the case of an item that affects more
than one Tax) applicable to the recipient of such payment for the relevant year,
reflecting for example, the effect of deductions available for interest paid or
accrued and for Taxes such as state and local income Taxes. Any payment required
to be made by the Stockholders under Section 8.5 that is not made when due shall
bear interest at the rate per annum determined, from time to time, under the
provision of Section 6621(a)(2) of the Code for each day until paid.
8.7 TERMINATION OF EXISTING TAX SHARING AGREEMENTS. Any and
all existing Tax Sharing Agreements shall be terminated as of the Closing Date.
After the Closing, neither ICM nor any Subsidiary shall have any further rights
or liabilities thereunder. This Agreement shall be the sole Tax sharing
agreement relating to ICM or any Subsidiary for all Pre-Closing Tax Periods.
ARTICLE 9
CONDITIONS TO CLOSING
9.1 CONDITIONS TO OBLIGATIONS OF THE INVESTOR AND THE
STOCKHOLDERS. The obligations of the Investor and the Stockholders to consummate
the Closing are subject to the satisfaction of the following conditions:
(i) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation
of the Closing.
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(ii) Any applicable waiting period under the HSR Act relating
to the transactions contemplated hereby shall have expired or been
terminated.
(iii) An opinion of an appraisal firm verifying the solvency
of ICM and its Subsidiaries (after taking into account the Redemption
Transaction) shall have been obtained at the Investor's expense.
9.2 CONDITIONS TO OBLIGATION OF THE INVESTOR. The obligation
of the Investor to consummate the Closing is subject to the satisfaction of the
following further conditions:
(i) (A) Each of the Stockholders and ICM shall have performed
in all material respects all of its obligations hereunder required to
be performed by it on or prior to the Closing Date, (B) the
representations and warranties of the Stockholders contained in this
Agreement and in any certificate or other writing delivered by the
Stockholders pursuant hereto, disregarding all qualifications and
exceptions contained therein relating to materiality or Material
Adverse Effect for specific instances, shall be true in all respects
except where the instances where such representations and warranties
are not true, if viewed in the aggregate, would not have a Material
Adverse Effect at and as of the Closing Date, as if made at and as of
such date, and (C) the Investor shall have received a certificate
signed by each of the Stockholders to the foregoing effect.
(ii) The Investor shall have conducted, at the Investor's
expense, a Phase I environmental audit of ICM and its Subsidiaries and
their respective assets and businesses, which audit will identify and
delineate, to the extent consistent with a Phase I audit, all
Environmental Liabilities and which audit (A) shall be satisfactory to
the Investor in its sole discretion and (B) shall be delivered to the
Investor in the form of a written report no later than ten days prior
to the Closing.
(iii) The Investor shall have received all documents it may
reasonably request relating to the existence of ICM and its
Subsidiaries and the authority of the Stockholders and ICM for this
Agreement and the Shareholder Agreement, all in form and substance
reasonably satisfactory to the Investor.
(iv) The Stockholders shall have delivered a certification for
ICM and signed by ICM to the effect that neither ICM nor any Subsidiary
of ICM is nor has it been within 5 years of the Closing Date a "United
States real
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property holding corporation" as defined in Section 897 of
the Code.
(v) ICM shall have obtained sufficient outside financing to
enable it to make payment of the Retired Shares Purchase Price and any
other amounts to be paid by it hereunder.
(vi) The Investor shall have completed its due diligence with
respect to the Other Businesses to the Investor's satisfaction.
(vii) There shall not be threatened, instituted or pending any
action or proceeding by any Person before any court or governmental
authority or agency, domestic or foreign, (A) seeking to restrain or
prohibit the ownership or operation by the Investor or any of its
Affiliates of all or any material portion of the business or assets of
ICM or any Subsidiary of ICM or of the Investor or any of their
Affiliates or to compel the Investor or any of its Affiliates to
dispose of all or any material portion of the business or assets of ICM
or any Subsidiary of ICM or of the Investor or any of their or
Affiliates, (B) seeking to impose or confirm limitations on the ability
of the Investor or any of its Affiliates effectively to exercise full
rights of ownership of the New Shares, or (C) seeking to require
divestiture by the Investor or any of its Affiliates of any the New
Shares.
(viii) The Investor shall have received an opinion of Laser,
Pokorny, Schwartz, Friedman & Economos, counsel to the Stockholders,
dated the Closing Date, in form and substance reasonably satisfactory
to the Investor. In rendering such opinion, such counsel may rely upon
certificates of public officers, as to matters governed by the laws of
jurisdictions other than New York and the corporate laws of Delaware or
the federal laws of the United States of America, upon opinions of
counsel reasonably satisfactory to the Investor and, as to matters of
fact, upon certificates of Stockholders or of officers of ICM or any
Subsidiary of ICM , copies of which opinions and certificates shall be
contemporaneously delivered to the Investor. For purposes of rendering
its opinion, such counsel may assume that the laws of New York are
identical to the laws of Illinois.
(ix) Each of the Stockholders and ICM shall have received all
consents, authorizations or approvals from the governmental agencies
referred to in Section , in each case in form and substance reasonably
satisfactory to the
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Investor, and no such consent, authorization or approval shall have
been revoked.
(x) The Investor shall have received certification signed by
each of the Stockholders to the effect that such party is not a
"foreign person" as defined in Section 1445 of the Code.
(xi) The transactions set forth in Part I of Exhibit F shall
have been consummated and the transactions set forth in Part II of
Exhibit F shall be consummated simultaneously with the Closing in a
manner satisfactory to the Investor in its sole discretion.
(xii) Each of the Stockholders and the Managers shall
have executed the Shareholder Agreement.
(xiii) All material consents, approvals, authorizations or
permits of, or filings with or notifications to, any third party
required for the consummation of the transactions contemplated hereby
shall have been obtained.
(xiv) Gradall shall have obtained an ALTA extended coverage
form of owner's title insurance policy, or a binder to issue the same,
dated the Closing Date, insuring or committing to insure, at ordinary
premium rates, title to the real property located in New Philadelphia,
Ohio on which Gradall's plant is constructed and the easements
appurtenant thereto and necessary for the use thereof, free and clear
of Liens except Liens for the Assumed Indebtedness and as otherwise
consented to by the Investor, such policy or binder to be issued by a
responsible title insurance company selected by the Investor, to be in
an amount reasonably satisfactory to the Investor, to be in form and
substance and include such affirmative coverages and endorsements
(including a non-imputation endorsement) reasonably satisfactory to the
Investor. The cost of any such policy or binder and any survey and
other documents and materials necessary to obtain the same shall be
paid by Gradall after the Closing Date.
(xv) The Investor shall have completed its survey of
Gradall's distributors to the Investor's satisfaction.
9.3 CONDITIONS TO OBLIGATION OF THE STOCKHOLDERS. The
obligation of the Stockholders to consummate the Closing is subject to the
satisfaction of the following further conditions:
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(i) (A) The Investor shall have performed in all material
respects all of its obligations hereunder required to be performed by
it at or prior to the Closing Date, (B) the representations and
warranties of the Investor contained in this Agreement and in any
certificate or other writing delivered by the Investor pursuant hereto,
disregarding all qualifications and exceptions contained therein
relating to materiality or Material Adverse Effect, shall be true in
all material respects at and as of the Closing Date, as if made at and
as of such date, and (C) the Stockholders shall have received a
certificate signed by the General Partner of the Investor to the
foregoing effect.
(ii) The Stockholders shall have received all documents they
may reasonably request relating to the existence of the Investor and
the authority of the Investor for this Agreement, all in form and
substance reasonably satisfactory to the Stockholders.
(iii) The Stockholders shall have received an opinion of Davis
Polk & Wardwell, counsel to the Investor, dated the Closing Date, in
form and substance reasonably satisfactory to the Stockholders. In
rendering such opinion, such counsel may rely upon certificates of
public officers, as to matters governed by the laws of jurisdictions
other than New York and the corporate laws of Delaware or the federal
laws of the United States of America, upon opinions of counsel
reasonably satisfactory to the Stockholders and, as to matters of fact
upon certificates of the Investor, copies of which opinions and
certificates shall be contemporaneously delivered to the Stockholders.
(iv) The Investor shall have executed the Shareholder
Agreement.
(v) ICM shall have delivered to the Stockholders certificates
for 140 shares of Preferred Stock, 70 of which shall be registered in
the name of David T. Shelby and 70 of which shall be registered in the
name of Jack D. Rutherford.
ARTICLE 10
SURVIVAL; INDEMNIFICATION
10.1 SURVIVAL. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing until the date which is three months after the
delivery
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to Investor of audited financial statements for ICM and its Subsidiaries for the
year ended December 31, 1996; PROVIDED that (i) the representations and
warranties set forth in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.9, 3.11,
3.12, 3.13, 3.14, 3.15, 3.19, 3.20, 3.21, 3.22 and 3.23 shall terminate upon the
consummation of an IPO, if earlier, (ii) covenants and agreements which, by
their terms, are to survive for a specified period of time shall survive for the
period of time specified therein, (iii) the covenants, agreements,
representations and warranties set forth in Sections 10.5, 10.6, 10.7(a) and (b)
and 10.8 shall survive indefinitely, (iv) the covenants, agreements,
representations and warranties contained in Section 10.3, except with respect to
the Disclosed Environmental Liabilities set forth in the section entitled
"Summary of Findings" in the Phase I report referred to in Section 9.2(ii),
shall survive until the tenth anniversary of the Closing, (v) the covenants,
agreements, representations and warranties contained in Sections 3.17 and 10.4
shall survive until the earlier of the seventh anniversary of the Closing and an
IPO, (vi) the covenants, agreements, representations and warranties contained in
Sections 3.24(c), (d), (h) and (i) and Article 8 shall survive until expiration
of the statute of limitations applicable to the matters covered thereby (giving
effect to any waiver, mitigation or extension thereof), if later and (vii) the
covenants, agreements, representations and warranties contained in Section
10.7(c) shall survive until the earlier of the tenth anniversary of the Closing
and an IPO. Notwithstanding the preceding sentence, (i) any covenant, agreement,
representation or warranty in respect of which indemnity may be sought under
this Agreement shall survive the time at which it would otherwise terminate
pursuant to the preceding sentence, if notice of the inaccuracy, breach or event
giving rise to such right of indemnity shall have been given to the party
against whom such indemnity may be sought prior to such time and (ii) the
provisions of this Section 10.1 shall not be construed to excuse the
Stockholders from, or in any way limit, the Stockholders' obligations under
Sections 10.3, 10.4, 10.5, 10.6 and 10.7.
10.2 INDEMNIFICATION GENERALLY. The Stockholders hereby
indemnify each Investor Indemnitee without duplication against and agree to hold
them harmless from any and all damage, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any action, suit or proceeding)
("Damages") incurred or suffered by any Investor Indemnitee arising out of any
misrepresentation or breach of warranty, covenant or agreement made or to be
performed by the Stockholders pursuant to this Agreement (except for matters
addressed in Article 8 or in Sections 10.3, 10.4, 10.5 and 10.6); PROVIDED that,
the Stockholders shall not be liable under this
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Section 10.2 unless the aggregate amount of Damages with respect to all matters
addressed by this Section 10.2 exceeds $450,000 (the "Stockholders' Basket") and
then only to the extent of such excess; and PROVIDED FURTHER that the
Stockholders shall not be liable under this Section 10.2 for Damages in an
amount exceeding $5,000,000 in the aggregate. For purposes of this Agreement,
Damages incurred or suffered by any Person shall be determined net of any
resulting tax benefit. For purposes of this Section 10.2, any breach of Section
3.9(a)(i) caused solely by circumstances effecting the economy generally that
occur and are evident prior to the Closing Date shall not be covered by this
Section 10.2.
10.3 ENVIRONMENTAL LIABILITIES. (a) Subject to Section
10.3(b), the Stockholders hereby indemnify the Investor Indemnitees from and
against and agree to hold each of them harmless from any and all Damages
(including, without limitation, reasonable expenses of investigation by
engineers, environmental consultants and similar technical personnel and all
remediation, clean-up and similar costs and all costs relating to improvements
to be made, including paving, dikes, sumps and roofing, to contain or eliminate
runoff at the metal chip dumpster/oil storage area), net of any Tax benefit to
ICM or any Subsidiary of ICM with respect to such Damages,incurred or suffered
by any Investor Indemnitee arising out of, in respect of or in connection with
any and all Environmental Liabilities; PROVIDED that, with respect to any
Environmental Liabilities specifically disclosed in Schedule 3.16 or
specifically identified in the Section entitled "Summary of Findings" (the
"Summary of Findings") in the Phase I environmental audit referred to in Section
9.2(ii) (each a "Disclosed Environmental Liability"), the Stockholders'
indemnification obligations under this Section 10.3(a) shall be limited to 50%
of the Damages, net of any Tax benefit of ICM or any Subsidiary of ICM with
respect to such Damages, arising out of, in respect of or in connection with any
such Disclosed Environmental Liability and PROVIDED FURTHER, that with respect
to Disclosed Environmental Liabilities set forth in the Summary of Findings,
such Damages shall be limited to amounts actually expended (or set forth in a
budget or plan identifying additional investigative, remedial or disposal
activities), in connection with an investigation, clean-up or remediation which
has been initiated on or prior to December 31, 1998, by ICM or any Affiliate of
ICM. Notwithstanding anything herein to the contrary, the parties agree that (i)
in connection with paragraph 4.1.1 in the Summary of Findings, any liabilities
relating to the matters referred to therein shall be included in the definition
of "Disclosed Environmental Liabilities" solely to the extent that such
liabilities arise out of contamination by TCE and no other substance, and (ii)
any Environmental Liability relating to the contamination of the waters or
sediments of the Tuscarawas
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River shall be deemed to be a Disclosed Environmental Liability as to which the
Stockholders' indemnification obligations hereunder shall survive until the
tenth anniversary of the Closing. The Stockholders' indemnification obligations
under this Section 10.3(a) with respect to Disclosed Environmental Liabilities
shall be reduced by an amount equal to 50% of the Excess Amount, if any. For
purposes of this Section 10.3, (i) the term "Environmental Liabilities" shall
have the meaning set forth in Section 1.1 without regard to the final sentence
of the definition of such term included in such Section, (ii) the term "Unknown
Environmental Liabilities" shall mean Environmental Liabilities other than
Disclosed Environmental Liabilities, (iii) the term "Excess Amount" means 56% of
the excess, if any, of 1995 EBIT over $12.3 million and (iv) the term "1995
EBIT" means consolidated earnings before interest and taxes of Gradall and its
Subsidiaries for the 1995 fiscal year determined (x) as certified by the chief
financial officer of Gradall in accordance with generally accepted accounting
principles and consistent with the past practices of Gradall and (y) without
regard to the transactions contemplated hereby and as certified by the Investor
to the Stockholders. The Investor shall provide the Stockholders with its
determination of 1995 EBIT not later than March 31, 1996.
(b) From and after the Closing Date, Gradall shall, to the
extent available on commercially reasonable terms as determined in the good
faith judgment of the Board of Directors of ICM, maintain insurance with respect
to Unknown Environmental Liabilities having an annual aggregate premium of
$26,000 (which premium shall be adjusted annually on each anniversary of the
Closing Date by adding to it, cumulatively, an amount equal to (x) the amount of
such premium multiplied by (y) the increase (but not any decrease) for the prior
year in the Consumer Price Index for the New York-Northeastern New Jersey
Metropolitan Statistical Area published by the Department of Labor), having a
deductible of $50,000 per occurrence and having coverage of $1,000,000 per
occurrence and in the aggregate and containing no additional terms or conditions
that would impose material obligations on ICM or any Subsidiary of ICM. The cost
of any such insurance policy, net of any Tax benefit to ICM or any Subsidiary of
ICM with respect to the payment of premiums for such insurance, shall be shared
equally by Gradall, on the one hand, and the Stockholders, on the other hand.
With respect to any Unknown Environmental Liability in respect of which Gradall
is entitled to payment under any such insurance policy, Gradall shall reimburse
the Stockholders for any amounts actually received by Gradall in respect of the
relevant Unknown Environmental Liability, net of any tax liability related
thereto, to the extent the Stockholders have fulfilled their indemnification
obligations in connection with such Unknown
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Environmental Liability in accordance with the provisions of Section 10.3(a) and
this Section 10.3(b). In the event that Gradall shall be unable to obtain
insurance coverage in accordance with this Section 10.3(b), Gradall shall to the
extent available maintain insurance with respect to Unknown Environmental
Liabilities with such coverages as can be obtained at the cost and with the
deductibles provided herein and provided that such insurance does not contain
additional terms or conditions that would impose material obligations on ICM or
any Subsidiary of ICM. In the event that Gradall discontinues its insurance
coverage and such coverage was available on the terms described in this Section
10.3(b), then the Stockholder's liability pursuant to this Section 10.3 shall be
reduced by the amount of the discontinued coverage.
(c) From and after the Closing Date, Gradall shall use
reasonable efforts to obtain compensation with respect to any Environmental
Liability for which ICM or any Subsidiary of ICM has indemnification rights
against Bendix or Allied Signal pursuant to the Purchase Agreement dated October
28, 1983 between GBKS Properties, Inc. (subsequently renamed The Gradall
Company) and Bendix Automation Company, as guaranteed by Allied Corporation
pursuant to the Guaranty dated October 28, 1983 between Allied Corporation and
GBKS Properties, Inc. (the "Allied Agreement"). Gradall shall reimburse the
Stockholders for their proportionate share of any funds actually received by
Gradall pursuant to the terms of the Allied Agreement to the extent the
Stockholders have paid such amounts to Gradall pursuant to Section 10.3(a).
10.4 PRODUCT LIABILITIES. (a) The Stockholders hereby
indemnify the Investor Indemnitees from and against and agree to hold each of
them harmless from any and all Damages, net of any Tax benefit to ICM or any
Subsidiary of ICM with respect to such Damages, incurred or suffered by any
Investor Indemnitee arising out of or otherwise relating to any breach of any
representation set forth in Section 3.17; PROVIDED that Stockholders'
indemnification obligations under this Section 10.4(a) shall be limited to
$10,000,000 in the aggregate; PROVIDED FURTHER that the Stockholders'
indemnification obligations with respect to Damages constituting costs of repair
and replacement of machines shall be limited to any product recalls where such
recall results in Damages exceeding $100,000 per recall and only to the extent
of such excess. In the event a recall of the kind described in the preceding
sentence occurs and ICM or any Subsidiary bears the first $100,000 of Damages,
such amount shall be applied towards the Stockholders' Basket described in
Section 10.2. Notwithstanding anything to the contrary contained herein, the
Stockholders will have no indemnity obligations pursuant to this Section 10.4
with respect
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to products or machines produced on or after the Closing Date. Notwithstanding
anything to the contrary contained herein, for purposes of this Section 10.4,
the term "Damages" shall not include costs and expenses, including attorneys'
fees, incurred by Gradall in connection with the defense of any product
liability or related claim.
(b) From and after the Closing Date Gradall shall, to the
extent available on commercially reasonable terms as determined in the good
faith judgment of the Board of Directors of ICM, maintain, at its own expense,
insurance having annual aggregate premium of $160,000 (which premium shall be
adjusted annually on the first day of each fiscal year by adding to it,
cumulatively, an amount equal to (x) the amount of such premium multiplied by
(y) the increase (but not any decrease) for the prior year in the Consumer Price
Index for the New York-Northeastern New Jersey Metropolitan Statistical Area
published by the Department of Labor), a deductible of $225,000 per occurrence
and coverage of $1,000,000 per occurrence and in the aggregate and additional
umbrella insurance having annual aggregate premium of $71,500 (which premium
shall be adjusted annually on each anniversary of the Closing Date by adding to
it, cumulatively, an amount equal to (x) the amount of such premium multiplied
by (y) the increase (but not any decrease) for the prior year in the Consumer
Price Index for the New York-Northeastern New Jersey Metropolitan Statistical
Area published by the Department of Labor),with a deductible of $10,000 per
occurrence and coverage of $5,000,000 per occurrence and in the aggregate,
covering matters of the type referred to in Section 3.17 ("Product Liability
Insurance"). In the event that Gradall shall be unable to obtain insurance
coverage pursuant to this Section 10.4(b) at the cost and with the deductibles
provided for herein, Gradall shall to the extent available maintain Product
Liability Insurance with such coverages as can be obtained at the cost and with
the deductibles provided herein. In addition, as soon as practicable after the
Closing, Gradall shall, at the Stockholders' expense, purchase insurance having
a one time premium of $60,000, having a deductible of $225,000 per occurrence
and having coverage of $1,000,000 per occurrence and in the aggregate for future
claims made with respect to events which occurred during the period beginning on
April 1, 1986 and ending on April, 1990. With respect to any matter in respect
of which Gradall is entitled to payment under any such Product Liability
Insurance policy, Gradall shall be responsible for all Damages in respect of
such matter up to the deductible amount under any such Product Liability
Insurance policy, and Stockholders' indemnification obligations pursuant to
Section 10.4(a) in respect of such matter shall extend only to Damages in excess
of the relevant deductible amount. Gradall shall reimburse the Stockholders for
any amounts actually received
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under a Product Liability Insurance policy by Gradall in respect of the relevant
product liability, net of any tax liability related thereto, to the extent the
Stockholders have fulfilled their indemnification obligations in connection with
such product liability in accordance with the provisions of Section 10.4(a) and
this Section 10.4(b). For so long as the Stockholders are subject to liability
under this Section 10.4, the Stockholders shall have the right to cause Gradall
to purchase additional insurance, at the Stockholder's expense (net of any Tax
benefit to ICM or any Subsidiary of ICM), with respect to the payment of
premiums for such additional insurance. In the event that Gradall discontinues
its insurance coverage and such coverage was available on the terms described in
this Section 10.4(b), then the Stockholders' liability pursuant to this Section
10.4 shall be reduced by the amount of the discontinued insurance coverage.
(c) From and after the Closing Date, Gradall shall use
reasonable efforts to obtain compensation with respect to any product liability
described in Section 3.17 for which ICM or any Subsidiary of ICM has
indemnification rights against Bendix or Allied Signal pursuant to the Allied
Agreement. Gradall shall reimburse the Stockholders for their proportionate
share of any funds actually received by Gradall pursuant to the terms of the
Allied Agreement to the extent the Stockholders have paid such amounts to
Gradall pursuant to Section 10.4(a).
10.5 OTHER BUSINESSES. The Stockholders hereby indemnify the
Investor Indemnitees against and agree to hold them harmless from any and all
Damages (including, without limitation, reasonable expenses of investigation by
engineers, environmental consultants and similar technical personnel and all
remediation, clean-up and similar costs) incurred or suffered by any Investor
Indemnitee arising out of the conduct of, or otherwise relating to, any Other
Business of whatever nature, whether presently in existence or arising
hereafter, including but not limited to:
(i) any liabilities or obligations relating to or arising out
of employee benefit or compensation arrangements with respect to any
Other Business or any present or former employee of any Other Business;
and
(ii) any Environmental Liability relating to, or arising out
of the conduct of, any Other Business (including any such matters
disclosed on Schedule 3.16).
10.6 RESTRUCTURING. The Stockholders hereby indemnify the
Investor Indemnitees from and against and agree to hold each of them harmless
from any and all Damages incurred or suffered by any Investor Indemnitee arising
out of, in respect of or in connection with the transactions referred to in
Exhibit F.
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10.7 ADDITIONAL MATTERS. (a) Subject to Section 10.7(b), the
Stockholders hereby indemnify the Investor Indemnitees against and agree to hold
them harmless from (i) any and all Damages except for survivor's benefits under
worker's compensation of $24,000 annually incurred or suffered by any Investor
Indemnitee arising out of or otherwise relating to the death of Mr. Schon and
(ii) 50% of any settlement or judgment paid, incurred or suffered by any
Investor Indemnitee arising out of or otherwise relating to the litigation
identified as LOAD CENTER, INC. V. THE GRADALL COMPANY, Superior Court of Los
Angeles, California, Case No. BC096850 (the "Load Center Litigation").
(b) The Stockholders' indemnification obligations pursuant to
Section 10.7(a)(ii) shall be reduced by an amount equal to 50% of the Excess Net
Income Amount, if any. "Excess Net Income Amount" means the incremental net
income of Gradall and its Subsidiaries attributable the conduct of Gradall's
business in the territory in dispute in the Load Center litigation (the "Load
Center Territory") for the one-year period beginning on the first day of the
month after the date on which a new distributor is appointed to the Load Center
Territory. Net income for such periods shall be determined using generally
accepted accounting principles consistent with the past practices of Gradall and
as certified by the Investor to the Stockholders. The Investor shall provide the
Stockholders with its determination of Excess Net Income Amount not later than
90 days after completion of such one-year period.
(c) The Stockholders hereby indemnify the Investor Indemnitees
for 50% of all amounts up to $180,000 in the aggregate expended by ICM or any
Subsidiary of ICM, net of any Tax benefit to ICM or any Subsidiary of ICM with
respect to such amounts, with respect to or under the Benefit Arrangement
described in Section 3.24(m) and 100% of all amounts, net of any Tax benefit to
ICM or any Subsidiary of ICM with respect to such amounts, in excess of $180,000
expended by ICM or any Subsidiary of ICM with respect to or under such Benefit
Arrangement.
10.8 PROCEDURES; OTHER. (a) The party seeking indemnification
under Article 10 (the "Indemnified Party") agrees to give prompt notice to the
party against whom indemnity is sought (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought under such Section. The Indemnifying
Party may, and at the request of the Indemnified Party shall, participate in and
control the defense of any such suit, action or proceeding at its own expense.
If the Indemnifying Party elects to assume the defense of any such claim or
proceeding, the Indemnifying Party thereby waives, except to
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the extent such right is expressly reserved by the Indemnifying Party, its right
to contest its obligation to indemnify the Indemnified Party pursuant to this
Section with respect to such claim or proceeding and the Indemnified Party may
participate in such defense, but in such case the expenses of the Indemnified
Party shall be paid by the Indemnified Party; PROVIDED that the fees and
expenses of such Indemnified Party's counsel shall be borne by the Indemnifying
Party if representation of both parties would be inappropriate due to actual or
potential differing interests between them. No such third party claim may be
settled by the Indemnified Party without the written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. Any such settlement
shall include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party of a release of the Indemnified Party from
all liability in respect of such claim. If the Indemnifying Party shall fail to
promptly defend or fail to promptly prosecute or withdraws from such defense,
the Indemnified Party shall have the right to undertake the defense or
settlement thereof, at the Indemnifying Party's expense. If the Indemnified
Party assumes the defense of any such claim or proceeding prior to a final
judgment thereon or to forego any appeal with respect thereto, then the
Indemnified Party shall give to the Indemnifying Party prompt written notice
thereof and the Indemnifying Party shall have the right to participate in the
settlement or assume or reassume the defense of such claim or proceeding.
(b) Any amount paid by the Stockholders under Article 10 will
be treated as a capital contribution unless a Final Determination causes any
such amount not to constitute a capital contribution for Federal Tax purposes.
(c) The Investor Indemnitees agree to use good faith efforts
to recover Damages described in Sections 10.3 and 10.4 from the applicable
insurer, if any, and under the Allied Agreement before attempting to recover
such Damages from the Stockholders pursuant to their obligations under Sections
10.3 and 10.4 PROVIDED, however the Stockholders agree that this Section 10.8(c)
in no way limits their obligations under Sections 10.3 and 10.4.
10.9 STOCKHOLDERS' OBLIGATIONS. Subject to the immediately
following sentence, the Stockholders' obligations pursuant to Section 8.5 and
Article 10 are joint and several. In the event that the Escrow Amount is
utilized in its entirety to satisfy the Stockholders' obligations under Section
8.5 and Article 10, any additional obligations on the part of the Stockholders
under Section 8.5 and Article 10 shall be several and not joint, with Jack D.
Rutherford to be liable for 50% of such obligations and David T. Shelby to be
liable for 50% of such
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obligations. The Escrow Amount shall have been reduced to zero before ICM or the
Investor may proceed against either of the Stockholders directly for their
obligations under this Article 10.
ARTICLE 11
TERMINATION
11.1 GROUNDS FOR TERMINATION. This Agreement may be
terminated at any time prior to the Closing:
(i) by mutual written agreement of the Stockholders
and the Investor;
(ii) by either the Stockholders or the Investor if the
Closing shall not have been consummated on or before October
15, 1995;
(iii) by either the Stockholders or the Investor if there
shall be any law or regulation that makes consummation of the
transactions contemplated hereby illegal or otherwise prohibited or if
consummation of the transactions contemplated hereby would violate any
nonappealable final order, decree or judgment of any court or
governmental body having competent jurisdiction; or
(iv) by the Stockholders or by the Investor, if there has been
a material misrepresentation or breach of warranty on the part of the
Investor (in the case of termination by the Stockholders) or by the
Stockholders (in the case of termination by the Investor) in the
representations and warranties contained herein; or any condition to
such party's obligations hereunder becomes incapable of fulfillment
through no fault of such party and is not waived by such party.
The party desiring to terminate this Agreement shall give
notice of such termination to the other party.
11.2 EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section , termination shall be without liability of either party
(or any stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other party to this Agreement; PROVIDED
that if such termination results from the willful failure of either party to
fulfill a condition to the performance of the obligations of the other party, or
from the failure to perform a covenant of
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<PAGE> 71
this Agreement or breach by either party hereto of any representation or
warranty or agreement contained herein, such party shall be fully liable for any
and all Damages incurred or suffered by the other party as a result of such
failure or breach. The provisions of Section shall survive any termination
hereof pursuant to Section 11.1.
ARTICLE 12
MISCELLANEOUS
12.1 NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be delivered personally sent by facsmilie transmission or sent by
registered or certified mail postage prepaid or by overnight courier,
if to the Investor, to:
MLGA Fund II, L.P.
Two Greenwich Plaza
Greenwich, Connecticut 06830
Attention: Sangwoo Ahn
Fax: (203) 869-3544
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: William L. Rosoff
Fax: (212) 450-4800
if to the Stockholders, to:
Jack D. Rutherford
11679 Briarwood Lane
Burr Ridge, Illinois 60525
and
David T. Shelby
559 Oak Street
Winnetka, Illinois 60093
Fax: (708) 441-8969
with a copy to:
Laser, Pokorny, Schwartz, Friedman & Economos
65
<PAGE> 72
205 N. Michigan Ave.
Suite 3800
Chicago, Illinois 60601
Attention: Bruce M. Friedman
Fax: (312) 540-0610
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 6 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
12.2 AMENDMENTS AND WAIVERS. (a) Any provision of this
Agreement may be amended or waived prior to the Closing Date if, but only if,
such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement, or in the case of a waiver, by the
party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
12.3 EXPENSES. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense;
PROVIDED that, if the Closing occurs and subject to the provisions of Section
2.2, all costs and expenses incurred by the Stockholders, ICM and the
Subsidiaries of ICM in connection with this Agreement shall be paid by ICM or a
Subsidiary of ICM.
12.4 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto
12.5 GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the law of the State of New
York, without regard to the conflicts of law rules of such state.
12.6 ARBITRATION. All disputes arising out of this
Agreement shall be settled as far as possible by negotiations
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<PAGE> 73
between the Parties, including if necessary discussions between their chief
executive officers. If the Parties cannot agree on an amicable settlement within
thirty (30) days from written submission of the matter by one Party to the other
Party, the matter shall be submitted for decision and final resolution to
arbitration to the exclusion of any courts of law under the rules of American
Arbitration Association and in accordance with New York Law. The seat of
arbitration will be New York City, unless the Parties otherwise agree in
writing.
The arbitration decision shall be rendered as soon as
possible, not later, however, if possible, than six months after the
constitution of the arbitration tribunal. The arbitration decision shall be
final and binding upon both Parties and the Parties agree that any award granted
pursuant to such decision may be entered forthwith in any court of competent
jurisdiction.
12.7 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
12.8 COUNTERPARTS; THIRD PARTY BENEFICIARIES. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. No provision of this Agreement is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
12.9 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement. No representation, inducement, promise, understanding, condition or
warranty not set forth herein has been made or relied upon by either party
hereto. Neither this Agreement nor any provision hereof is intended to confer
upon any Person other than the parties hereto any rights or remedies hereunder.
12.10 HEADINGS. The headings of Articles and 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 hereof.
12.11 LEGAL FEES. In the event that either party seeks to
enforce any rights arising hereunder in any arbitration proceeding pursuant to
Section 12.6 or in any court of competent jurisdiction, the prevailing party
therein shall be entitled to recover from the other party, in addition to any
other sums
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<PAGE> 74
adjudicated to be due and without regard to any other relief granted, all
reasonable costs and expenses (including reasonable attorneys' fees) paid or
incurred by such prevailing party in connection with enforcing such rights or
defending any claim or action asserted therein. The arbitration tribunal or
court adjudicating any claims hereunder shall determine the prevailing party in
any actions brought hereunder and the amount of compensation due to such
prevailing party pursuant to this Section 12.11.
12.12 SEVERABILITY. If any provision of this Agreement is held
to be invalid or unenforceable for any reason, that provision will be reformed
to the maximum extent permitted to preserve the parties' original intent,
failing which, such provision will be severed from this Agreement with the
balance of the Agreement continuing in full force and effect. Such occurrence
will not have the effect of rendering the provisions in question invalid in any
other jurisdiction or in any other case or circumstances or of rendering invalid
any other provision contained herein to the extent that such other provisions
are not themselves in conflict with any applicable law.
12.13 RECITALS. The recitals hereto are incorporated
by reference and made a part hereof.
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<PAGE> 75
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
ICM INDUSTRIES, INC.
By: /s/ DAVID T. SHELBY
-------------------------------
Title: President
MLGA FUND II, L.P.
By: MLGAL PARTNERS, as General
Partner
By: /s/ WILLIAM C. UGHETTA, JR.
-------------------------------
Title: General Partner
THE STOCKHOLDERS:
/s/ JACK D. RUTHERFORD
-------------------------------
Jack D. Rutherford
/s/ DAVID T. SHELBY
-------------------------------
David T. Shelby
69
<PAGE> 1
EXHIBIT 10.02
AMENDMENT TO RECAPITALIZATION AGREEMENT
AMENDMENT dated as of October 12, 1995 among Gradall Industries,
Inc. (the "Company"), MLGA Fund II, L.P. (the "Investor") and Jack D.
Rutherford and David T. Shelby (each individually a "Stockholder" and
collectively, the "Stockholders").
W I T N E S S E T H :
WHEREAS, the parties hereto have heretofore entered into a
Recapitalization Agreement dated as of September 15, 1995 (the "Agreement");
and
WHEREAS, the parties hereto desire to amend the Agreement as set
forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise
specifically defined herein, each term used herein which is defined in the
Agreement shall have the meaning assigned to such term in the Agreement. Each
reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and each other similar
reference contained in the Agreement shall from and after the date hereof refer
to the Agreement as amended hereby.
SECTION 2. AMENDMENT OF SECTION 2.2 OF THE AGREEMENT. (a) The
parties agree that the adjustments to the Retired Shares Purchase Price
contained in subsections 2.2(a)(i)(D), (F) and (G) and subsections
2.2(a)(ii)(A) and (C) relating to the estimation of Taxes and Tax Benefits of
Gradall and its Subsidiaries as of the Closing Date shall not be made on the
Closing Date and shall instead be made as such Taxes and Tax Benefits are paid
or realized. The Investor shall (i) cause the Company to, and the Company
shall, file all tax returns or other documents required to obtain the Tax
Benefits at the earliest reasonably practicable date, (ii) provide Stockholders
with copies of all such tax returns or other documents promptly upon the filing
thereof, (iii) provide Stockholders with copies of
<PAGE> 2
all communications from or with the Internal Revenue Service or any other
taxing authority relating to such tax returns or other documents and (iv)
promptly notify the Stockholders of the receipt of any such Tax Benefits.
(b) Section 2.2(a)(i)(E) shall be amended to read as follows:
"(E) all amounts set forth in Exhibit B which are paid to the
Managers (excluding the value of any Common Stock transferred to such Managers)
by Gradall or any Subsidiary of Gradall and all amounts set forth in Exhibit G
which are paid to employees by Gradall or any Subsidiary of Gradall,"
(c) Section 2.2(b) of the Agreement shall be amended to read as
follows:
"(b) As promptly as practicable after the filing of the relevant
Tax returns, the Investor shall notify the Stockholders of the actual amount
reflected on such returns of (i) the Taxes (A) payable by Gradall or any
Subsidiary of Gradall as a consequence of the consummation of the transactions
referred to in Exhibit F and (B) payable by Gradall or any of its Subsidiaries
with respect to the Pre-Closing Periods described in clauses (F) and (G) of
Section 2.2(a) (the "Actual Tax Payments") and (ii) the Tax benefits received
by Gradall or any Subsidiary of Gradall as a result of the payment by Gradall
or any Subsidiary of Gradall of any amount referred to in clauses (i)(B), (C),
(D) and (E) of Section 2.2(a) (the "Actual Tax Benefits"). The amount equal to
Actual Tax Payments MINUS Actual Tax Benefits is referred to herein as "Actual
Net Taxes". The notice referred to in the first sentence of this Section
2.2(b) shall also indicate the difference between Actual Net Taxes and
Estimated Net Taxes. If Actual Net Taxes, as certified by the Investor, exceed
Estimated Net Taxes, the Stockholders shall, within two business days of
receipt of the Investor's certification of such excess, deliver to the
Investor, by wire transfer of immediately available funds to an account
designated by the Investor, an amount equal to such excess plus interest
(calculated on a daily basis) at a rate of 10% per annum which interest shall
accrue on a daily basis from and after the date on which the relevant Tax
returns are filed through the date of payment. If Estimated Net Taxes exceed
Actual Net Taxes as certified by the Investor, Gradall shall, within two
business days of delivery of its certification of such deficiency, deliver to
the Stockholders, by wire transfer of immediately available funds to an account
designated by the Stockholders, an amount equal to such deficiency plus
interest (calculated as
2
<PAGE> 3
set forth in the preceding sentence) at a rate equal to 10% per annum.
Notwithstanding such payments, any further increase or decrease in the taxes
payable as a consequence of the consummation of the transactions referred to in
Exhibit F shall constitute a Loss which shall be indemnified under Section 8.5
hereof."
SECTION 3. AMENDMENT OF EXHIBIT F, PART II OF THE AGREEMENT. The
subsection entitled "Termination of Gradall Phantom Stock Agreement" of Exhibit
F, Part II of the Agreement is amended to read as follows:
"Raymond A. Imp's Performance Share Agreement with Gradall dated
January 1, 1990 will be cancelled; Gradall shall pay International Consulting
Management, Ltd. $3,000,000 in consideration of cancellation of a Management
Agreement between such parties; and International Consulting Management, Ltd.
will pay $3,000,000 (less required withholding) to Raymond A. Imp."
SECTION 4. AMENDMENT TO SCHEDULE 3.11 TO THE AGREEMENT. Section
A.(2) of Schedule 3.11 to the Agreement is amended to read as follows:
"(2) PERSONAL PROPERTY
-----------------
(a) Term Lease Master Agreement #3864013 between The Gradall
Company and IBM Credit Corporation dated November 28, 1988
for lease of IBM equipment, including:
(i) Term Lease Supplement #156869 dated 12/30/92.
(ii) Term Lease Supplement #156861 dated 11/12/92.
(iii) Term Lease Supplement #156876 dated 12/30/92.
(iv) Term Lease Supplement #510619 dated January 20, 1993.
(v) Term Lease Supplement #510632 dated January 20, 1993.
(vi) Term Lease Supplement #C00212756 dated 5/2/95."
3
<PAGE> 4
SECTION 5. GOVERNING LAW. This Amendment shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 6. COUNTERPARTS; EFFECTIVENESS. This Amendment may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Amendment shall become effective as of the date hereof when
each of the parties to the Agreement shall have executed counterparts hereof
(or, in the case of any party as to which an executed counterpart shall not
have been received, the Agent shall have received telegraphic, telex or other
written confirmation from such party of execution of a counterpart hereof by
such party).
SECTION 7. AGREEMENT REMAINS IN EFFECT. Except as amended
hereby, the Agreement remains in full force and effect in accordance with its
terms.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the date first above written.
GRADALL INDUSTRIES, INC.
By: /s/ Jack D. Rutherford
---------------------------
Title:
MLGA FUND II, L.P.
By: MLGAL PARTNERS, as General
Partner
By: /s/ William C. Ughetta, Jr.
---------------------------
Title:
THE STOCKHOLDERS
/s/ Jack D. Rutherford
----------------------------
Jack D. Rutherford
/s/ David T. Shelby
----------------------------
David T. Shelby
5
<PAGE> 1
EXHIBIT 10.04
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this 13 day of October, 1995, by and between THE
GRADALL COMPANY, an Ohio corporation (the "Company"), and BARRY L. PHILLIPS
("Executive").
WITNESSETH THAT:
WHEREAS, Executive has been employed by the Company as its President
and Chief Operating Officer pursuant to the terms of an employment agreement by
and between the Company and the Executive dated September 5, 1985, as restated
and amended by agreements dated July 21, 1987, January 19, 1988, July 20, 1988,
July 17, 1989 and February 5, 1993 (the "Prior Employment Agreement");
WHEREAS, the Company and the Executive desire to amend and restate the
Prior Employment Agreement to provide for the continued employment of the
Executive upon the terms and conditions hereinafter set forth; and
WHEREAS, the Executive's services are of great value to the Company and
it is recognized that substantial inducement must be offered to the Executive in
order that the Company may retain his services.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties agree as follows:
1. DUTIES. The Company hereby agrees to continue to employ the
Executive as President and Chief Operating Officer of the Company, and the
Executive hereby agrees to continue to serve the Company in that capacity in
accordance with the terms and conditions set forth herein:
a. The Executive shall be vested with all powers and
rights attendant to the office of President and Chief
Operating Officer, and shall have full authority
<PAGE> 2
and responsibility, subject to the general direction,
approval and control of the Board of Directors of the
Company, to formulate policies and administer the Company in
all respects.
b. If elected or appointed by the Board of Directors, the
Executive shall serve as a director of the Company without
additional compensation.
c. During the term of this Agreement, the Executive shall
devote all of his business time, attention, energy and skill
to the performance of the duties and services described
herein, and shall not engage directly or indirectly in any
other business activity, whether or not such business
activity is pursued for gain, profit or other pecuniary
advantage, except with the written consent of the Company's
Board of Directors, provided, that the provisions of this
Section 1(c) shall not restrict the Executive's investment
of his personal assets or the Executive's participation in
any professional, academic or civic activity.
2. TERM. Subject to prior termination as set forth in Section 11
hereof, the term of this Agreement shall be for a period of one year, beginning
on the date hereof, which term shall be automatically renewed for successive one
year periods until terminated as set forth in Section 11 hereof.
3. COMPENSATION. The Company shall pay to the Executive as compensation
for his services hereunder a base salary of One Hundred and Sixty-Six Thousand
Dollars ($166,000) per year, payable in equal semi-monthly installments, subject
to withholding and other applicable taxes. The salary provided herein shall be
subject to adjustment based on annual reviews conducted by the Company.
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<PAGE> 3
4. INCENTIVE COMPENSATION. The Executive shall be entitled to participate
in any incentive compensation plans established by the Company from time to
time.
5. EXPENSES. The Executive is authorized to incur reasonable expenses in
connection with the business of the Company and the performance of his duties
hereunder, including expenses for entertainment, travel and similar items. The
Company will pay or reimburse the Executive for all expenses upon the
presentation by the Executive of an itemized account of such expenditures and
any other documentation or substantiation of expenses which may be required for
compliance with applicable state and federal tax laws.
6. VACATIONS. The Executive shall be entitled to four (4) weeks of vacation
each year, during which time his compensation shall be paid in full.
7. AUTOMOBILE EXPENSES. During the term of this Agreement, the Company
shall reimburse the Executive for all expenses incurred in connection with the
maintenance of an automobile for the Executive's business use including, but not
limited to, acquisition costs, fuel, maintenance and insurance, upon the
submission to the Company of an itemized account of such expenditures and any
other documentation or substantiation of expenses which may be required for
compliance with applicable state and federal tax laws. The Company shall pay to
the Executive such additional amount as may be necessary to reimburse the
Executive for any federal state or local income taxes the Executive is required
to pay as a result of the Company's payments pursuant to this Section 7,
including such tax reimbursement payments.
8. EXECUTIVE BENEFITS. The Executive shall be entitled to all benefits
offered by the Company to any of its executive or salaried employees including,
but not limited to, major medical health insurance, hospitalization insurance,
life insurance, travel and accident insurance, and disability insurance,
including, but not limited to, those benefits the Executive currently receives
from the Company.
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<PAGE> 4
9. DISABILITY. The Company shall maintain in full force and effect and pay
all premiums due under that certain disability insurance policy, insuring the
Executive and issued by The New England Insurance Companies under Policy No.
DO99437 (the "Disability Policy"). In the event that the Executive is unable to
perform his duties hereunder by reason of illness or incapacity, the Executive
shall continue to receive all amounts payable under this Agreement, until the
Executive receives payments under the Disability Policy. If the Executive
receives the full benefit amount payable under the Policy, the Company shall
have no further obligation to make payments under this Agreement to the
Executive during the period in which the Executive is receiving the full benefit
under the Disability Policy. During any such period of disability, the Executive
shall continue to receive all benefits theretofore received by the Executive.
Upon the termination of the Executive's disability and the Executive's right to
receive the full benefit payable under the Disability Policy, the Executive's
full compensation shall be reinstated in full.
10. DEFERRAL OF COMPENSATION. The Executive shall be entitled to
participate in the Company's Supplemental Executive Retirement Plan and any
other deferred compensation program maintained by the Company.
11. TERMINATION. This Agreement may be terminated in accordance with the
following terms and conditions:
a. The Company may terminate this Agreement at any time, without cause,
upon ninety (90) days written notice to Executive. However, in such
event, the Company shall pay or provide to the Executive
i. a severance allowance of at least twelve (12) months pay at the
Executive's then current rate of pay (less all amounts required
to be withheld and deducted), payable on a monthly basis,
starting on the last day of the first full month following
termination;
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<PAGE> 5
ii. all amounts the Executive would have received under the Short and
Long Term Management Incentive Plans (less all amounts required
to be withheld and deducted) during the twelve (12) month period
following the effective date of such termination; and
iii. benefits equivalent to those previously received by the Executive
including, but not limited to, benefits provided under Sections 7
and 8 of this Agreement, for the twelve (12) month period
following the effective date of such termination.
Notwithstanding the above, if the Company terminates this Agreement
prior to November 1, 1997, the severance period provided for above
shall in each case be increased to twenty-four (24) months.
b. The Company may terminate this Agreement upon such notice as the
Directors regard as suitable, conditional upon payment of the
severance allowance set forth in Section 11(a) hereof, under the
following circumstances:
i. the sale by the Company of substantially all of its assets to a
single purchaser or to a group of associated purchasers;
ii. the acquisition by any person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 (other
than the shareholders of the Company as of the date hereof) of
beneficial ownership of capital stock of the Company representing
fifty-one percent (51%) or more of the voting power of all
outstanding capital stock of the Company;
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<PAGE> 6
iii. a decision by the Company to terminate its business and liquidate
its assets;
iv. the merger or consolidation of the Company in a transaction in
which the shareholders of the Company immediately prior to such
merger or consolidation fail to hold at least fifty-one percent
(51%) of the outstanding voting shares of the new or continuing
corporation; or
v. any damage to the Company's factory, as a result of which the
Company is unable to conduct the ordinary course of its business
thereafter for a period of 120 consecutive days.
c. The Company may terminate this Agreement upon ninety (90) days notice
to the Executive, in the event that the Executive has been unable to
perform his duties by reason of illness or incapacity, which inability
continues for a consecutive twelve month period, provided, that the
Executive is receiving the full benefit amount payable under the
Disability Policy.
d. Notwithstanding anything herein to the contrary, the Company shall
have the right to terminate this Agreement, effective upon written
notice of such termination, and shall not have an obligation to pay
any amounts provided under Section 11(a) hereof upon the happening of
any of the following events:
i. the violation by the Executive of the restrictive covenants set
forth in Sections 12 and 13 hereof, as determined by a court of
competent jurisdiction;
ii. the commission by the Executive of a material theft or
embezzlement of Company property;
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<PAGE> 7
iii. the conviction of the Executive for a crime resulting in
injury to the business or property of the Company; or
iv. the commission of any act by the Executive in the
performance of his duties hereunder adjudged by a court of
competent jurisdiction to amount to gross, willful or wanton
negligence.
e. The Executive may terminate this Agreement upon ninety (90) days
written notice to the Company. Upon the effective date of such
termination, the Company shall have no further obligation to pay
any amounts provided for in this Agreement, except as set forth
in Section 11(f) hereof.
f. In the event of termination pursuant to Sections 11(a), 11(b),
11(c) 11(d) or 11(e) hereof, the Executive shall receive the
entire balance of any sums earned by him prior to termination and
such other benefits which may be due him including, but not
limited to, a prorata portion of amounts earned by the Executive
under any incentive compensation plans maintained by the Company.
g. Upon termination of this Agreement, for any reason, the Executive
shall promptly surrender to the Company all property provided him
by the Company for use in relation to his employment, and, in
addition, the Executive shall surrender to the Company any and
all documents, files, records or other material and information
of or pertaining to the Company or its business operations.
12. NON-COMPETITION. During the period of his employment with the Company
and for a period of six months thereafter, the Executive covenants and agrees
that he shall not do any of the following:
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<PAGE> 8
a. Own, manage, operate, join, control, be employed by, participate
in, or be connected in any manner with the ownership, management,
operation, or control of any business that is competitive with
the types of businesses conducted by the Company at that time
within any areas in which the Company conducts business or within
any geographic areas in which the Company intends to conduct
business, as known to Executive by reason of Executive's
affiliation with the Company. Nothing herein shall prohibit
Executive from owning stock or other securities of a competitor,
provided that Executive's equity interest shall not exceed five
percent (5%) of the total outstanding stock of such competitor,
and provided Executive, in fact, does not have the power to
control or direct the management or policies of such competitor
and does not serve as a director or officer thereof, and is not
otherwise associated with any competitor, except as consented to
by the Company.
b. Induce or influence any employee, independent contractor, agent,
customer or supplier of the Company to terminate or curtail his,
her or its employment or business relationship with the Company.
c. Solicit or sell any product or service which is competitive with
those offered by the Company to any customer which did business
with the Company at any time during the term of Executive's
employment with the Company.
13. CONFIDENTIALITY. During the period of his employment by the Company and
for a period of six (6) months following its termination, for any reason, the
Executive covenants and agrees that he shall not use, disseminate, or disclose,
for his own benefit, or for the benefit of any person, firm, business, or other
entity, any confidential information pertaining to the Company,
-8-
<PAGE> 9
unless such information is first made public by the Company; the Company
authorizes, in writing, the use, dissemination, or disclosure of such
information; or as otherwise required by law. For purposes of this subparagraph,
confidential information is information which is not generally known to the
Company's industry, and relates, by way of example and not by way of limitation,
to the Company's manufacturing process, cost and pricing data, supply sources,
contracts, and customer lists.
14. NOTICES. Any notice required or desired to be given pursuant to this
Agreement shall be in writing and sent by certified mail to the parties at the
following addresses, or to such other addresses as either may designate in
writing to the other party:
To the Company: International Consulting Management, Ltd.
303 East Wacker Drive, Suite 1112
Chicago, IL 60601
To Executive: Barry L. Phillips
403 Hillcrest Drive, N.E.
New Philadelphia, OH 44663
15. WAIVER. Failure to insist upon strict compliance with any of the terms,
covenants, or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition, nor shall any waiver or relinquishment of any right or
power hereunder at any one or more times be deemed a waiver or relinquishment of
such right or power at any other time or times.
16. SEVERABILITY. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision. In the event that any part of a covenant contained herein is
determined by a court of law to be invalid, a judicially enforceable provision
shall be substituted in its place. Any covenant so modified shall be binding
upon the parties and shall have the same force and effect as if originally set
forth in this Agreement.
17. MODIFICATION. This Agreement may be amended only in writing, signed by
both parties hereto.
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<PAGE> 10
18. HEADINGS. The headings in this Agreement are inserted for convenience
only and are not to be considered a construction of the provisions thereof.
19. ASSIGNMENT. The Executive acknowledges that the services to be rendered
by him are unique and personal. Accordingly, the Executive may not assign any of
his rights or delegate any of his duties or obligations under this Agreement.
However, the rights and obligations of the Company under this Agreement shall
inure to the benefit of and shall be binding upon the successors and assigns of
the Company including, but not limited to, any corporation which may acquire all
or substantially all of the Company's assets and business, or which may be
consolidated or merged with or into the Company.
20. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Ohio.
21. NOVATION. This Agreement terminates and supersedes the Prior Employment
Agreement.
22. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
and agreement between the Company and the Executive with regard to all matters
herein. There are no other agreements, conditions or representations, oral or
written, express or implied, with regard thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
THE GRADALL COMPANY
/s/ Jack D. Rutherford
----------------------
/s/ Barry L. Phillips
---------------------
Barry L. Phillips
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<PAGE> 1
EXHIBIT 10.05
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this 13th day of October, 1995, by and between THE
GRADALL COMPANY, an Ohio corporation (the "Company"), and DAVID S. WILLIAMS
("Executive").
WITNESSETH THAT:
WHEREAS, Executive has been employed by the Company as its Vice President
of Marketing and Sales pursuant to the terms of an employment agreement by and
between the Company and the Executive dated January 13, 1986, as amended by
agreements dated July 17, 1989 and February 5, 1993 (the "Prior Employment
Agreement");
WHEREAS, the Company and the Executive desire to amend and restate the
Prior Employment Agreement to provide for the continued employment of the
Executive upon the terms and conditions hereinafter set forth; and
WHEREAS, the Executive's services are of great value to the Company and it
is recognized that substantial inducement must be offered to the Executive in
order that the Company may retain his services.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties agree as follows:
1. DUTIES. The Company hereby agrees to continue to employ the Executive as
Vice President of Marketing and Sales of the Company, and the Executive hereby
agrees to continue to serve the Company in that capacity in accordance with the
terms and conditions set forth herein:
a. The Executive shall be vested with all powers and rights
attendant to the office of Vice President or Marketing and Sales,
and shall have full authority and responsibility, subject to the
general direction, approval and control of
<PAGE> 2
the Board of Directors and the President of the Company, to
formulate policies and administer the Company in all respects
relative to the sales and marketing of the Company's products.
b. If elected or appointed by the Board of Directors, the Executive
shall serve as a director of the Company without additional
compensation.
c. During the term of this Agreement, the Executive shall devote all
of his business time, attention, energy and skill to the
performance of the duties and services described herein, and
shall not engage directly or indirectly in any other business
activity, whether or not such business activity is pursued for
gain, profit or other pecuniary advantage, except with the
written consent of the Company's Board of Directors, provided,
that the provisions of this Section 1(c) shall not restrict the
Executive's investment of his personal assets or the Executive's
participation in any professional, academic or civic activity.
2. TERM. Subject to prior termination as set forth in Section 11 hereof,
the term of this Agreement shall be for a period of one year, beginning on the
date hereof, which term shall be automatically renewed for successive one year
periods until terminated as set forth in Section 11 hereof.
3. COMPENSATION. The Company shall pay to the Executive as compensation for
his services hereunder a base salary of One Hundred and Forty Thousand Dollars
($140,000) per year, payable in equal semi-monthly installments, subject to
withholding and other applicable taxes. The salary provided herein shall be
subject to adjustment based on annual reviews conducted by the Company.
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<PAGE> 3
4. INCENTIVE COMPENSATION. The Executive shall be entitled to participate
in any incentive compensation plans established by the Company from time to
time.
5. EXPENSES. The Executive is authorized to incur reasonable expenses in
connection with the business of the Company and the performance of his duties
hereunder, including expenses for entertainment, travel and similar items. The
Company will pay or reimburse the Executive for all expenses upon the
presentation by the Executive of an itemized account of such expenditures and
any other documentation or substantiation of expenses which may be required for
compliance with applicable state and federal tax laws.
6. VACATIONS. The Executive shall be entitled to four (4) weeks of vacation
each year, during which time his compensation shall be paid in full.
7. AUTOMOBILE EXPENSES. During the term of this Agreement, the Company
shall reimburse the Executive for all expenses incurred in connection with the
maintenance of an automobile for the Executive's business use including, but not
limited to, acquisition costs, fuel, maintenance and insurance, upon the
submission to the Company of an itemized account of such expenditures and any
other documentation or substantiation of expenses which may be required for
compliance with applicable state and federal tax laws. The Company shall pay to
the Executive such additional amount as may be necessary to reimburse the
Executive for any federal state or local income taxes the Executive is required
to pay as a result of the Company's payments pursuant to this Section 7,
including such tax reimbursement payments.
8. EXECUTIVE BENEFITS. The Executive shall be entitled to all benefits
offered by the Company to any of its executive or salaried employees including,
but not limited to, major medical health insurance, hospitalization insurance,
life insurance, travel and accident insurance, and disability insurance,
including, but not limited to, those benefits the Executive currently receives
from the Company.
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<PAGE> 4
9. DISABILITY. If the Executive is unable to perform his duties by reason
of illness or incapacity, the Executive shall be entitled to receive all
benefits provided under the Company's standard disability program and shall be
entitled to receive all benefits theretofore received by the Executive.
10. DEFERRAL OF COMPENSATION. The Executive shall be entitled to
participate in the Company's Supplemental Executive Retirement Plan and any
other deferred compensation program maintained by the Company.
11. TERMINATION. This Agreement may be terminated in accordance with the
following terms and conditions:
a. The Company may terminate this Agreement at any time, without
cause, upon ninety (90) days written notice to Executive.
However, in such event, the Company shall pay or provide to the
Executive
i. a severance allowance of at least twelve (12) months pay at
the Executive's then current rate of pay (less all amounts
required to be withheld and deducted), payable on a monthly
basis, starting on the last day of the first full month
following termination;
ii. all amounts the Executive would have received under the
Short and Long Term Management Incentive Plans (less all
amounts required to be withheld and deducted) during the
twelve (12) month period following the effective date of
such termination; and
iii. benefits equivalent to those previously received by the
Executive including, but not limited to, benefits provided
under Sections 7 and 8 of this Agreement, for the twelve
(12) month period following the effective date of such
termination.
-4-
<PAGE> 5
Notwithstanding the above, if the Company terminates this
Agreement prior to November 1, 1997, the severance period
provided for above shall in each case be increased to twenty-four
(24) months.
b. The Company may terminate this Agreement upon such notice as the
Directors regard as suitable, conditional upon payment of the
severance allowance set forth in Section 11(a) hereof, under the
following circumstances:
i. the sale by the Company of substantially all of its assets
to a single purchaser or to a group of associated
purchasers;
ii. the acquisition by any person, including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act
of 1934 (other than the shareholders of the Company as of
the date hereof) of beneficial ownership of capital stock of
the Company representing fifty-one percent (51%) or more of
the voting power of all outstanding capital stock of the
Company;
iii. a decision by the Company to terminate its business and
liquidate its assets;
iv. the merger or consolidation of the Company in a transaction
in which the shareholders of the Company immediately prior
to such merger or consolidation fail to hold at least
fifty-one percent (51%) of the outstanding voting shares of
the new or continuing corporation; or
v. any damage to the Company's factory, as a result of which
the Company is unable to conduct the ordinary course of its
business thereafter for a period of 120 consecutive days.
-5-
<PAGE> 6
c. The Company may terminate this Agreement upon ninety (90) days
notice to the Executive, in the event that the Executive has been
unable to perform his duties by reason of illness or incapacity,
which inability continues for a consecutive twelve month period.
d. Notwithstanding anything herein to the contrary, the Company
shall have the right to terminate this Agreement, effective upon
written notice of such termination, and shall not have an
obligation to pay any amounts provided under Section 11(a) hereof
upon the happening of any of the following events:
i. the violation by the Executive of the restrictive covenants
set forth in Sections 12 and 13 hereof, as determined by a
court of competent jurisdiction;
ii. the commission by the Executive of a material theft or
embezzlement of Company property;
iii. the conviction of the Executive for a crime resulting in
injury to the business or property of the Company; or
iv. the commission of any act by the Executive in the
performance of his duties hereunder adjudged by a court of
competent jurisdiction to amount to gross, willful or wanton
negligence.
e. The Executive may terminate this Agreement upon ninety (90) days
written notice to the Company. Upon the effective date of such
termination, the Company shall have no further obligation to pay
any amounts provided for in this Agreement, except as set forth
in Section 11(f) hereof.
f. In the event of termination pursuant to Sections 11(a), 11(b),
11(c) 11(d) or 11(e) hereof, the Executive shall receive the
entire balance of any sums
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<PAGE> 7
earned by him prior to termination and such other benefits which
may be due him including, but not limited to, a prorata portion
of amounts earned by the Executive under any incentive
compensation plans maintained by the Company.
g. Upon termination of this Agreement, for any reason, the Executive
shall promptly surrender to the Company all property provided him
by the Company for use in relation to his employment, and, in
addition, the Executive shall surrender to the Company any and
all documents, files, records or other material and information
of or pertaining to the Company or its business operations.
12. NON-COMPETITION. During the period of his employment with the Company
and for a period of six months thereafter, the Executive covenants and agrees
that he shall not do any of the following:
a. Own, manage, operate, join, control, be employed by, participate
in, or be connected in any manner with the ownership, management,
operation, or control of any business that is competitive with
the types of businesses conducted by the Company at that time
within any areas in which the Company conducts business or within
any geographic areas in which the Company intends to conduct
business, as known to Executive by reason of Executive's
affiliation with the Company. Nothing herein shall prohibit
Executive from owning stock or other securities of a competitor,
provided that Executive's equity interest shall not exceed five
percent (5%) of the total outstanding stock of such competitor,
and provided Executive, in fact, does not have the power to
control or direct the management or policies of such
-7-
<PAGE> 8
competitor and does not serve as a director or officer thereof,
and is not otherwise associated with any competitor, except as
consented to by the Company.
b. Induce or influence any employee, independent contractor, agent,
customer or supplier of the Company to terminate or curtail his,
her or its employment or business relationship with the Company.
c. Solicit or sell any product or service which is competitive with
those offered by the Company to any customer which did business
with the Company at any time during the term of Executive's
employment with the Company.
13. CONFIDENTIALITY. During the period of his employment by the Company and
for a period of six (6) months following its termination, for any reason, the
Executive covenants and agrees that he shall not use, disseminate, or disclose,
for his own benefit, or for the benefit of any person, firm, business, or other
entity, any confidential information pertaining to the Company, unless such
information is first made public by the Company; the Company authorizes, in
writing, the use, dissemination, or disclosure of such information; or as
otherwise required by law. For purposes of this subparagraph, confidential
information is information which is not generally known to the Company's
industry, and relates, by way of example and not by way of limitation, to the
Company's manufacturing process, cost and pricing data, supply sources,
contracts, and customer lists.
14. NOTICES. Any notice required or desired to be given pursuant to this
Agreement shall be in writing and sent by certified mail to the parties at the
following addresses, or to such other addresses as either may designate in
writing to the other party:
To the Company: International Consulting Management, Ltd.
303 East Wacker Drive, Suite 1112
Chicago, IL 60601
-8-
<PAGE> 9
To Executive: David S. Williams
5601 Foxchase N.W.
Canton, Ohio 44718
15. WAIVER. Failure to insist upon strict compliance with any of the terms,
covenants, or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition, nor shall any waiver or relinquishment of any right or
power hereunder at any one or more times be deemed a waiver or relinquishment of
such right or power at any other time or times.
16. SEVERABILITY. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision. In the event that any part of a covenant contained herein is
determined by a court of law to be invalid, a judicially enforceable provision
shall be substituted in its place. Any covenant so modified shall be binding
upon the parties and shall have the same force and effect as if originally set
forth in this Agreement.
17. MODIFICATION. This Agreement may be amended only in writing, signed by
both parties hereto.
18. HEADINGS. The headings in this Agreement are inserted for convenience
only and are not to be considered a construction of the provisions thereof.
19. ASSIGNMENT. The Executive acknowledges that the services to be rendered
by him are unique and personal. Accordingly, the Executive may not assign any of
his rights or delegate any of his duties or obligations under this Agreement.
However, the rights and obligations of the Company under this Agreement shall
inure to the benefit of and shall be binding upon the successors and assigns of
the Company including, but not limited to, any corporation which may acquire all
or substantially all of the Company's assets and business, or which may be
consolidated or merged with or into the Company.
-9-
<PAGE> 10
20. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Ohio.
21. NOVATION. This Agreement terminates and supersedes the Prior Employment
Agreement.
22. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
and agreement between the Company and the Executive with regard to all matters
herein. There are no other agreements, conditions or representations, oral or
written, express or implied, with regard thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
THE GRADALL COMPANY
/s/ Barry L. Phillips
---------------------
/s/ David S. Williams
---------------------
David S. Williams
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<PAGE> 1
EXHIBIT 10.06
DEFERRED COMPENSATION AGREEMENT
-------------------------------
THIS AGREEMENT entered into this 19th day of July, 1989, by and
between THE GRADALL COMPANY, an Ohio corporation, with principal offices at 406
Mill Avenue, S.W., New Philadelphia, Ohio 44663 (hereinafter called the
"Company"), and BARRY L. PHILLIPS (hereinafter called the "Employee").
W I T N E S S E T H, T H A T
-----------------------------
WHEREAS, the Employee is a key executive employee of the Company,
possessing substantial knowledge of and experience in the business of the
Company, and such knowledge and experience has, and continues to be, of great
value to the Company in the conduct of its business; and
WHEREAS, the Company desires to secure for itself the continued
services of the Employee until Employee retires, and to provide certain
deferred compensation for Employee in consideration of Employee's past and
future service;
WHEREAS, the Corporation desires to assist the Executive in paying
for life insurance on the life of the Executive; and
WHEREAS, the Corporation has determined that this assistance in
paying for life insurance can best be provided under a "split-dollar" type
arrangement;
IT IS NOW THEREFORE AGREED AS FOLLOWS:
<PAGE> 2
ARTICLE 1. DEFINITIONS. For purposes of this Agreement the
following terms shall be defined as set forth in this Section 1.
1.1 "RETIREMENT AGE" shall mean the date upon
which employee attains age sixty-five (65), or such later date upon which
Employee, with the consent of the Company, elects to retire after attaining age
sixty-five (65) and to remain continuously in the employ of the Company
until retirement.
1.2 "DESIGNATED BENEFICIARY" shall mean the
person or persons designated by Employee, in accordance with the provisions of
Section 6 hereof, to receive, in the event of Employee's death, any amounts
payable to Employee hereunder.
ARTICLE 2. RETIREMENT OF EMPLOYEE.
2.1 DEFERRED COMPENSATION. Upon attaining
Retirement Age, if Employee has remained continuously in the employ of the
Company, Employee shall retire, whereupon the Company shall pay Employee
annually in twelve (12) approximately equal monthly installments, for a period
of fifteen (15) years certain, a retirement benefit in the amount of
Seventy-Eight Thousand Six Hundred Eighty Seven Dollars ($78,687).
2.2 DEATH OF EMPLOYEE AFTER RETIREMENT. In
the event the Employee's death shall occur prior to the expiration of fifteen
(15) years from the date of Employee's retirement under this Section 2, the
Company shall pay the
<PAGE> 3
annual deferred compensation described in Section 2.1 above to Employee's
Designated Beneficiary for the balance of such fifteen (15) year period.
ARTICLE 3. DEATH OF EMPLOYEE PRIOR TO RETIREMENT.
3.1 DEATH BENEFIT. In the event of
Employee's death prior to retirement pursuant to Section 2 hereof and prior to
any earlier termination of Employee's employment with the Company, the Employee
will be entitled to receive a life insurance benefit out of the proceeds of a
life insurance policy, and, generally income tax exempt to this Employee's
beneficiary but taxable during this Employee's working years to the extent of
the annual value of his life insurance coverage under the split dollar
agreement corresponding to policy # 8167285 issued by The New England Life
insurance company (hereinafter referred to as the "Policy").
ARTICLE 4. TERMINATION OTHER THAN BY REASON OF
DEATH OR RETIREMENT.
4.1 FORFEITURE OF BENEFITS. In the event
that Employee's employment with the Company shall hereafter terminate or be
terminated for any reason, with or without cause, other than Employee's death
or retirement as set forth hereinabove, the Executive shall receive a lump sum
amount equal to the net cash surrender value of the Policy, or the right to
continue the Policy.
ARTICLE 5. DISABILITY BENEFIT.
3
<PAGE> 4
5.1 If the Employee's employment shall be
terminated by reason of disability while in the employ of the Corporation, the
Employee shall be paid an amount equal to the net cash surrender value of the
Policy, or the right to continue the Policy.
ARTICLE 6. DESIGNATED BENEFICIARY.
6.1 APPOINTMENT OF DESIGNATED BENEFICIARY.
Upon execution of this Agreement, Employee shall designate, in a writing in
form satisfactory to the Board of Directors of the Company, and file with the
Secretary of the Company, the person, persons or entity to whom payments of the
benefits and/or deferred compensation, as set forth in Sections 2 and 3,
hereof, shall be made in the event of Employee's death. Employee shall
thereafter be free to amend, alter or change such designation, provided
however, that any such amendment, alteration or change shall be made by a
writing in form satisfactory to the Board of Directors of the Company and shall
be filed with the Secretary of the Company.
ARTICLE 7. MISCELLANEOUS.
7.1 NO ASSIGNMENT WITHOUT CONSENT OF COMPANY.
Except as set forth herein, no rights of any kind under this Agreement shall,
without the written consent of the Company, be transferable or assignable by
the Employee, any Designated Beneficiary or any other person, or to be subject
to alienation, encumbrance, garnishment, attachment, execution or levy of any
kind, voluntary or involuntary.
4
<PAGE> 5
This Agreement shall be binding upon and shall inure to the benefit of the
Company, its successors and assigns.
7.2 INTERPRETATION. All questions of
interpretation, construction or application arising under this Agreement shall
be decided by the Board of Directors of the Company, whose decision shall be
final and conclusive upon all persons.
7.3 SAVINGS CLAUSE. In the event
that any provision or term of this Agreement is determined by any judicial,
quasi-judicial or administrative body to be void or not enforceable for any
reason, it is agreed upon intent of the parties hereto that all other
provisions or terms of the Agreement shall be enforceable as if such void or
nonenforceable provision or term had never been a part hereof.
7.4 CHANGE OF BUSINESS FORM. The Corporation
agrees that it will not merge or consolidate with any other corporation or
organization, or permit its business activities to be taken over by any other
organization, unless and until the succeeding or continuing corporation or
other organization shall expressly assume the rights and obligations of the
Corporation herein set forth. The Corporation further agrees that it will not
cease its business activities or terminate its existence, other than as
heretofore set for in this Paragraph 7.4, without having made adequate
provision for the fulfilling of its obligations hereunder. In the event of any
default with
5
<PAGE> 6
respect to the provisions of this Paragraph 7.4, the Employee (or other obligee
or obligees) shall have transferred assets, until such default be corrected.
7.5 GOVERNING LAW. This Agreement is
executed in and shall be construed in accordance with governed by the laws of
the State of Ohio.
7.6 EMPLOYMENT OF EMPLOYEE BY COMPANY.
Nothing herein shall be construed as an offer or commitment by the Company to
continue Employee's employment with the Company for any period of time.
ARTICLE 8. AMENDMENT OF AGREEMENT.
8.1 This Agreement may be revoked or amended
in whole or in part by a writing signed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands as of the day and year first above written.
THE GRADALL COMPANY
By: /s/ Jack D. Rutherford
-------------------------
/s/ Barry L. Phillips
----------------------------
BARRY L. PHILLIPS
"EMPLOYEE"
6
<PAGE> 1
EXHIBIT 10.07
AMENDED AND RESTATED
DEFERRED COMPENSATION AGREEMENT
-------------------------------
THIS AGREEMENT entered into this 30th day of August, 1995, by and
between THE GRADALL COMPANY, an Ohio corporation, with principal offices at 406
Mill Avenue, S.W., New Philadelphia, Ohio 44663 (the "Company"), and DAVID S.
WILLIAMS (the "Employee").
WITNESSETH THAT:
WHEREAS, the Company and the Employee entered into a Deferred
Compensation Agreement, dated July 19, 1989 (the "Deferred Compensation
Agreement"); and
WHEREAS, the Company and the Employee desire to amend and restate the
Deferred Compensation Agreement as set forth below.
NOW, THEREFORE, the Company and the Employee agree as follows:
ARTICLE 1 - DEFINITIONS. For purposes of this Agreement, the
following terms shall be defined as set forth in this Section 1.
1.1 "Retirement" shall mean the termination of the Employee's
employment with the Company, whether voluntary or involuntary, with or without
cause, (a) at any time after the Employee reaches the age sixty (60), or (b) as
a result of the disability of the Employee.
1.2 "Designated Beneficiary" shall mean the person or persons
designated by Employee, in accordance with the provisions of Section 5.1
hereof, to receive, in the event of Employee's death, any amounts payable to
Employee hereunder.
1.3 "Policy" shall mean that certain life insurance policy owned
by the Rabbi Trust insuring the life of the Employee and issued by The New
England Mutual Life Insurance Company under Policy No. 8461724.
1.4 "Rabbi Trust" shall mean the Trust under The Gradall Company
Non-Qualified Deferred Compensation Plans.
ARTICLE 2 - RETIREMENT OF EMPLOYEE.
2.1 DEFERRED COMPENSATION. Upon the Retirement of the Employee,
the Company shall pay Employee annually in twelve (12) approximately equal
monthly installments, for a period of fifteen (15) years certain, a retirement
benefit in the amount of Thirty Thousand Dollars ($30,000) per year.
<PAGE> 2
2.2 DEATH OF EMPLOYEE AFTER RETIREMENT. In the event that
Employee's death shall occur prior to the expiration of fifteen (15) years from
the date of Employee's retirement under this Article 2, the Company shall pay
the annual deferred compensation described in Section 2.1 above to Employee's
Designated Beneficiary for the balance of such fifteen (15) year period.
ARTICLE 3 - DEATH OF EMPLOYEE PRIOR TO RETIREMENT.
3.1 DEATH BENEFIT. In the event of Employee's death prior to
Retirement pursuant to Article 2 hereof and prior to any earlier termination of
Employee's employment with the Company, the Company shall pay annually in
twelve (12) equal monthly installments to Employee's Designated Beneficiary,
for a period of fifteen (15) years certain; a death benefit in the amount of
Thirty Thousand Dollars ($30,000) per year.
ARTICLE 4 - TERMINATION OTHER THAN BY REASON OF DEATH.
4.1 ASSIGNMENT OF POLICY. In the event that Employee's employment
with the Company shall hereafter terminate or be terminated for any reason,
with or without cause, other than Employee's death or Retirement as set forth
hereinabove, the Company shall cause the Rabbi Trust to assign to the Employee
all of the Rabbi Trust's right, title and interest in and to the Policy.
Thereafter, the Employee shall have all ownership rights in the Policy,
including the right to continue the Policy in full force and effect, and to
cancel or surrender the Policy.
ARTICLE 5 - DESIGNATED BENEFICIARY.
5.1 APPOINTMENT OF DESIGNATED BENEFICIARY. Upon execution of this
Agreement, Employee shall designate, in a writing in form satisfactory to the
Board of Directors of the Company, and file with the Secretary of the Company,
the person, persons or entity to whom payments of the benefits and/or deferred
compensation, as set forth in Articles 2 and 3, hereof, shall be made in the
event of Employee's death. Employee shall thereafter be free to amend, alter
or change such designation, provided, however, that any such amendment,
alteration or change shall be made by a writing in form satisfactory to the
Board of Directors of the Company and shall be filed with the Secretary of the
Company.
ARTICLE 6 - NON-QUALIFIED DEFERRED COMPENSATION PLAN TRUST.
6.1 RABBI TRUST. The Employee shall contribute to the Rabbi
Trust, as a deferral of his compensation from the Company, $2,468.77 per year,
until the earlier of (a) the Employee's Retirement, (b) January 1, 2001, or (c)
the assignment of the Policy to the Employee pursuant to Section 4.1 hereof.
The Company may withhold from compensation otherwise payable to the Employee
all amounts to be contributed by the Employee pursuant to this Section 6.1.
The Company shall contribute to the Rabbi Trust, for the account of the
Employee, that amount per year as is equal to the annual premium due under the
Policy, less the amount, if any, which the
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<PAGE> 3
Employee is required to contribute to the Rabbi Trust pursuant to this Section
6.1. All amounts contributed to the Rabbi Trust pursuant to the terms of this
Section 6.1 shall be used by the Rabbi Trust to pay the annual premium due
under the Policy. The Company's obligation to make contributions to the Rabbi
Trust pursuant to this Section 6.1 shall continue until the earlier of (a) the
payment in full of all premiums due under the Policy, (b) the death of the
Employee, or (c) the assignment of the Policy to the Employee pursuant to
Section 4.1 hereof, even if after the Retirement of the Employee.
6.2 POLICY. Except as provided in Section 4.1 hereof, the Policy
shall be owned by the Rabbi Trust, which shall be the sole beneficiary of
amounts payable thereunder. All proceeds of the Policy, including the cash
surrender value thereof and any death benefits paid thereunder, shall be,
subject to the terms of the Rabbi Trust, used to satisfy the Company's
obligations hereunder. If the proceeds of the Policy are insufficient to
satisfy the Company's obligations hereunder, the Company shall remain liable on
all payments due hereunder.
ARTICLE 7 - MISCELLANEOUS.
7.1 NO ASSIGNMENT WITHOUT CONSENT OF COMPANY. Except as set forth
herein, no rights of any kind under this Agreement shall, without the written
consent of the Company, be transferable or assignable by the Employee, any
Designated Beneficiary or any other person, or to be subject to alienation,
encumbrance, garnishment, attachment, execution or levy of any kind, voluntary
or involuntary. This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and assigns.
7.2 INTERPRETATION. All questions of interpretation, construction
or application arising under this Agreement shall be decided by the Board of
Directors of the Company, whose decision shall be final and conclusive upon all
persons.
7.3 SAVINGS CLAUSE. In the event that any provision or term of
this Agreement is determined by any judicial, quasi-judicial or administrative
body to be void or not enforceable for any reason, it is agreed upon intent of
the parties hereto that all other provisions or terms of the Agreement shall be
enforceable as if such void or nonenforceable provision or term had never been
a part hereof.
7.4 CHANGE OF BUSINESS FORM. The Company agrees that it will not
merge or consolidate with any other corporation or organization, or permit its
business activities to be taken over by any other organization, unless and
until the succeeding or continuing corporation or other organization shall
expressly assume the rights and obligations of the Company herein set forth.
The Company further agrees that it will not cease its business activities or
terminate its existence, other than as heretofore set forth in this Paragraph
7.4, without having made adequate provision for the fulfilling of its
obligations hereunder. In the event of any default with
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<PAGE> 4
respect to the provisions of this Paragraph 7.4, the Employee (or other obligee
or obligees) shall have transferred assets, until such default be corrected.
7.5 GOVERNING LAW. This Agreement is executed in and shall be
construed in accordance with and governed by the laws of the State of Ohio.
7.6 EMPLOYMENT OF EMPLOYEE BY COMPANY. Nothing herein shall be
construed as an offer or commitment by the Company to continue Employee's
employment with the Company for any period of time.
ARTICLE 8 - AMENDMENT OF AGREEMENT.
8.1 This Agreement may be revoked or amended, in whole or in part,
by a writing signed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
as of the day and year first above written.
THE GRADALL COMPANY
By: /s/ Barry L. Phillips
-----------------------------
/s/ David L. Phillips
--------------------------------
David S. Williams - "Employee"
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<PAGE> 1
EXHIBIT 10.08
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
-------------------------------------
THIS AGREEMENT is made and entered into as of this 30th day of August,
1995, by and between The Gradall Company (the "Company") and Barry L. Phillips
(the "Executive").
WITNESSETH THAT:
WHEREAS, the Company is the owner of a life insurance policy issued by The
New England Mutual Life Insurance Company (the "Insurer") insuring the life of
the Executive, as further described on Exhibit A hereto (the "Policy");
WHEREAS, the Policy is subject to a split dollar endorsement in favor of
the Executive (the "Split Dollar Endorsement"); and
WHEREAS, the Company and the Executive desire to convert the Policy to a
collateral assignment split dollar arrangement on the terms set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. CONVERSION OF POLICY TO COLLATERAL ASSIGNMENT. The Company shall assign,
set over, and transfer unto the Executive all of the Company's right title and
interest in and to the Policy, subject to and at the same time that the
Executive executes a collateral assignment of the Policy in favor of the
Company, securing the Executive's obligation to pay to the Company the
"Company's Interest" in the Policy, determined in accordance with the provisions
of Section 5 hereof. The Company's Interest in the Policy shall at no time vest
in or inure to the benefit of the Executive, but shall at all times inure to the
benefit of the Company, whether as a result of the Company's ownership of the
Policy, or as a result of the collateral assignment of the Policy to the
Company, which shall be deemed to occur simultaneously with the transfer of
ownership of the Policy to the Executive.
2. PAYMENT OF PREMIUMS BY THE EXECUTIVE. From and after the date of this
Agreement, the Executive shall pay that portion of the premium due under the
Policy as is equal to the lesser of (a) the PS-58 cost of the insurance coverage
provided by the Policy, or (b) the Insurer's current published premium rate for
annually renewable term insurance for standard risks in an amount equal to the
coverage provided by the Policy. Premium amounts payable by the Executive
pursuant to this Section 2 shall be withheld by the Company from compensation
which is otherwise payable to the Executive, including amounts to be paid by the
Company to the Executive pursuant to Section 4 hereof.
3. PAYMENTS OF PREMIUMS BY THE COMPANY. On or before the due date of the
Policy premium, or within any applicable grace period, the Company shall pay the
full amount of the premium due on the Policy, including that portion thereof,
withheld from the Executive's compensation, pursuant to Section 2 hereof.
4. BONUS. On or before the due date of the Policy premium, the Company
shall pay the Executive a bonus in an amount equal to 100% of that portion of
the premium on the Policy
<PAGE> 2
to be paid by the Executive pursuant to Section 2 hereof. The Company is hereby
authorized to withhold from such bonus that portion of the premium on the Policy
to be paid by the Executive pursuant to Section 2 hereof.
5. REPAYMENT OF THE COMPANY'S INTEREST. Except as provided by Section 7
hereof, the Company shall be repaid an amount equal to the Company's Interest
(as hereinafter defined) upon the earlier to occur of (a) the surrender or
cancellation of the Policy, provided that such cancellation does not result from
the Company's failure to pay premiums on the Policy as required by Section 3
hereof, or (b) the death of the Executive. For the purposes of this Agreement,
the term "Company's Interest" shall mean the sum of (a) the greater of (i) the
cash surrender value of the Policy, as of the date of this Agreement, or (ii)
the cumulative total premium paid by the Company under the Policy since the
effective date of the Split Dollar Endorsement to the date of this Agreement;
plus (b) the cumulative total premium paid by the Company after the date of this
Agreement, pursuant to Section 3 hereof, less the amount paid by or on behalf of
the Executive pursuant to Section 2 hereof (the "Company's Interest"). Except as
provided by Section 7 hereof, and unless otherwise paid by the Executive, the
Company's Interest shall be repaid from the cash surrender value of the Policy
(as defined therein) upon the surrender or cancellation of the Policy, or from
the death proceeds of the Policy upon the death of the Executive.
6. COLLATERAL ASSIGNMENT, OWNERSHIP OF POLICY. To secure the Executive's
obligation to pay the Company the Company's Interest, the Executive has,
contemporaneously herewith, assigned the Policy to the Company as collateral,
pursuant to the form attached hereto as Exhibit B, which collateral assignment
specifically provides that the sole right and interest of the Company in the
Policy is to be paid the Company's Interest pursuant to the terms of Section 5
and Section 6 hereof. Upon the Company's receipt of the Company's Interest or as
provided in Section 7 hereof, the Company shall release the collateral
assignment of the Policy, by execution and delivery to the Executive of an
appropriate instrument of release. Except as set forth in this Section 6, the
Company shall have no rights or interest in the Policy. Subject to the limited
collateral assignment to the Company provided for herein, the Executive shall be
the sole and exclusive owner of the Policy and shall possess and be entitled to
exercise all the rights of the owner of the Policy including, but not limited
to, the right to designate the beneficiaries of and collect the proceeds payable
upon death under the Policy, select settlement and investment options, borrow on
the security of the Policy (to the extent the cash surrender value of the Policy
exceeds the Company's Interest) and to assign, surrender or cancel the Policy.
7. RELEASE OF THE COMPANY'S INTEREST. Upon the termination of the
Executive's employment with the Company, for any reason, whether voluntary or
involuntary, with or without cause, the Company's Interest in the Policy shall
terminate, without any payment to the Company by the Executive or from the
Policy. Upon the termination of the Executive's employment with the Company, the
Company shall release the collateral assignment of the Policy, by execution and
delivery to the Executive of an appropriate instrument of release, without the
payment to the Company of any consideration.
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<PAGE> 3
8. TERMINATION OF AGREEMENT. This Agreement shall terminate upon the
earliest to occur of any of the following events:
a. surrender of the Policy by the Executive;
b. delivery by the Executive of written notice of termination to the
Company; or
c. the termination of the Executive's employment with the Company,
whether voluntary or involuntary, with or without cause, for any
reason including the death of the Executive.
Upon the termination of this Agreement all obligations of the Company pursuant
to Sections 3 or 4 hereof shall cease. Notwithstanding the termination of this
Agreement, the provisions of Sections 5, 6 and 7 of the Agreement shall survive
the termination of this Agreement.
9. INSURER. The Insurer shall be fully discharged from its obligations
under the Policy by complying with the terms thereof and those of any collateral
assignment executed by and filed with the Insurer in connection herewith. The
insurer shall not be bound by or deemed to have notice of the provisions of this
Agreement.
10. NAMED FIDUCIARY, DETERMINATION OF BENEFITS, CLAIMS PROCEDURE AND
ADMINISTRATION. The following provisions are intended to meet the requirements
of the Employee Retirement Income Act of 1974.
a. The Company is hereby designated as the named fiduciary under
this Agreement. The named fiduciary shall have authority to
control and manage the operation and administration of this
Agreement, and it shall be responsible for establishing and
carrying out a funding policy and method consistent with the
objectives of this Agreement.
b. (1) Claim. If the Executive believes he is being denied a
benefit to which he is entitled under this Agreement, he may
file a written request for such benefit with the Company,
setting forth his or her claim. The request must be
addressed to the President of the Company at its then
principal place of business.
(2) Claim Decision.
Upon receipt of a claim, the Company shall advise the Executive
that a reply will be forthcoming within ninety (90) days and shall, in
fact, deliver such reply within such period. The Company may, however,
extend the reply period for an additional ninety (90) days for
reasonable cause.
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<PAGE> 4
If the claim is denied in whole or in part, the Company shall
adopt a written opinion, using language calculated to be understood by
the Executive, setting forth: (a) the specific reason or reasons for
such denial; (b) the specific reference to pertinent provisions of
this Agreement on which such denial is based; (c) a description of any
additional material or information necessary for the Executive to
perfect his claim and an explanation why such material or such
information is necessary; (d) appropriate information as to the steps
to be taken if the Executive wishes to submit the claim for review;
and (e) the time limits for requesting a review under subsection (3)
and for review under subsection (4) hereof.
(3) Request for Review.
Within sixty (60) days after the receipt by the Executive of the
written opinion described above, the Executive may request in writing
that the Secretary of the Company review the determination of the
Company. Such request must be addressed to the Secretary of the
Company, at its then principal place of business. The Executive or his
duly authorized representative may, but need not, review the pertinent
documents and submit issues and comments in writing for consideration
by the Company. If the Executive does not request a review of the
Company's determination by the Secretary of the Company within such
sixty (60) day period, he shall be barred and estopped from
challenging the Company's determination.
(4) Review of Decision.
Within sixty (60) days after the Secretary's receipt of a request
for review, he will review the Company's determination. After
considering all materials presented by the Executive, the Secretary
will render a written opinion, written in a manner calculated to be
understood by the Executive, setting forth the specific reasons for
the decision and containing specific references to the pertinent
provisions of this Agreement on which the decision is based. If
special circumstances require that the sixty (60) day time period be
extended, the Secretary will so notify the Executive and will render
the decision as soon as possible, but no later than one hundred twenty
(120) days after receipt of the request for review.
11. AMENDMENT. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
successors or assigns, and may not be otherwise terminated except as provided
herein.
12. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns, and the Executive and his
successors, assigns, heirs, executors, administrators and beneficiaries.
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<PAGE> 5
13. NOTICE. Any notice, consent or demand required or permitted to be given
under the provisions of this Agreement shall be in writing, and shall be signed
by the party giving or making the same. If such notice, consent or demand is
mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last known address as shown on the
records of the Company. The date of such mailing shall be deemed the date of
notice, consent or demand.
14. GOVERNING LAW. This Agreement, and the rights of the parties hereunder,
shall be governed by and construed in accordance with the laws of the State of
Ohio.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate, as of the day and year first above written.
The Company THE GRADALL COMPANY
By:/s/ Bruce A. Jonker
----------------------
ATTEST:
/s/ Joseph H. Keller Jr.
- ------------------------
Secretary
The Executive /s/ Barry L. Phillips
---------------------
Barry L. Phillips
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<PAGE> 6
EXHIBIT "A"
-----------
COMPANY: The New England Mutual Life Insurance Company
POLICY NO.: 6801161
DATE OF POLICY:
INSURED PERSON(S): Barry L. Phillips
DEATH BENEFIT: $500,000
OWNER OF POLICY: The Gradall Company, subject to the transfer of ownership
to the Insured pursuant to the terms of this Agreement
ANNUAL PREMIUM: $9,865.00
<PAGE> 1
EXHIBIT 10.09
GRADALL INDUSTRIES, INC.
1995 STOCK OPTION PLAN
1. GENERAL. This Stock Option Plan (the "Plan") provides eligible employees
of Gradall Industries, Inc., a Delaware corporation (the "Company"), and its
subsidiaries with the opportunity to acquire or expand their equity interest in
the Company by making available for purchase shares of Common Stock, without par
value, of the Company ("Common Stock"), through the granting of nontransferable
options to purchase shares of Common Stock ("Stock Options"). Stock Options
shall be referred to herein as "Grants", and an individual grant of Stock
Options shall be referred to herein as a "Grant".
It is intended that key employees may be granted, simultaneously or from
time to time, Stock Options that qualify as incentive stock options ("Incentive
Stock Options") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). This Plan and Option Agreements entered into pursuant to
this Plan shall be administered and construed in a manner consistent with the
requirements of Section 422 of the Code.
The Plan is intended to conform to the extent necessary with all provisions
of the Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including, without limitation, Rule 16b-3. The Plan shall be
administered, and Stock Options shall be granted and may be exercised, only in
such a manner as to conform to such laws, rules and regulations, if applicable.
2. PURPOSE OF THE PLAN. The purpose of the Plan is to provide continuing
incentives to key employees of the Company and its subsidiaries, by encouraging
such key employees to acquire new or additional share ownership in the Company,
thereby increasing their proprietary interest in the Company's business and
enhancing their personal interest in the Company's success. For purposes of the
Plan, a "subsidiary" consists of any corporation fifty percent (50%) of the
stock of which is directly or indirectly owned or controlled by the Company.
3. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective upon its
adoption by the Board of Directors, subject to approval by holders of a majority
of the outstanding shares of voting capital stock of the Company. If the Plan is
not so approved within twelve (12) months after the date the Plan is adopted by
the Board of Directors, the Plan and any Grants made hereunder shall be null and
void. However, if the Plan is so approved, no further shareholder approval shall
be required with respect to the making of Grants pursuant to the Plan, except as
provided in Section 9 hereof.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board
of Directors of the Company (the "Board"), unless and until the Board appoints a
committee composed of no fewer than two (2) members of the Board (the
"Committee"). No person shall be appointed to the Committee who, during the one
(1) year period immediately preceding such
<PAGE> 2
person's appointment to the Committee, has received any Grants under the Plan or
any similar stock option or stock incentive plan, maintained by the Company or
any subsidiary corporation, other than as permitted pursuant to Rule
16b-3(c)(2)(i)(A-D). A member of the Committee shall not be eligible to
participate in the Plan while serving on the Committee.
A majority of the members of the Committee shall constitute a quorum. The
acts of a majority of the members present at any meeting at which a quorum is
present (or acts unanimously approved in writing by the members of the
Committee) shall constitute binding acts of the Committee.
Subject to the terms and conditions of the Plan, the Board, unless and
until a Committee is appointed, and then the Committee (hereinafter, the
"Administrator") shall be authorized and empowered:
a. To select the key employees to whom Grants may be made;
b. To determine the number of shares of Common Stock to be covered
by any Grant;
c. To prescribe the terms and conditions of any Grants made under
the Plan, and the form(s) and agreement(s) used in connection
with such Grants, which shall include agreements governing the
granting of Stock Options which may provide that the stock which
is the subject of any such Grant shall be subject to the
restrictions on transfer contained in any agreement in effect
among the Company and one or more of its stockholders;
d. To determine the time or times when Stock Options will be granted
and when they will terminate in whole or in part;
e. To determine the time or times when Stock Options that are
granted may be exercised; provided, however, that unless the
Administrator specifically determines otherwise in any individual
instance, the standard vesting schedule for Stock Options granted
hereunder shall be three equal yearly installments;
f. To establish any other Stock Option agreement provisions not
inconsistent with the terms and conditions of the Plan or with
the terms and conditions of Section 422 of the Code; and
g. Make any other determination and take any other action that the
Administrator deems necessary or desirable for the administration
of the Plan.
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<PAGE> 3
5. EMPLOYEES ELIGIBLE FOR GRANTS. Grants may be made from time to time to
those key employees of the Company or its subsidiaries who are designated by the
Administrator in its sole and exclusive discretion. Key employees may include,
but shall not necessarily be limited to, members of the Board of Directors
(excluding members of the Committee) and officers of the Company and any
subsidiary; however, Stock Options shall be granted to key employees only while
actually employed by the Company or a subsidiary. No Stock Option shall be
granted to any key employee during any period of time when such key employee is
on a leave of absence.
6. STOCK SUBJECT TO THE PLAN. The shares to be issued pursuant to any Grant
made under the Plan shall be shares of Common Stock. Either shares of Common
Stock held as treasury stock or authorized and unissued shares of Common Stock,
or both, may be so issued, in such amount or amounts within the maximum limits
of the Plan as the Administrator shall from time to time determine.
Subject to the provisions of the next succeeding paragraph of this Section
6, the aggregate number of shares of Common Stock that can be actually issued
under the Plan shall be Fifty-Six and Nine-Tenths (56.9) shares.
If, at any time subsequent to the date of adoption of the Plan by the Board
of Directors, the number of issued and outstanding shares of Common Stock
increases or decreases, or the Common Stock is changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another corporation (whether as a result of a stock split, stock dividend,
combination or exchange of shares, exchange for other securities,
reclassification, reorganization, redesignation, merger, consolidation,
recapitalization or other similar transaction): (i) there shall automatically be
substituted for each share of Common Stock subject to an unexercised Stock
Option (in whole or in part) granted under the Plan, the number and kind of
shares of stock or other securities into which each share of outstanding Common
Stock shall be changed or for which each such share of Common Stock shall be
exchanged; and (ii) the option price per share of Common Stock or unit of
securities shall be increased or decreased proportionately so that the aggregate
purchase price for the securities subject to a Stock Option shall remain the
same as immediately prior to such event. In addition to the foregoing, the
Administrator shall be entitled in the event of any such increase, decrease or
exchange of shares of Common Stock to make other adjustments to the securities
subject to a Stock Option, the provisions of the Plan, and to any related Stock
Option agreements (including adjustments which may provide for the elimination
of fractional shares) where necessary (under Section 422(a)(2) of the Code or
otherwise) to preserve the terms and conditions of any Grants hereunder.
7. STOCK OPTION PROVISIONS.
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<PAGE> 4
a. GENERAL. The Administrator may grant to key employees (also
referred to as "optionees") nontransferable Stock Options that qualify as
Incentive Stock Options under Section 422 of the Code. Stock Options shall only
be granted under this Plan within ten (10) years from the earlier of (i) the
date this Plan is adopted by the Board and (ii) the date this Plan is approved
by the stockholders of the Company.
b. STOCK OPTION PRICE. The option price per share of Common
Stock which may be purchased under a Stock Option under the Plan shall be
determined by the Administrator at the time of Grant, but shall not be less than
one hundred percent (100%) of the fair market value of a share of Common Stock,
determined as of the date such Option is granted; however, if a key employee to
whom a Stock Option is granted is, at the time of the grant of such Option, an
"owner" as defined in Section 422(b)(6) of the Code (modified as provided in
Section 424(d) of the Code) of more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any subsidiary (a
"Substantial Shareholder"), the price per share of Common Stock of such Option,
as determined by the Administrator, shall not be less than one hundred ten
percent (110%) of the fair market value of a share of Common Stock on the date
such Option is granted. Except as specifically provided above, the fair market
value of a share of Common Stock shall be determined in accordance with
procedures to be established by the Administrator. The day on which the
Administrator approves the granting of a Stock Option shall be considered the
date on which such Option is granted.
c. PERIOD OF STOCK OPTION. The Administrator shall determine
when each Stock Option is to expire. However, no Stock Option shall be
exercisable after the expiration of ten (10) years from the date upon which such
Option is granted, or five (5) years from the date upon which such Option is
granted, with respect to Options granted to a Substantial Shareholder.
d. LIMITATION ON EXERCISE AND TRANSFER OF STOCK OPTIONS. Only
the key employee to whom a Stock Option is granted may exercise such Option,
except where a guardian or other legal representative has been duly appointed
for such employee, and except as otherwise provided in the case of such
employee's death. No Stock Option granted hereunder shall be transferable by an
optionee other than by will or the laws of descent and distribution. No Stock
Option granted hereunder may be pledged or hypothecated, nor shall any such
Option be subject to execution, attachment or similar process.
e. PAYMENT FOR STOCK OPTION PRICE. A Stock Option shall be
exercised by an optionee giving written notice to the Company of his intention
to exercise the same, accompanied by full payment of the purchase price in cash
or by check. The Administrator may, in its sole discretion, approve other
methods of exercise for a Stock Option or payment of the option price, provided
that no such method shall cause any option granted under the Plan to not qualify
under Section 422 of the Code, or cause any share of Common Stock issued in
connection with the exercise of an option not to be a fully paid and
non-assessable share of Common Stock.
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<PAGE> 5
f. LIMITATION ON EXERCISABLE STOCK OPTION. The aggregate fair
market value of the shares of Common Stock first becoming subject to exercise as
Stock Options by a key employee during any given calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000.00). Such aggregate fair
market value shall be determined as of the date such Option is granted, taking
into account, in the order in which granted, any other incentive stock options
granted by the Company, or by a parent or subsidiary thereof.
g. WITHHOLDING OF TAXES. The Administrator may, in its sole
discretion, require, as a condition to any Grant or to the delivery of
certificates for shares issued thereunder, that the optionee pay to the Company,
in cash, any federal, state or local taxes of any kind required by law to be
withheld with respect to any Grant or any delivery of shares of Common Stock
upon exercise thereof. The Company, to the extent permitted or required by law,
shall have the right to deduct from any payment of any kind (including salary,
bonus, severance of insurance proceeds) otherwise due to an optionee any
federal, state or local taxes of any kind required by law to be withheld with
respect to any Grant or to the delivery of shares of Common Stock under the
Plan.
8. TERMINATION OF EMPLOYMENT. If a key employee ceases to be an employee of
the Company or a subsidiary, for a reason other than death, retirement,
"permanent and total disability" (as defined below) or such key employee's
employment is terminated other than for "cause" (as defined below), his Grants
shall terminate on the effective date of such termination of employment. Neither
the key employee nor any other person shall have any right after such date to
exercise all or any part of his Stock Options and they shall thereupon be
forfeited, declared void and without value, or both.
If termination of employment is due to death or permanent and total
disability, then outstanding Stock Options may be exercised, to the extent they
are exercisable on the date of such termination of employment, within the one
(1) year period ending on the anniversary of such death or permanent and total
disability. If termination of employment is without cause or as a result of
retirement, within three (3) months of the date of such termination. In the case
of death, such outstanding Stock Options may be exercised by such key employee's
estate, or the person designated by such key employee by Will, or as otherwise
designated by the laws of descent and distribution. Notwithstanding the
foregoing, in no event shall any Stock Option be exercisable after the
expiration of the option period.
For purposes hereof, "permanent and total disability" means a permanent and
total disability as defined in Section 22(e)(3) of the Code. For purposes
hereof, termination for "cause" means termination of the employee's employment
by the Company as a result of (i) conviction of the employee for a felony or for
any crime or offense lesser than a felony involving the property of the Company
or a subsidiary; (ii) conduct by the employee that has caused demonstrable and
serious injury to the Company or a subsidiary, monetary or otherwise;
-5-
<PAGE> 6
or (iii) substandard performance, or material misconduct or negligence in the
performance, of the employee's duties in the reasonable judgment of the Board.
9. AMENDMENTS TO PLAN. The Administrator is authorized to interpret this
Plan and from time to time adopt any rules and regulations for carrying out this
Plan that it may deem advisable. Subject to the approval of the Board, the
Administrator may at any time amend, modify, suspend or terminate this Plan. In
no event, however, without the approval of the stockholders, shall any action of
the Administrator or the Board result in:
a. Materially amending, modifying or altering the eligibility
requirements provided in Section 5 hereof;
b. Materially increasing, except as provided in Section 6 hereof,
the maximum number of shares of Common Stock that may be made
subject to Grants; or
c. Materially increasing the benefits accruing to participants under
this Plan;
except to conform this Plan and any agreements made hereunder to changes in the
Code or required by governing law.
10. INVESTMENT REPRESENTATION, APPROVALS AND LISTING. The Administrator
may, if it deems appropriate, condition its grant of any Stock Option hereunder
upon receipt of the following investment representation from the optionee:
"I agree that any shares of Common Stock of Gradall Industries, Inc.
which I may acquire by virtue of this Stock Option shall be acquired
for investment purposes only and not with a view to distribution or
resale, and may not be transferred, sold, assigned, pledged,
hypothecated or otherwise disposed of unless (i) a registration
statement or post-effective amendment to a registration statement under
the Securities Act, with respect to said shares of Common Stock has
become effective so as to permit the sale or other disposition of said
shares by me; or (ii) there is presented to Gradall Industries, Inc. an
opinion of counsel satisfactory to Gradall Industries, Inc. to the
effect that the sale or other proposed disposition of said shares of
Common Stock may lawfully be made otherwise than pursuant to an
effective registration statement or post-effective amendment to a
registration statement relating to the said shares under the Securities
Act of 1933, as amended."
The Company shall not be required to issue any certificate for shares of
Common Stock upon the exercise of any Stock Option granted under this Plan prior
to (i) the obtaining of any approval from any governmental agency with the
Administrator shall, in its sole discretion,
-6-
<PAGE> 7
determine to be necessary or advisable; (ii) the admission of such shares to
listing on any national securities exchange on which the shares of Common Stock
may be listed; (iii) the completion of any registration or other qualification
of the shares of Common Stock under any state or federal law or ruling or
regulations of any governmental body which the Administrator shall, in its sole
discretion, determine to be necessary or advisable or the determination by the
Administrator, in its sole discretion, that any registration or other
qualification of the shares of Common Stock is not necessary or advisable; or
(iv) the obtaining of an investment representation from the optionee in the form
stated above or in such other form as the Administrator, in its sole discretion,
shall determine to be adequate.
11. GENERAL PROVISIONS. The form and substance of Stock Option Agreements
made hereunder, whether granted at the same or different times, need not be
identical. Nothing in this Plan or in any Stock Option agreement shall confer
upon any employee any right to continue in the employ of the Company or any of
its subsidiaries or to interfere with or limit the right of the Company or any
subsidiary to terminate his employment at any time, with or without cause.
Nothing contained in this Plan or in any Stock Option Agreement shall be
construed as entitling any optionee to any rights of a stockholder as a result
of the grant of Stock Option, until such time as shares of Common Stock are
actually issued to such optionee pursuant to the exercise of such Option. This
Plan may be assumed by the successors and assigns of the Company. The liability
of the Company under this Plan and any sale made hereunder is limited to the
obligations set forth herein with respect to such sale and no term or provision
of this Plan shall be construed to impose any liability on the Company in favor
of any employee (or any other party acting on his behalf or in his stead) with
respect to any loss, cost or expense which such employee or party may incur in
connection with or arising out of any transaction in connection with this Plan.
The cash proceeds received by the Company from the issuance of shares of Common
Stock pursuant to this Plan will be used for general corporate purposes. The
expense of administering this Plan shall be borne by the Company. The captions
and section numbers appearing in this Plan are inserted only as a matter of
convenience. They do not define, limit, construe or describe the scope or intent
of the provisions of this Plan.
12. PROVISIONS APPLICABLE SOLELY TO INSIDERS. The provisions of this
Section 12 shall apply only to persons who are subject to Section 16 of the
Exchange Act with respect to securities of the Company ("Insiders"), and shall
apply to Insiders notwithstanding any provision of the Plan to the contrary. No
Insider shall be permitted to transfer any security of the Company acquired by
him, except to the extent permitted by 17 C.F.R. Secs.240.16a-2(d)(1), upon the
exercise of any Stock Option, until at least six (6) months and one (1) day
after the later of (i) the day on which such Stock Option is granted to the
Insider or (ii) the day on which the exercise or conversion price of such Stock
Option is fixed.
13. TERMINATION OF THIS PLAN. This Plan shall terminate on October 13,
2005, and thereafter no Stock Options shall be granted hereunder. All Stock
Options outstanding at the
-7-
<PAGE> 8
time of termination of this Plan shall continue in full force and effect
according to their terms and the terms and conditions of this Plan.
-8-
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made and entered into as of this 1st day of
November, 1995, by and between The Gradall Company, an Ohio Corporation (the
"Company"), and Bruce A. Jonker (the "Executive").
WITNESSETH THAT:
WHEREAS, the Company desires to continue the employment of the
Executive and the Executive is willing to continue in the employment of the
Company, in an executive capacity, on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties hereto agree as follows:
1. DUTIES. The Company hereby agrees to continue to employ the
Executive in an executive capacity and the Executive hereby agrees to continue
to serve the Company in that capacity in accordance with the terms and
conditions set forth in this Agreement. The Executive shall devote his best
efforts and skills, energy and attention to the business of the Company.
2. TERM. Subject to prior termination as set forth in Section 7
hereof, the term of this Agreement shall be for a one year period, beginning on
the date hereof, which term shall be automatically renewed for successive one
year periods, until terminated pursuant to Section 7 hereof.
3. COMPENSATION. The Company shall pay to the Executive as
compensation for his services hereunder a base salary of $6,857.00 per month,
or at the rate currently existing, whichever is higher. The salary provided
for herein shall be subject to adjustment based on the annual reviews conducted
by the Company. In addition to the Executive's base salary, the Executive
shall continue to participate in any incentive compensation plans established
by the Company from time to time, provided that the Executive is eligible to
participate in such plans pursuant to the terms thereof. The Company shall
contribute for the account of the Executive $5,000 per year to the Supplemental
Executive Retirement Plan ("SERP") maintained by the Company.
4. EXPENSES. Subject to the Company's policies and procedures in
effect from time to time, the Executive is authorized to incur reasonable
expenses in connection with the business of the Company and the performance of
his duties hereunder, including expenses for entertainment, travel and similar
items. Subject to the Company's policies and procedures, in effect from time
to time, the Company will reimburse the Executive for all such expenses upon
the presentation by the Executive of an itemized account of such expenditures
and any other documentation or substantiation of expenses which may be required
for compliance with applicable state and federal tax laws.
<PAGE> 2
5. VACATIONS. The Executive shall be entitled to four weeks of
vacation each year, during which time his compensation shall be paid in full.
6. AUTOMOBILE ALLOWANCE. The Company shall provide the Executive
with a car allowance in an amount comparable to that made available to other
executives of his level employed by the Company.
7. TERMINATION. This Agreement may be terminated in accordance
with the following terms and conditions:
a. The Company may terminate this Agreement at any time,
without cause, upon written notice to the Executive,
provided that the Company shall continue to pay to
the Executive all amounts he would otherwise receive
under this Agreement for a period of 14 months from
the effective date of such termination including, but
not limited to, salary, incentive compensation,
contributions to the SERP and continuation of
coverage under life and medical insurance programs in
which the Executive participated. Notwithstanding
the above, the amount required to be paid by the
Company pursuant to this Section 7(a) shall be
reduced by any amounts paid to or for the benefit of
the Executive by any other company for which the
Executive provides services during such period.
b. The Company may terminate this Agreement upon written
notice to the Executive and shall have no obligation
to pay any amounts provided for under this Agreement
if the Executive commits any act of fraud or
dishonesty, is convicted of a felony or commits an
act of gross negligence or willful misconduct which
are injurious to the Company or its stockholders.
8. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Ohio.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement between the Company and the Executive with regard
to the subject matter hereof and supersedes all other agreements, conditions or
representations, oral or written, express or implied, including, without
limitation, all prior employment agreements by and between the Company and the
Executive.
- 2 -
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above set forth.
THE GRADALL COMPANY
By: /s/ Barry L. Phillips
--------------------------------
/s/ Bruce A. Jonker
-----------------------------------
Bruce A. Jonker, Executive
-3-
<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made and entered into as of this 1st day of
November, 1995, by and between The Gradall Company, an Ohio Corporation (the
"Company"), and Joseph H. Keller, Jr. (the "Executive").
WITNESSETH THAT:
WHEREAS, the Company desires to continue the employment of the
Executive and the Executive is willing to continue in the employment of the
Company, in an executive capacity, on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties hereto agree as follows:
1. DUTIES. The Company hereby agrees to continue to employ the
Executive in an executive capacity and the Executive hereby agrees to continue
to serve the Company in that capacity in accordance with the terms and
conditions set forth in this Agreement. The Executive shall devote his best
efforts and skills, energy and attention to the business of the Company.
2. TERM. Subject to prior termination as set forth in Section 7
hereof, the term of this Agreement shall be for a one year period, beginning on
the date hereof, which term shall be automatically renewed for successive one
year periods, until terminated pursuant to Section 7 hereof.
3. COMPENSATION. The Company shall pay to the Executive as
compensation for his services hereunder a base salary of $7,428.00 per month,
or at the rate currently existing, whichever is higher. The salary provided
for herein shall be subject to adjustment based on the annual reviews conducted
by the Company. In addition to the Executive's base salary, the Executive
shall continue to participate in any incentive compensation plans established
by the Company from time to time, provided that the Executive is eligible to
participate in such plans pursuant to the terms thereof. The Company shall
contribute for the account of the Executive $5,000 per year to the Supplemental
Executive Retirement Plan ("SERP") maintained by the Company.
4. EXPENSES. Subject to the Company's policies and procedures in
effect from time to time, the Executive is authorized to incur reasonable
expenses in connection with the business of the Company and the performance of
his duties hereunder, including expenses for entertainment, travel and similar
items. Subject to the Company's policies and procedures, in effect from time
to time, the Company will reimburse the Executive for all such expenses upon
the presentation by the Executive of an itemized account of such expenditures
and any other documentation or substantiation of expenses which may be
required for compliance with applicable state and federal tax laws.
<PAGE> 2
5. VACATIONS. The Executive shall be entitled to four weeks of
vacation each year, during which time his compensation shall be paid in full.
6. AUTOMOBILE ALLOWANCE. The Company shall provide the Executive
with a car allowance in an amount comparable to that made available to other
executives of his level employed by the Company.
7. TERMINATION. This Agreement may be terminated in accordance
with the following terms and conditions:
a. The Company may terminate this Agreement at any time,
without cause, upon written notice to the Executive,
provided that the Company shall continue to pay to
the Executive all amounts he would otherwise receive
under this Agreement for a period of 14 months from
the effective date of such termination including, but
not limited to, salary, incentive compensation,
contributions to the SERP and continuation of
coverage under life and medical insurance programs in
which the Executive participated. Notwithstanding
the above, the amount required to be paid by the
Company pursuant to this Section 7(a) shall be
reduced by any amounts paid to or for the benefit of
the Executive by any other company for which the
Executive provides services during such period.
b. The Company may terminate this Agreement upon written
notice to the Executive and shall have no obligation
to pay any amounts provided for under this Agreement
if the Executive commits any act of fraud or
dishonesty, is convicted of a felony or commits an
act of gross negligence or willful misconduct which
are injurious to the Company or its stockholders.
8. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Ohio.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement between the Company and the Executive with regard
to the subject matter hereof and supersedes all other agreements, conditions or
representations, oral or written, express or implied, including, without
limitation, all prior employment agreements by and between the Company and the
Executive.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above set forth.
THE GRADALL COMPANY
By: /s/ Barry L. Phillips
---------------------------------
/s/ Joseph H. Keller, Jr.
-------------------------------------
Joseph H. Keller, Jr., Executive
-3-
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made and entered into as of this 1st day of
November, 1995, by and between The Gradall Company, an Ohio Corporation (the
"Company"), and James C. Cahill (the "Executive").
WITNESSETH THAT:
WHEREAS, the Company desires to continue the employment of the
Executive and the Executive is willing to continue in the employment of the
Company, in an executive capacity, on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties hereto agree as follows:
1. DUTIES. The Company hereby agrees to continue to employ the
Executive in an executive capacity and the Executive hereby agrees to continue
to serve the Company in that capacity in accordance with the terms and
conditions set forth in this Agreement. The Executive shall devote his best
efforts and skills, energy and attention to the business of the Company.
2. TERM. Subject to prior termination as set forth in Section 7
hereof, the term of this Agreement shall be for a one year period, beginning on
the date hereof, which term shall be automatically renewed for successive one
year periods, until terminated pursuant to Section 7 hereof.
3. COMPENSATION. The Company shall pay to the Executive as
compensation for his services hereunder a base salary of $6930.00 per month, or
at the rate currently existing, whichever is higher. The salary provided for
herein shall be subject to adjustment based on the annual reviews conducted by
the Company. In addition to the Executive's base salary, the Executive shall
continue to participate in any incentive compensation plans established by the
Company from time to time, provided that the Executive is eligible to
participate in such plans pursuant to the terms thereof. The Company shall
contribute for the account of the Executive $5,000 per year to the Supplemental
Executive Retirement Plan ("SERP") maintained by the Company.
4. EXPENSES. Subject to the Company's policies and procedures in
effect from time to time, the Executive is authorized to incur reasonable
expenses in connection with the business of the Company and the performance of
his duties hereunder, including expenses for entertainment, travel and similar
items. Subject to the Company's policies and procedures, in effect from time
to time, the Company will reimburse the Executive for all such expenses upon
the presentation by the Executive of an itemized account of such expenditures
and any other documentation or substantiation of expenses which may be
required for compliance with applicable state and federal tax laws.
<PAGE> 2
5. VACATIONS. The Executive shall be entitled to four weeks of
vacation each year, during which time his compensation shall be paid in full.
6. AUTOMOBILE ALLOWANCE. The Company shall provide the Executive
with a car allowance in an amount comparable to that made available to other
executives of his level employed by the Company.
7. TERMINATION. This Agreement may be terminated in accordance
with the following terms and conditions:
a. The Company may terminate this Agreement at any time,
without cause, upon written notice to the Executive,
provided that the Company shall continue to pay to
the Executive all amounts he would otherwise receive
under this Agreement for a period of 14 months from
the effective date of such termination including, but
not limited to, salary, incentive compensation,
contributions to the SERP and continuation of
coverage under life and medical insurance programs in
which the Executive participated. Notwithstanding
the above, the amount required to be paid by the
Company pursuant to this Section 7(a) shall be
reduced by any amounts paid to or for the benefit of
the Executive by any other company for which the
Executive provides services during such period.
b. The Company may terminate this Agreement upon written
notice to the Executive and shall have no obligation
to pay any amounts provided for under this Agreement
if the Executive commits any act of fraud or
dishonesty, is convicted of a felony or commits an
act of gross negligence or willful misconduct which
are injurious to the Company or its stockholders.
8. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Ohio.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement between the Company and the Executive with regard
to the subject matter hereof and supersedes all other agreements, conditions or
representations, oral or written, express or implied, including, without
limitation, all prior employment agreements by and between the Company and the
Executive.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above set forth.
THE GRADALL COMPANY
By: /s/ Barry L. Phillips
--------------------------------
/s/ James C. Cahill
-----------------------------------
James C. Cahill, Executive
-3-
<PAGE> 1
EXHIBIT 10.13
THE GRADALL COMPANY
AMENDED AND RESTATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
--------------------------------------
WITNESSETH THAT:
WHEREAS, effective March 1, 1988, The Gradall Company, an Ohio
corporation (the "Company") adopted a Supplemental Executive Retirement Plan
(the "Plan") for the benefit of certain employees of the Company, as selected
by the Board of Directors of the Company, and
WHEREAS, the Company desires to amend and restate the Plan for the
further benefit of those employees participating in the Plan.
NOW, THEREFORE, the Plan is hereby amended and restated as follows:
ARTICLE I
---------
ESTABLISHMENT OF PLAN AND PURPOSE
---------------------------------
1.1 ESTABLISHMENT OF PLAN. The Company hereby establishes a plan
to be known as The Gradall Company Supplemental Executive Retirement Plan (the
"Plan"). The Plan is to be effective as of March 1, 1988.
1.2 PURPOSE OF PLAN. The purpose of the Plan shall be to reward
selected employees of the Company for loyal service rendered to the Company by
providing them with supplemental compensation, the payment of which will be
deferred pursuant to the provisions of this Plan and by permitting those
selected employees to elect to defer the payment to them of all or a portion of
their compensation pursuant to the terms and conditions hereinafter set forth.
1.3 ESTABLISHMENT OF TRUST. The Company has established an
irrevocable grantor trust pursuant to the terms of that certain Trust Agreement
dated as of August 30, 1995, by and between the Company and Barry L. Phillips,
Bruce A. Jonker and Stanley W. Swope, as Trustees (the "Trust"). All amounts
heretofore or hereafter contributed pursuant to the terms
<PAGE> 2
of this Plan by the Company or any Participant, including any investments or
life insurance policies purchased prior to the date of the Trust and any income
or other earnings accrued or realized with respect to such contributions prior
to the date of the Trust shall be paid to the Trustees, to be held,
administered and distributed in accordance with the terms of the Trust.
ARTICLE II
----------
DEFINITIONS
-----------
2.1 "ACCOUNTS" shall mean the following accounts which may be
maintained for Participants in the Plan, adjusted in each case for such
account's share in the increase or decrease in the net worth of the Trust:
(a) "COMPANY ACCOUNT" shall mean the separate bookkeeping
account maintained for each Participant to which
shall be credited the Participant's share of any
Company contributions made to this Plan as provided
in Article IV hereof.
(b) "COMPENSATION DEFERRAL ACCOUNT" shall mean the
separate bookkeeping account maintained for each
Participant to which shall be credited the portion
of the Participant's Compensation for which payment
has been deferred pursuant to Article V.
2.2 "BENEFICIARY" shall mean the person(s) a Participant shall
have selected to receive his or her death benefits, as provided in
Section 8.4 hereof.
2.3 "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company.
2.4 "CLAIMS MANAGER" shall mean the person designated to review
claims pursuant to Section 7.1 hereof.
-2-
<PAGE> 3
2.5 "COMMITTEE" shall mean the separate committee established by
the Board of Directors to administer the Plan.
2.6 "COMPANY" shall mean The Gradall Company, an Ohio corporation.
2.7 "COMPENSATION" with respect to any Participant shall mean
the total compensation paid or accrued by the Company for a Plan Year which
shall include regular salary and wages, overtime pay, bonuses and commissions.
Amounts paid to a Participant pursuant to this Plan and the Trust shall
not be considered as Compensation.
2.8 "DISABILITY" shall mean a physical or mental condition of a
Participant resulting from bodily injury, disease or mental disorder which
renders the Participant incapable of continuing his or her usual and customary
employment with the Company for a period of one (1) year or longer. The
Disability of a Participant shall be determined by a licensed physician chosen
by the Company.
2.9 "EMPLOYEE" shall mean any person who is employed by the
Company on a regular and full-time basis.
2.10 "ELECTION FORM" shall mean the form to be distributed to and
completed by Participants each year electing to defer Compensation, as
provided in Section 5.1 hereof.
2.11 "ENROLLMENT PERIOD" shall mean the period commencing on
January 1 and ending on February 15 of each year.
2.12 "PARTICIPANT" shall mean an employee who has been selected for
participation in the Plan as provided in Article III hereof.
2.13 "PLAN" shall mean The Gradall Company Supplemental Executive
Retirement Plan.
2.14 "PLAN ADMINISTRATOR" shall mean the person(s) or entity
designated to administer the Plan in accordance with Section 8.1 hereof.
-3-
<PAGE> 4
2.15 "PLAN YEAR" shall mean the twelve (12) month period commencing
on March 1 and ending on the last day of February of each year.
2.16 "RETIREMENT DATE" shall mean the day on which a Participant
attains the age of sixty (60) years.
2.17 "TRUST" shall mean the trust established pursuant to the
terms of The Gradall Company Nonqualified Deferred Compensation Plans
Trust Agreement, dated as of August 30, 1995, by and between the Company and
Barry L. Phillips, Bruce A. Jonker and Stanley W. Swope, as Trustees.
2.18 "TRUSTEES" shall mean the persons who serve as trustees of the
Trust.
ARTICLE III
-----------
PARTICIPATION
-------------
The Committee shall determine from time to time, by resolution, those
Employees who are eligible to participate in the Plan. The Plan is designed to
be a selective benefit program and only Employees designated to participate in
the Plan by the Committee shall be eligible to participate in the Plan. The
Committee is hereby authorized from time to time to designate for participation
in this Plan, Employees not previously selected for participation in this Plan
and to terminate the eligibility to participate in this Plan of any Employee
previously selected for participation herein; provided, however, the
termination by the Committee of the eligibility to participate in this Plan of
any Employee shall not reduce or eliminate the Accounts of any such Employee,
prohibit such Employee from having his or her Accounts increased by earnings
attributable thereto following such Employee's termination of participation in
this Plan or restrict or otherwise affect the right of the Employee to receive
amounts in his or her Accounts in accordance with the terms of this Plan and
Trust.
-4-
<PAGE> 5
ARTICLE IV
----------
COMPANY CONTRIBUTIONS
---------------------
The Company shall, from time to time, contribute such amounts to the
Trust for the benefit of the Participants as the Board of Directors shall
determine. All Company contributions shall be allocated among the Company
Accounts of the Participants in such manner as the Board of Directors shall
determine, in its sole discretion.
ARTICLE V
---------
PARTICIPANT CONTRIBUTIONS
-------------------------
5.1 PARTICIPANT ELECTIVE CONTRIBUTIONS. Each Participant in the
Plan may elect to defer the payment to him or her of all or any portion of the
Participant's Compensation for any Plan Year. Prior to the commencement of
each Enrollment Period, the Plan Administrator will give each Participant the
option of electing to defer receipt of the payment of all or any portion of
such Participant's Compensation for the ensuing Plan Year by distributing an
election form (an "Election Form") to each Participant which will provide as
follows:
(a) That the Employee has the option of reducing all or
any portion of his or her Compensation for such Plan
Year by completing the Election Form;
(b) That the Employee's election to defer receipt of
Compensation will be effective on the first day of
the Plan Year immediately following such Enrollment
Period;
(c) That the Election Form must be completed and returned
to the Plan Administrator prior to the termination of
the Enrollment Period; and
(d) That the Election Form may not be revised or revoked
by the Employee during the Plan Year for any reason.
5.2 FAILURE TO ELECT. If a Participant fails to return an
Election Form to the Plan Administrator prior to the end of an Enrollment
Period, the Participant will not be eligible to
-5-
<PAGE> 6
have the payment of all or any portion of the Participant's Compensation
deferred for the Plan Year immediately following such Enrollment Period.
However, a Participant who fails to timely submit an Election Form prior to the
end of an Enrollment Period, will be allowed to submit an Election Form during
any subsequent Enrollment Period for subsequent Plan Years.
5.3 REVISION OF ELECTION FORM. No Participant may revise his or
her Election Form during a Plan Year.
ARTICLE VI
----------
DISTRIBUTION OF BENEFITS UPON CESSATION OF EMPLOYMENT
-----------------------------------------------------
6.1 VESTING IN COMPENSATION DEFERRAL ACCOUNT. Notwithstanding
anything herein contained to the contrary, each Participant shall at all times
be fully vested in such Participant's Compensation Deferral Account. Upon the
date a Participant becomes entitled to a distribution of his or her Company
Account as provided in Sections 6.2 through 6.7 hereof (or in the case of a
Participant who is "Terminated For Cause" as defined in Section 6.5 hereof,
upon the date a Participant would be entitled to a distribution but for the
application of Section 6.5 hereof), the Participant shall also be entitled to
receive a distribution of his or her Compensation Deferral Account.
6.2 DISABILITY AND RETIREMENT. Upon the date a Participant is
either (a) determined to be suffering from a Disability or (b) reaches his or
her Retirement Date, the Participant shall fully vest in the entire balance of
his or her Company Account and such Participant's Company Account shall be
distributed to such Participant in the manner set forth in Section 6.7 hereof.
6.3 TERMINATION OF EMPLOYMENT. In the event any Participant
ceases to be an Employee prior to the Participant's Retirement Date for any
reason other than the death or Disability of the Participant, the Participant
shall, subject to the provisions of Sections 6.5 and
-6-
<PAGE> 7
6.6 hereof, become vested in the balance of his or her Company Account in
accordance with the following schedule:
<TABLE>
<CAPTION>
IF TERMINATION OCCURS VESTED PERCENTAGE
--------------------- -----------------
<S> <C>
Prior to Date Employee Attains Age 55 0%
Prior to Date Employee Attains Age 60 50%
But on or after Date Employee
Attains Age 55
On or after Date Employee Attains Age 60 100%
</TABLE>
A Participant who ceases to be an Employee of the Company shall have such
vested amounts of the Participant's Company Account distributed to him or her
in the manner set forth in Section 6.7 hereof and such Participant shall
forfeit the nonvested portion of his or her Account which funds shall revert to
and become the property of the Company.
6.4 DEATH. Upon the death of a Participant, the Participant shall
fully vest in the entire balance of his or her Company Account. Upon the death
of a Participant, all proceeds of life insurance policies, insuring the life of
such Participant and payable to the Trust shall be allocated to such
Participant's Compensation Deferral Account and the entire balance of the
Participant's Company Account and Compensation Deferral Account, including any
life insurance proceeds allocated to such Accounts as set forth above, shall be
distributed to such Participant's Beneficiary in one lump sum within sixty (60)
days following the close of the Plan Year in which the Participant dies (or at
such earlier time as the Plan Administrator shall determine), provided, that, in
the event any life insurance proceeds have not been received by the Trust by
such date, such life insurance proceeds shall be distributed to such
Participant's Beneficiary within sixty (60) days of the Trust's receipt
thereof.
-7-
<PAGE> 8
6.5 TERMINATION FOR CAUSE. Notwithstanding the provisions of
Section 6.3 hereof, any Participant whose employment with the Company shall be
"Terminated For Cause" prior to the time such Participant has reached his or
her Retirement Date, shall forfeit any and all rights to his or her Company
Account and such funds shall become the property of the Company. For purposes
of this Plan, a Participant shall be deemed to be Terminated For Cause if the
Committee shall have made a good faith determination that:
(a) The Participant has committed gross neglect in the performance
of any duties required by the Company to be performed by such
Participant;
(b) The Participant has committed an act of theft or fraud while
in the employ of the Company; or
(c) The Participant shall commit acts of repeated insubordination
to the Company.
6.6 CHANGE OF CONTROL. Notwithstanding the provisions of
Section 6.3 hereof, if at any time there shall be a sale of substantially all of
the assets of the Company or a sale of more than fifty percent (50%) of the
outstanding shares of voting common stock of the Company, each Participant's
Company Account shall fully vest in such Participant and become distributable as
provided in Section 6.7 hereof. The foregoing notwithstanding, a Participant's
Company Account shall fully vest in such Participant and payment thereon may be
made to such Participant pursuant to this Section only to the extent that such
accelerated vesting or payment would not create an excess parachute payment
under Section 280G or Section 4999 of the Internal Revenue Code of 1986, as
amended. Notwithstanding the above, this Section 6.6 shall not be triggered by
the acquisition of stock in the Company by Morgan, Lewis, Githens & Ahn,
Inc. prior to October 31, 1995.
-8-
<PAGE> 9
6.7 DISTRIBUTIONS UPON TERMINATION OF EMPLOYMENT. Upon the
termination of the Participant's full time employment with the Company, for any
reason other than death, whether voluntary or involuntary, with or without
cause, the entire vested balance of the Participant's Company Account and
Compensation Deferral Account (subject to the forfeiture as provided for in
Section 6.5 hereof) shall be distributed to such Participant in monthly
installments for a period of sixty (60) months, with the first such installment
being due and payable within sixty (60) days following the termination of the
Participant's employment with the Company, the amount of which installments
shall be equal to that portion of the Participant's vested and nonforfeited
Accounts as is determined by multiplying the balance thereof (including any
allocations of income, earnings, gain or loss) by a fraction, the numerator of
which shall be one (1) and the denominator of which shall be the number of
remaining installment payments to be made. Notwithstanding the above, the Plan
Administrator may accelerate the payment of such distribution if he deems such
acceleration to be in the best interests of such Participant. No Participant
shall have any right to require the acceleration of any distribution to such
Participant. During the period of any installment distribution, the vested and
nonforfeited amounts remaining in such Participant's Account shall continue to
be held by the Trust and invested in accordance with the terms of the Trust.
ARTICLE VII
-----------
CLAIMS PROCEDURE
----------------
7.1 CLAIMS MANAGER. For claims procedure purposes, the "Claims
Manager" shall be STAN SWOPE, or such other individual who may be appointed by
the Board of Directors.
7.2 EXPLANATION OF DENIAL OF CLAIMS. If for any reason a claim
for benefits under this Plan is denied by the Company, the Plan Administrator
shall deliver to the claimant a written
-9-
<PAGE> 10
explanation setting forth the specific reasons for the denial, pertinent
references to the Plan section on which the denial is based, such other data as
may be pertinent and information on the procedures to be followed by the
claimant in obtaining a review of his or her claim, all written in a manner
calculated to be understood by the claimant. For this purpose:
(a) The claim shall be deemed filed when presented orally or in
writing to the Plan Administrator.
(b) The Plan Administrator's explanation shall be in writing and
delivered to the claimant within ninety (90) days of the date
the claim is filed.
(c) If the Plan Administrator does not notify the Participant of
the denial of the claim within the ninety (90) day period
specified in Section 7.2(b) hereof, then the claim shall be
deemed denied.
7.3 REVIEW OF DENIAL OF CLAIMS. The claimant shall have sixty
(60) days following the earlier of (a) the receipt of the denial of the claim
or (b) the effective date of the denial of the claim, as provided in Section
7.2(c) hereof, to file with the Claims Manager a written request for a full and
fair review of the denial. For such review, the claimant or the claimant's
representative may submit pertinent documents and written issues and comments.
The Claims Manager shall decide the issue and furnish the claimant with a
written response within sixty (60) days of receipt of the claimant's request
for review of the claim. The written response shall include specific reasons
for the decision written in a manner calculated to be understood by the
claimant, as well as specific references to the pertinent Plan provisions on
which the decision is based. If a written response is not so furnished to the
claimant within such sixty (60) day period, the claim shall be deemed denied on
review.
ARTICLE VIII
------------
MISCELLANEOUS
-------------
-10-
<PAGE> 11
8.1 ADMINISTRATION. This plan shall be operated and administered
by the Committee, which shall, for the purposes of this Plan, be the Plan
Administrator. The construction and interpretation by the Plan Administrator
of any provision of this Plan shall be final and conclusive, unless otherwise
determined by the Plan Administrator or otherwise decided by the Claims
Manager. No member of the Committee, nor any person to whom the Committee
delegated its authority pursuant to the foregoing, shall be liable for any
action or determination made by him or her in good faith.
8.2 NONALIENATION OF BENEFITS. No Participant shall have the
right to assign, pledge, sell, anticipate, encumber or transfer his or her
benefits under this Plan in any manner whatsoever. No assignment, pledge,
sale, anticipation, encumbrance or transfer of any of the benefits under this
Plan made by any Participant shall be valid or recognized by the Company.
8.3 AMENDMENT OR TERMINATION. This Plan may be amended or
terminated by the Company at any time; provided, however, no such amendment or
termination shall impair or diminish in any manner whatsoever the Participant's
rights to amounts allocated to Participant's Accounts prior to such amendment
or termination.
8.4 RESTRICTIONS ON PARTICIPANTS' RIGHTS. The benefits granted or
allocated to any Participant pursuant to this Plan do not constitute any stock
of the Company nor shall they evidence any indebtedness of the Company, but,
rather, shall constitute only a right to receive benefits which are payable
pursuant to the terms and conditions provided herein. Notwithstanding anything
herein to the contrary, nothing in this Plan shall:
(a) Give any Participant any rights in any stock of the Company
currently outstanding or hereafter issued;
(b) Give any Participant any rights as a creditor of the Company;
or
-11-
<PAGE> 12
(c) Create any right of employment in any Participant, limit the
Company's rights to terminate the employment of any
Participant, or evidence any agreement or understanding that
the Company will employ a Participant in any particular
position, at any particular rate of remuneration or for any
particular length of time.
8.4 DESIGNATION OF BENEFICIARY. Each Employee, upon becoming a
Participant, shall file with the Plan Administrator, a notice in writing
designating one or more beneficiaries to whom payments otherwise due the
Participant pursuant to this Plan shall be made in the event of such
Participant's death. A Participant shall have the right to change the
beneficiary or beneficiaries from time to time but no such change shall become
effective until submitted in writing to the Plan Administrator. In the event
no designation of beneficiary is made by a Participant or if all of the
beneficiaries a Participant shall have designated shall be deceased, the
deceased Participant shall be deemed to have designated his or her estate as
beneficiary hereunder.
8.5 GOVERNING LAW. This Plan shall be construed and governed by
the laws of the State of Ohio, to the extent not preempted by Federal law.
8.6 PARTICIPANT AS COMMITTEE MEMBER. No person who is a member of
the Committee shall take part in any decision regarding the eligibility of such
member to become a Participant in this Plan, the eligibility of such member as
a Participant to share in any Company contribution for any Plan Year, the right
of such member to receive an accelerated distribution hereunder, or in any
other election or decision as a Committee member which affects such member's
rights as a Participant hereunder. The provisions of this Section 8.6 shall
apply notwithstanding anything in this Plan or in the Trust to the contrary.
-12-
<PAGE> 1
EXHIBIT 10.14
THE GRADALL COMPANY
BENEFIT RESTORATION PLAN
EFFECTIVE AUGUST 30, 1995
<PAGE> 2
<TABLE>
<CAPTION>
THE GRADALL COMPANY
BENEFIT RESTORATION PLAN
TABLE OF CONTENTS
ARTICLE SECTION PAGE
-------------------------------------------------------------------------------
<S> <C> <C>
I ESTABLISHMENT AND PURPOSE 1
1.1 Establishment ......................... 1
1.2 Purpose ............................... 1
1.3 Application of Plan ................... 1
II DEFINITIONS AND CONSTRUCTION 2
2.1 Definitions ........................... 2
2.2 Gender and Number ..................... 2
2.3 Severability .......................... 2
2.4 Applicable Law ........................ 2
2.5 Plan Not an Employment
Contract ............................ 2
III PARTICIPATION 3
3.1 Participants .......................... 3
IV BENEFITS 4
4.1 Amount of Benefits .................... 4
4.2 Commencement Date ..................... 4
4.3 Vesting ............................... 4
4.4 Death Benefits ........................ 4
4.5 Funding ............................... 5
4.6 Tax Withholding ....................... 5
4.7 Nontransferability .................... 5
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
V ADMINISTRATION 6
5.1 Administration ........................... 6
5.2 Finality of Determination ................ 6
5.3 Expenses ................................. 6
5.4 Indemnification and
Exculpation ............................. 6
VI CLAIMS PROCEDURE 7
6.1 Written Claim ............................ 7
6.2 Denied Claim ............................. 7
6.3 Review Procedure ......................... 7
6.4 Committee Review ......................... 7
VII MERGER, AMENDMENT, AND TERMINATION 8
7.1 Merger, Consolidation, or
Acquisition .......................... 8
7.2 Amendment and Termination ................ 8
</TABLE>
ii
<PAGE> 4
THE GRADALL COMPANY
BENEFIT RESTORATION PLAN
ARTICLE I - ESTABLISHMENT AND PURPOSE
-------------------------------------
1.1 ESTABLISHMENT. The Gradall Company (the "Company"), hereby
establishes, effective as of August 30, 1995, an unfunded retirement benefit
plan to be known as the "THE GRADALL COMPANY BENEFIT RESTORATION PLAN" (the
"plan").
1.2 PURPOSE. The general purpose of this plan is to provide the amount
of the benefit which would have otherwise been paid under the Company's
Employees' Retirement Plan (effective October 28, 1983) as it was constituted on
December 31, 1987, but which cannot be paid due to revisions in the Employees'
Retirement Plan As Amended and Restated January 1, 1988 to comply with tax law
changes.
1.3 APPLICATION OF PLAN. The terms of this plan are applicable only to
employees of the Company who are in the active employ of the Company on or after
the effective date of the plan.
1
<PAGE> 5
ARTICLE II - DEFINITIONS AND CONSTRUCTION
-----------------------------------------
2.1 DEFINITIONS. Unless otherwise indicated, the terms used in this
plan shall have the same meaning as they have under the pension plan in effect
on the applicable date.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the context,
any masculine terminology when used in the plan shall also include the feminine
gender, and the definition of any term in the singular shall also include the
plural.
2.3 SEVERABILITY. In the event any provision of the plan shall be held
invalid or illegal for any reason, any illegality or invalidity shall not affect
the remaining parts of the plan, but the plan shall be construed and enforced as
if the illegal or invalid provision had never been inserted, and the Company
shall have the privilege and opportunity to correct and remedy such questions of
illegality or invalidity by amendment as provided in the plan.
2.4 APPLICABLE LAW. This plan shall be governed and construed in
accordance with the laws of the State of Ohio.
2.5 PLAN NOT AN EMPLOYMENT CONTRACT. This plan is not an employment
contract. It does not give to any person the right to be continued in
employment, and all employees remain subject to change of salary, transfer,
change of job, discipline, layoff, discharge, or any other change of employment
status.
2
<PAGE> 6
ARTICLE III - PARTICIPATION
---------------------------
3.1 PARTICIPANTS. The Committee shall determine if an employee of the
Company is eligible to participate in the plan. An employee of the Company shall
be considered for participation in this plan when his annual pension benefit
under the Employees' Retirement Plan (effective October 28, 1983) as it was
constituted on December 31, 1987, is reduced on account of changes in the
pension formula in the Employees' Retirement Plan as Amended and Restated
January 1, 1988.
Attached in Appendix A are the affected participants. Additional employees may
be added as participants if they meet the criteria and are part of the select
group of management or are highly compensated as determined by the Committee.
3
<PAGE> 7
ARTICLE IV - BENEFITS
---------------------
4.1 AMOUNT OF BENEFITS.
(a) GENERAL. The monthly benefit payable at actual
retirement under this plan to the participant shall be equal to the difference
between the amount in (1) and the amount in (2) where --
(1) is the amount of the monthly benefit that would
be payable under the Employees' Retirement Plan (effective October 28,
1983) as it was constituted on December 31, 1987, in the form of a
single life annuity.
(2) is the amount of the monthly benefit actually
payable under the Employees' Retirement Plan As Amended and Restated
January 1, 1988, in the form of a single life annuity.
The existence of a qualified domestic relations order does not affect the
calculation of the benefit under (a)(1) or (a)(2).
(b) OTHER FORMS. Alternative forms of benefit payout can be
elected prior to the retirement date. The benefit will be adjusted using
actuarial factors used in the pension plan. In addition, a lump sum amount will
be calculated and will be included as an alternative form of benefit under this
plan.
(c) PLAN TERMINATION. In the event that the pension plan is
terminated, one of the following should occur --
(1) If the pension plan is merged or replaced, then
the benefit calculated in 4.1(a)(2) will be based on the pension plan
in effect.
(2) If the pension plan is settled through the
purchase of deferred annuities or a lump sum payment in cash, then the
benefit in 4.1 will be determined and settled in a similar fashion at
the effective date of the settlement.
4.2 COMMENCEMENT DATE. Benefits payable under this plan shall
commence on or about the same date that benefits commence under the pension
plan.
4.3 VESTING. A participant shall become vested in the benefit payable
under Section 4.1 at the same time that he becomes vested under the pension
plan.
4.4 DEATH BENEFITS. No death benefit shall be paid under this plan
except as provided in this section. A death benefit shall be payable to a
surviving spouse or other designated beneficiary of the participant if a death
benefit is payable under the
4
<PAGE> 8
terms of the pension plan. Such death benefit shall be computed using the same
factors and assumptions used to compute the applicable death benefit under the
pension plan and shall be paid in the same form as such death benefit, except
that the amount of the death benefit shall be computed with respect to the
amount of the benefit the participant accrues under this plan.
4.5 FUNDING. All amounts paid under this plan shall be paid in cash
from the general assets of the Company. Benefits shall be reflected on the
accounting records of the Company but shall not be construed to create, or
require the creation of, a trust, custodial or escrow account. No employee shall
have any right, title, or interest whatever in or to any investment reserves,
accounts, or funds that the Company may purchase, establish, or accumulate to
aid in providing the benefits described in this plan. Nothing contained in this
plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust or a fiduciary relationship of any kind between the
Company and an employee or any other person. Neither an employee or a
beneficiary of an employee shall acquire any interest greater than that of an
unsecured creditor.
4.6 TAX WITHHOLDING. The Company may withhold from a payment any
federal, state, or local taxes required by law to be withheld with respect to
such payment and such sum as the Company may reasonably estimate as necessary to
cover any taxes for which the Company may be liable and which may be assessed
with regard to such payment.
4.7 NONTRANSFERABILITY. An employee or his beneficiary shall have no
rights by way of anticipation or otherwise to assign or otherwise dispose of any
interest under this plan, nor shall rights be assigned or transferred by
operation of law.
5
<PAGE> 9
ARTICLE V - ADMINISTRATION
--------------------------
5.1 ADMINISTRATION. The plan shall be administered by the
Compensation Committee of the Board.
5.2 FINALITY OF DETERMINATION. The determination of the Committee as to
any disputed questions arising under this plan, including questions of
construction and interpretation, shall be final, binding, and conclusive upon
all persons.
5.3 EXPENSES. The expenses of administering the plan shall be
borne by the Company.
5.4 INDEMNIFICATION AND EXCULPATION. The members of the Committee, its
agents, and officers, directors, and employees of the Company and its affiliates
shall be indemnified and held harmless by the Company against and from any and
all loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by them in connection with or resulting from any claim, action, suit,
or proceeding to which they may be a party or in which they may be involved by
reason of any action taken or failure to act under this plan and against and
from any and all amounts paid by them in settlement (with the Company's written
approval) or paid by them in satisfaction of a judgment in any such action,
suit, or proceeding. The foregoing provision shall not be applicable to any
person if the loss, cost, liability, or expense is due to such person's gross
negligence or willful misconduct.
6
<PAGE> 10
ARTICLE VI - CLAIMS PROCEDURE
-----------------------------
6.1 WRITTEN CLAIM. Benefits shall be paid in accordance with the
provisions of this agreement. The participant, or a designated recipient or any
other person claiming through the participant shall make a written request for
benefits under this agreement. This written claim shall be mailed or delivered
to the named fiduciary. Such claim shall be reviewed by the named fiduciary or
his delegate. The named fiduciary for this plan shall be the same as the named
fiduciary of the Company's pension plan.
6.2 DENIED CLAIM. If the claim is denied, in full or in part, the named
fiduciary shall provide a written notice within ninety (90) days setting forth
the specific reasons for denial, and any additional material or information
necessary to perfect the claim, and an explanation of why such material or
information is necessary, and appropriate information and explanation of the
steps to be taken if a review of the denial is desired.
6.3 REVIEW PROCEDURE. If the claim is denied and a review is desired,
the participant (or beneficiary) shall notify the named fiduciary in writing
within sixty (60) days (a claim shall be deemed denied if the named fiduciary
does not take any action within the aforesaid ninety (90) day period) after
receipt of the written notice of denial. In requesting a review, the participant
or his beneficiary may request a review of the plan document or other pertinent
documents with regard to the employee benefit plan created under this agreement,
may submit any written issues and comments, may request an extension of time for
such written submission of issues and comments, and may request that a hearing
be held, but the decision to hold a hearing shall be within the sole discretion
of the committee.
6.4 COMMITTEE REVIEW. The decision on the review of the denied claim
shall be rendered by the Committee within sixty (60) days after the receipt of
the request for review (if no hearing is held) or within sixty (60) days after
the hearing if one is held. The decision shall be written and shall state the
specific reasons for the decision including reference to specific provisions of
this plan on which the decision is based.
7
<PAGE> 11
ARTICLE VII - MERGER, AMENDMENT, AND TERMINATION
------------------------------------------------
7.1 MERGER, CONSOLIDATION, OR ACQUISITION. The plan shall be binding
upon the Company, its assigns, and any successor Company which shall succeed to
substantially all of its assets and business through merger, consolidation or
acquisition.
7.2 AMENDMENT AND TERMINATION. The Board of Directors of the Company
may amend, modify, or terminate the plan at any time. In the event of a
termination of the plan pursuant to this section, unpaid benefits shall continue
to be an obligation of the Company and shall be paid as scheduled.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer on this 31st day of AUGUST, 1995,
effective as of the 30th day of AUGUST, 1995.
THE GRADALL COMPANY
By: /s/ Barry Phillips
-------------------------
ATTEST:
By:
-------------------------
[SEAL]
8
<PAGE> 12
APPENDIX A
THE GRADALL COMPANY
The participants in the Benefit Restoration Plan are as follows:
James Cahill
Bruce Jonker
John Gano
William English
Stanley Swope
Michael Haberman
Ky Kuehling
Everett Evans
Phillip Keller
1
<PAGE> 1
EXHIBIT 10.15
Conformed Copy
- -------------------------------------------------------------------------------
$32,000,000
LOAN AND SECURITY AGREEMENT
DATED AS OF OCTOBER 13, 1995
BY AND AMONG
THE GRADALL COMPANY,
AS BORROWER,
GRADALL INDUSTRIES, INC.
AND
GRADALL INVESTMENT COMPANY,
AS CORPORATE GUARANTORS,
AND
HELLER FINANCIAL, INC.,
AS AGENT AND AS LENDER
- -------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
SECTION 1. DEFINITION......................................................................................2
1.1 CERTAIN DEFINED TERMS...........................................................................2
1.2 ACCOUNTING TERMS...............................................................................16
1.3 OTHER DEFINITIONAL PROVISIONS..................................................................17
SECTION 2. LOANS AND COLLATERAL...........................................................................17
2.1 LOANS..........................................................................................17
2.2 INTEREST.......................................................................................24
2.3 FEES...........................................................................................28
2.4 PAYMENTS AND PREPAYMENTS.......................................................................29
2.5 TERM OF THIS AGREEMENT.........................................................................30
2.6 STATEMENTS.....................................................................................31
2.7 GRANT OF SECURITY INTEREST.....................................................................31
2.8 CAPITAL ADEQUACY AND OTHER ADJUSTMENTS.........................................................31
2.9 TAXES..........................................................................................32
2.10 REQUIRED TERMINATION AND PREPAYMENT............................................................34
2.11 OPTIONAL PREPAYMENT/REPLACEMENT OF AGENT OR LENDERS IN RESPECT OF INCREASED
COSTS..........................................................................................34
2.12 COMPENSATION...................................................................................34
2.13 BOOKING OF LIBOR RATE LOANS....................................................................35
2.14 ASSUMPTIONS CONCERNING FUNDING OF LIBOR RATE LOANS.............................................35
SECTION 3. CONDITIONS TO LOAN.............................................................................35
3.1 CONDITIONS TO LOANS............................................................................35
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES......................................................37
4.1 ORGANIZATION, POWERS, CAPITALIZATION...........................................................37
4.2 AUTHORIZATION OF BORROWING, NO CONFLICT........................................................38
4.3 FINANCIAL CONDITION............................................................................38
4.4 INDEBTEDNESS AND LIABILITIES...................................................................38
4.5 ACCOUNT WARRANTIES.............................................................................38
4.6 NAMES..........................................................................................39
4.7 LOCATIONS; FEIN................................................................................39
4.8 TITLE TO PROPERTIES; LIENS.....................................................................39
4.9 LITIGATION; ADVERSE FACTS......................................................................39
4.10 PAYMENT OF TAXES...............................................................................39
4.11 PERFORMANCE OF AGREEMENTS......................................................................40
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
4.12 EMPLOYEE BENEFIT PLANS.........................................................................40
4.13 INTELLECTUAL PROPERTY..........................................................................40
4.14 BROKER'S FEES..................................................................................40
4.15 ENVIRONMENTAL COMPLIANCE.......................................................................40
4.16 SOLVENCY.......................................................................................40
4.17 DISCLOSURE.....................................................................................41
4.18 INSURANCE......................................................................................41
4.19 COMPLIANCE WITH LAWS...........................................................................41
4.20 BANK ACCOUNTS..................................................................................41
4.21 SUBSIDIARIES...................................................................................41
4.22 EMPLOYEE MATTERS...............................................................................41
4.23 GOVERNMENTAL REGULATION........................................................................42
4.24 RECAPITALIZATION DOCUMENTS.....................................................................42
SECTION 5. AFFIRMATIVE COVENANTS..........................................................................42
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS.........................................................42
[Omitted]...............................................................................................43
5.2 ACCESS TO ACCOUNTANTS..........................................................................46
5.3 INSPECTION.....................................................................................46
5.4 COLLATERAL RECORDS.............................................................................47
5.5 ACCOUNT COVENANTS; VERIFICATION................................................................47
5.6 COLLECTION OF ACCOUNTS AND PAYMENTS............................................................47
5.7 ENDORSEMENT....................................................................................48
5.8 CORPORATE EXISTENCE............................................................................48
5.9 PAYMENT OF TAXES...............................................................................48
5.10 MAINTENANCE OF PROPERTIES; INSURANCE...........................................................48
5.11 COMPLIANCE WITH LAWS...........................................................................49
5.12 FURTHER ASSURANCES.............................................................................49
5.13 COLLATERAL LOCATIONS...........................................................................49
5.14 BAILEES........................................................................................49
5.15 MORTGAGES; TITLE INSURANCE; SURVEYS............................................................49
5.16 USE OF PROCEEDS AND MARGIN SECURITY............................................................51
5.17 PURCHASE OF CAPITAL ASSETS.....................................................................51
5.18 INVENTORY REPORTING............................................................................51
5.19 ENVIRONMENTAL PROGRAM..........................................................................51
5.20 POST-CLOSING MATTERS...........................................................................51
SECTION 6. FINANCIAL COVENANTS............................................................................52
6.1 OMITTED. ......................................................................................52
6.2 OMITTED........................................................................................52
6.3 MINIMUM EBITDA.................................................................................52
6.4 OMITTED........................................................................................52
6.5 CAPITAL EXPENDITURE LIMITS.....................................................................52
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
6.6 FIXED CHARGE COVERAGE..........................................................................53
6.7 INTEREST COVERAGE..............................................................................54
6.8 ALTERNATIVE COVENANT COMPLIANCE................................................................54
SECTION 7. NEGATIVE COVENANTS.............................................................................55
7.1 INDEBTEDNESS AND LIABILITIES...................................................................55
7.2 GUARANTIES.....................................................................................55
7.3 TRANSFERS, LIENS AND RELATED MATTERS...........................................................56
7.4 INVESTMENTS AND LOANS..........................................................................56
7.5 RESTRICTED JUNIOR PAYMENTS.....................................................................57
7.6 RESTRICTION ON FUNDAMENTAL CHANGES.............................................................57
7.7 CHANGES RELATING TO SUBORDINATED DEBT..........................................................57
7.8 TRANSACTIONS WITH AFFILIATES...................................................................57
7.9 ENVIRONMENTAL LIABILITIES......................................................................58
7.10 CONDUCT OF BUSINESS............................................................................58
7.11 COMPLIANCE WITH ERISA..........................................................................58
7.12 TAX CONSOLIDATIONS.............................................................................58
7.13 SUBSIDIARIES...................................................................................59
7.14 FISCAL YEAR....................................................................................59
7.15 PRESS RELEASE; PUBLIC OFFERING MATERIALS.......................................................59
7.16 BANK ACCOUNTS..................................................................................59
SECTION 8. DEFAULT, RIGHTS AND REMEDIES...................................................................59
8.1 EVENT OF DEFAULT...............................................................................59
8.2 SUSPENSION OF COMMITMENTS......................................................................61
8.3 ACCELERATION...................................................................................62
8.4 REMEDIES.......................................................................................62
8.5 APPOINTMENT OF ATTORNEY-IN-FACT................................................................63
8.6 LIMITATION ON DUTY OF AGENT WITH RESPECT TO COLLATERAL.........................................63
8.7 APPLICATION OF PROCEEDS........................................................................63
8.8 LICENSE OF INTELLECTUAL PROPERTY...............................................................64
8.9 WAIVERS, NON-EXCLUSIVE REMEDIES................................................................64
SECTION 9. ASSIGNMENT AND PARTICIPATION...................................................................64
9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS........................................................64
9.2 AGENT..........................................................................................65
9.3 CONSENTS.......................................................................................70
9.4 SET OFF AND SHARING OF PAYMENTS................................................................70
9.5 DISBURSEMENT OF FUNDS..........................................................................70
9.6 SETTLEMENTS, PAYMENTS AND INFORMATION..........................................................71
9.7 DISSEMINATION OF INFORMATION...................................................................72
9.8 DISCRETIONARY ADVANCES.........................................................................73
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 10. MISCELLANEOUS................................................................................. 73
10.1 EXPENSES AND ATTORNEYS' FEES...................................................................73
10.2 INDEMNITY......................................................................................73
10.3 AMENDMENTS AND WAIVERS.........................................................................74
10.4 NOTICES........................................................................................75
10.5 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS..................................................76
10.6 INDULGENCE NOT WAIVER..........................................................................77
10.7 MARSHALING; PAYMENTS SET ASIDE.................................................................77
10.8 ENTIRE AGREEMENT...............................................................................77
10.9 INDEPENDENCE OF COVENANTS......................................................................77
10.10 SEVERABILITY...................................................................................77
10.11 LENDERS' OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS............................77
10.12 HEADINGS.......................................................................................78
10.13 APPLICABLE LAW. ...............................................................................78
10.14 SUCCESSORS AND ASSIGNS.........................................................................78
10.15 NO FIDUCIARY RELATIONSHIP; LIMITATION OF LIABILITIES...........................................78
10.16 CONSENT TO JURISDICTION........................................................................78
10.17 WAIVER OF JURY TRIAL...........................................................................79
10.18 CONSTRUCTION...................................................................................79
10.19 COUNTERPARTS; EFFECTIVENESS....................................................................79
10.20 NO DUTY........................................................................................79
10.21 CONFIDENTIALITY................................................................................79
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
SCHEDULES AND EXHIBITS
- ----------------------
<S> <C>
Exhibit 1 Stock ownership
Exhibit 2 Assignment of Contract as Collateral Security
Exhibit 3 Consent to assignment of contract
Exhibit 4 Borrowing Base Certificate
Exhibit 5 Closing Certificate
Exhibit 6 Compliance Certificate
Exhibit 7 Corporate Guaranty of each of GII, GIC and each of Borrower's
Subsidiaries
Exhibit 8 Inventory Report
Exhibit 9 Lender Addition Agreement
Exhibit 10 Security Agreement and Mortgage - Trademarks, Patents and Copyrights,
together with corresponding assignments
Exhibit 11 Reconciliation Report
Exhibit 12 Revolving Notes
Exhibit 13 Subordination Agreement
Exhibit 14 Term Notes
Exhibit 15 Notice of Borrowing
Schedule 1.1(A) Mortgaged Property
Schedule 1.1(B) Liens (Permitted Encumbrances)
Schedule 1.1(C) Pro Forma
Schedule 3.1(A) Closing Deliveries
Schedule 4.1(B) Authorized Capital Stock of Loan Parties
Schedule 4.6 Names of Borrower
Schedule 4.7 Locations of Collateral
Schedule 4.12 Post-Retirement Benefits
Schedule 4.13 Intellectual Property
Schedule 4.20 Bank account information
Schedule 4.21 Subsidiaries
Schedule 4.22 Employment Matters
Schedule 5.16 Outstanding Indebtedness to be Refinanced at Closing
Schedule 5.17 New Philadelphia, Ohio Property Description
Schedule 5.20(a) Foreign Patents and Trademarks
Schedule 5.20(b) Certain Liens
Schedule 7.1(f) Existing Indebtedness
Schedule 7.2 Existing Guaranties
Schedule 7.4 Existing Investments
Schedule 7.8 Transactions with Affiliates
</TABLE>
v
<PAGE> 7
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is dated as of October 13,
1995 and entered into among THE GRADALL COMPANY, an Ohio corporation
("Borrower"), with its principal place of business at 406 Mill Avenue S.W., New
Philadelphia, Ohio 44663, GRADALL INDUSTRIES, INC., a Delaware corporation
(formerly known as ICM Industries, Inc.) ("GII"), with its principal place of
business at 406 Mill Avenue S.W., New Philadelphia, Ohio 44663, GRADALL
INVESTMENT COMPANY, an Ohio corporation ("GIC") (formerly known as ICM
Investment Company) ("GIC"), with its principal place of business at 406 Mill
Avenue S.W., New Philadelphia, Ohio 44663,the financial institutions listed on
the signature pages hereof and their respective successors and assigns (each
individually a "Lender" and collectively "Lenders") and HELLER FINANCIAL, INC.,
a Delaware corporation (in its individual capacity, "Heller"), with offices at
500 West Monroe, Chicago, Illinois 60661 for itself as a Lender and as Agent.
All capitalized terms used herein are defined in Section 1 of this Agreement.
WHEREAS, GII is the owner of 100% of the issued and
outstanding shares of capital stock of GIC, and GIC is the owner of 100% of the
issued and outstanding shares of capital stock of the Borrower;
WHEREAS, GII, MLGA Fund II, L.P., a Delaware limited
partnership ("Investor"), David T. Shelby ("Shelby") and Jack D. Rutherford
("Rutherford") are parties to a recapitalization agreement, dated as of
September 15, 1995 (as amended, modified or supplemented from time to time in
accordance with its terms and the terms hereof, the "Recapitalization
Agreement");
WHEREAS, pursuant to the Recapitalization Agreement, among
other things, GII will repurchase and cancel certain of the shares of common
stock owned by Shelby and Rutherford and GII will issue to Investor newly issued
shares of common stock of GII, as a result of which Investor will own and
control 825 shares of common stock of GII, with the remaining shares of common
stock of GII being owned as set forth on Exhibit 1 hereto;
WHEREAS, in order to finance a portion of the amount payable
by GII under the terms of the Recapitalization Agreement, the Borrower shall
declare and pay a dividend to GIC with the proceeds of borrowings made on the
Closing Date hereunder and with the proceeds of the issuance of the Subordinated
Debt and GIC will declare and pay to GII a dividend with the proceeds of such
dividend;
WHEREAS, Borrower desires that Lenders extend a credit
facility to provide a term loan and revolving credit loans on the Closing Date
to provide a portion of the funds required to fund such dividend, to provide, on
and after the Closing Date, revolving credit loans and letters of credit for
working capital needs and for other general corporate purposes; and
<PAGE> 8
WHEREAS, Borrower desires to secure its obligations under the
Loan Documents by granting to Agent, for benefit of Lenders, a security interest
in and lien upon certain of Borrower's property; and
WHEREAS, GIC and GII are each willing to guaranty all of the
obligations of Borrower to Agent and Lenders under the Loan Documents and to
grant to Agent, for benefit of Lenders, a security interest in certain property
of GIC and GII.
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Borrower, Agent and
Lenders agree as follows:
SECTION 1. DEFINITION.
1.1 CERTAIN DEFINED TERMS. Certain Defined Terms.
The following terms used in this Agreement shall have the following meanings:
"Accounts" means, all "accounts" (as defined in the UCC), accounts
receivable, contract rights and general intangibles relating thereto, notes,
drafts and other forms of obligations owed to or owned by Borrower arising or
resulting from the sale of goods or the rendering of services.
"Additional Mortgaged Property" has the meaning assigned to that term
in subsection 5.15.
"Affiliate" means any Person (other than Agent or Lender): (a) directly
or indirectly controlling, controlled by, or under common control with,
Borrower; (b) directly or indirectly owning or holding five percent (5%) or more
of any equity interest in Borrower; or (c) five percent (5%) or more of whose
voting stock or other equity interest is directly or indirectly owned or held by
Borrower. For purposes of this definition, "control" (including with correlative
meanings, the terms "controlling", "controlled by" and "under common control
with") means the possession directly or indirectly of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities or by contract or otherwise.
"Agent" means Heller in its capacity as agent for the Lenders under the
Loan Documents and any successor in such capacity appointed pursuant to
subsection 9.1.
"Agent's Account" means ABA No. 0710-0001-3, Account No. 55-35158 at
First National Bank of Chicago, One First National Plaza, Chicago, IL 60670,
Reference: Heller Business Credit for the benefit of The Gradall Company.
"Agent's Depository Account" has the meaning assigned to that term in
subsection 5.6.
"Agreement" means this Loan and Security Agreement as it may be
amended, supplemented or otherwise modified from time to time.
2
<PAGE> 9
"Alternative Covenant Compliance Certificate" shall mean a certificate,
in a form acceptable to the Agent, of the chief financial officer of the
Borrower stating that (i) the Borrower has, in good faith and using assumptions
deemed reasonable by such officer, projected that, for the fiscal quarter
beginning on the day following the Quarterly Test Date in respect of which such
certificate is delivered, the average daily amount by which (A) the lesser of
the Borrowing Base or the Revolving Loan Commitment shall exceed (B) the sum of
(x) the outstanding principal balance of the Revolving Loan plus (y) the Letter
of Credit Reserve, is more than $2,000,000 and (ii) that the Borrower has
complied with clauses (b), (c), (d) and (e) of subsection 6.8 as to such
Quarterly Test Date and, as to such clause (c), shall have attached a Compliance
Certificate demonstrating compliance with the applicable covenants set forth in
such clause (c).
"Asset Disposition" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any or all of
the assets of Borrower or any of its Subsidiaries other than sales of Inventory
in the ordinary course of business.
"Assignment of Contract" means (i) the Assignment of Contract as
Collateral Security pursuant to which Borrower, GIC and GII assign to the Agent
for the benefit of the Lenders all right, title and interest under the
Recapitalization Documents, substantially in the form of Exhibit 2 hereto, and
(ii) the consent to such assignment by Shelby and Rutherford, substantially in
the form of Exhibit 3 hereto.
"Bank Letters of Credit" means letters of credit issued by a bank for
the account of Borrower and supported by a Risk Participation Agreement.
"Bank One Letter Agreement" means the letter agreement, dated October
11, 1995, among Bank One, Columbus, N.A., the Agent and the Borrower regarding
the pay-off of indebtedness owing to Bank One, Columbus, N.A. and related
matters.
"Base Rate" means a variable rate of interest per annum equal to the
higher of (a) the rate of interest from time to time published by the Board of
Governors of the Federal Reserve System as the "Bank Prime Loan" rate in Federal
Reserve Statistical Release H.15(519) entitled "Selected Interest Rates" or any
successor publication of the Federal Reserve System reporting the Bank Prime
Loan rate or its equivalent, or (b) the Federal Funds Effective Rate. The
statistical release generally sets forth a Bank Prime Loan rate for each
Business Day. In the event the Board of Governors of the Federal Reserve System
ceases to publish a Bank Prime Loan rate or its equivalent, the term "Base Rate"
shall mean a variable rate of interest per annum equal to the highest of the
"prime rate", "reference rate", "base rate", or other similar rate announced
from time to time by any of Bankers Trust Company, The Chase Manhattan Bank,
N.A. or Chemical Bank (or their respective successors) (with the understanding
that any such rate may merely be a reference rate and may not necessarily
represent the lowest or best rate actually charged to any customer by any such
bank).
"Base Rate Loan" means at any time that portion of the Loans bearing
interest at rates determined by reference to the Base Rate at such time.
3
<PAGE> 10
"Base Rate Revolving Loan" means at any time that portion of the
Revolving Loan bearing interest at rates determined by reference to the Base
Rate at such time.
"Base Rate Term Loan" means at any time that portion of the Term Loan
bearing interest at rates determined by reference to the Base Rate at such time.
"Blocked Accounts" has the meaning assigned to that term in subsection
5.6.
"Borrower" has the meaning assigned to that term in the preamble to
this Agreement.
"Borrowing Base" has the meaning assigned to that term in subsection
2.1(B).
"Borrowing Base Certificate" means a certificate and assignment
schedule duly executed by an officer of Borrower appropriately completed and in
substantially the form of Exhibit 4 hereto.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the States of Illinois, Pennsylvania,
Ohio or New York or for the purposes of LIBOR Rate Loans only, London, England
or is a day on which banking institutions located in any such state or city are
closed.
"Capital Expenditures" means all amounts (including deposits) expended
or capitalized for or with respect to any fixed assets or improvements, or for
replacements, substitutions or additions thereto, which have a useful life of
more than one year, including the direct or indirect acquisition of such assets
by way of increased product or service charges, offset items or otherwise
(excluding amounts expended under or with respect to Capital Leases, but
including cash down payments for assets acquired under Capital Leases).
"Capital Lease" means any lease of any property (whether real, personal
or mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.
"Cash Equivalents" means: (a) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(b) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's Corporation or at least P-1 from Moody's Investors Service, Inc.; and (c)
certificates of deposit or bankers' acceptances maturing within six (6) months
from the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $250,000,000 and not subject to
setoff rights in favor of such bank.
"Change of Control" means that any of the following shall have
occurred:
4
<PAGE> 11
(a) GII shall cease to own and control, beneficially and of
record, 100% of the issued and outstanding shares of capital stock of
GIC (except as a result of a Permitted Merger);
(b) GIC shall cease to own and control, beneficially and of
record, 100% of the issued and outstanding shares of capital stock of
the Company (except as a result of a Permitted Merger);
(c) Investor shall cease to own and control at least 66 2/3%
(or, on or after an offering of stock of GII registered under the
Securities Act of 1933, as amended, 40%) of the fully diluted voting
power represented by capital stock and other securities of GII, or
shall cease to have the power to appoint a majority of the Board of
Directors of GII or shall cease to have the power to direct or cause
the direction of the management and policies of GII; or
(d) any person or group (within the meaning of sections 13(d)
and 14(d)(2) of the Securities and Exchange Act of 1934, as amended)
other than Investor shall acquire a greater percentage of the fully
diluted voting power represented by capital stock and other securities
of GII than that owned and controlled by Investor.
"Closing Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of Borrower appropriately completed
and in substantially the form of Exhibit 5 hereto.
"Closing Date" means the date and time that the Term Loan is advanced.
"Collateral" has the meaning assigned to that term in subsection 2.7.
"Collecting Banks" has the meaning assigned to that term in subsection
5.6.
"Commitment" or "Commitments" means the commitment or commitments of
Lenders to make Loans as set forth in subsections 2.1(A) and 2.1(B) and to
provide Lender Letters of Credit as set forth in subsection 2.1(G).
"Compliance Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of Borrower appropriately completed
and in substantially the form of Exhibit 6 hereto.
"Corporate Guarantor" means each Person who executes and delivers a
Corporate Guaranty.
"Corporate Guaranty" means each continuing Guaranty by GIC, GII and
each of Borrower's Subsidiaries (other than FSC), in the form of Exhibit 7, as
amended, restated, supplemented or modified from time to time.
5
<PAGE> 12
"Default" means a condition or event that, after notice or lapse of
time or both, would constitute an Event of Default if that condition or event
were not cured or removed within any applicable grace or cure period.
"Default Rate" has the meaning assigned to that term in subsection 2.2.
"EBITDA" means, for any period, without duplication, the total of the
following for Parent Group on a consolidated basis, each calculated for such
period: (1) net income determined in accordance with GAAP; PLUS, to the extent
included in the calculation of net income, (2) the sum of (a) income and
franchise taxes paid or accrued; (b) Interest Expenses, net of interest income,
paid or accrued; (c) interest paid in kind; (d) amortization and depreciation
and (e) other non-cash charges (excluding accruals for cash expenses made in the
ordinary course of business); LESS, to the extent included in the calculation of
net income, (3) the sum of (a) the income of any Person (other than wholly-owned
Subsidiaries of GII) in which GII or a wholly owned Subsidiary of GII has an
ownership interest unless such income is received by GII or such wholly-owned
Subsidiary in a cash distribution; (b) gains or losses from sales or other
dispositions of assets (other than Inventory in the normal course of business);
and (c) extraordinary or non-recurring gains, but not net of extraordinary or
non-recurring "cash" losses.
"Eligible Accounts" has the meaning assigned to that term in
subsection 2.1(C).
"Eligible Inventory" has the meaning assigned to that term in
subsection 2.1(C).
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of any
Loan Party or any ERISA Affiliate or (b) has at any time within the preceding
six (6) years been maintained for the employees of any Loan Party or any current
or former ERISA Affiliate.
"Environmental Claims" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials or arising under Environmental Laws.
"Environmental Laws" means any present or future federal, state or
local law, rule, regulation or order relating to pollution, waste, disposal or
the protection of human health or safety, plant life or animal life, natural
resources or the environment.
"Equipment" means all "equipment" (as defined in the UCC), including,
without limitation, all machinery, motor vehicles, trucks, trailers, vessels,
aircraft and rolling stock and all parts thereof and all additions and
accessions thereto and replacements therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
6
<PAGE> 13
"ERISA Affiliate", as applied to any Loan Party, means any Person who
together with any Loan Party is treated as a single employer within the meaning
of Section 414(b), (c), (m) or (o) of the IRC.
"Event of Default" means each of the events set forth in subsection
8.1.
"Excess Cash Flow" means, for any period, the greater of (A) zero (0);
or (B) without duplication, the total of the following for Parent Group on a
consolidated basis, each calculated for such period: (1) EBITDA; PLUS (2) tax
refunds actually received in respect of periods after the Closing Date; LESS (3)
Capital Expenditures (to the extent actually made in cash and/or due to be made
in cash within such period but in no event more than the amount permitted by
subsection 6.5 hereof); LESS (4) income and franchise taxes paid or accrued
excluding any provision for deferred taxes included in the determination of net
income; LESS (5) decreases in deferred income taxes resulting from payments of
deferred taxes accrued in prior periods; LESS (6) Interest Expenses paid or
accrued; LESS (7) scheduled amortization of Indebtedness actually paid and/or
due to be paid within such period not prohibited under subsection 7.5; LESS (8)
voluntary prepayments of the Term Loan made during such period; LESS (9)
voluntary prepayments of the Revolving Loan made during such period as a result
of or in order to effect any permanent reduction of the Revolving Loan
Commitment.
"Federal Funds Effective Rate" means, for any day, the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the
immediately following Business Day by the Federal Reserve Bank of New York or,
if such rate is not published for any Business Day, the average of the
quotations for the day of the requested Loan received by Agent from three
Federal funds brokers of recognized standing selected by Agent.
"Fiscal Year" means each twelve month period ending on the last day of
December in each year.
"Fixed Charge Coverage" means, for any period, Operating Cash Flow
divided by Fixed Charges.
"Fixed Charges" means, for any period, and each calculated for such
period (without duplication), (a) Interest Expenses paid or accrued by Parent
Group; PLUS (b) scheduled payments of principal with respect to all Indebtedness
of Parent Group plus any prepayment of principal of the Loans under subsection
2.4(B)(4); PLUS (c) any provision for (to the extent it is greater than zero)
income or franchise taxes included in the determination of net income, excluding
any provision for deferred taxes; PLUS (d) Restricted Junior Payments made in
cash to the extent permitted under subsection 7.5(b); plus (e) payment of
deferred taxes accrued in any prior period.
"FSC" means The Gradall Company FSC, Inc., a United States Virgin
Islands corporation.
7
<PAGE> 14
"Funding Date" means the date of each funding of a Loan or issuance of
a Lender Letter of Credit.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination.
"Hazardous Material" means all or any of the following: (a) substances
that are defined or listed in, or otherwise classified pursuant to, any
Environmental Laws or regulations as "hazardous substances", "hazardous
materials", "hazardous wastes", "toxic substances" or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity or
toxicity; (b) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million.
"Indebtedness", as applied to any Person, means without duplication:
(a) all indebtedness for borrowed money; (b) obligations under leases which in
accordance with GAAP constitute Capital Leases; (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; and (e) all indebtedness of the type
described in clauses (a) through (d) of this definition secured by any Lien on
any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person.
"Intellectual Property" means all present and future designs, patents,
patent rights and applications therefor, trademarks and registrations or
applications therefor, trade names, inventions, copyrights and all applications
and registrations therefor, software or computer programs, license rights, trade
secrets, methods, processes, know-how, drawings, specifications, descriptions,
and all memoranda, notes and records with respect to any research and
development, whether now owned or hereafter acquired, all goodwill associated
with any of the foregoing, and proceeds of all of the foregoing, including,
without limitation, proceeds of insurance policies thereon.
"Interest Coverage" means, for any period, Operating Cash Flow DIVIDED
BY Interest Expenses.
"Interest Expenses" means, without duplication, for any period, the
following, for Parent Group each calculated for such period: interest expenses
deducted in the determination of net income (excluding (i) the amortization or
write off of fees and costs with respect to the transactions
8
<PAGE> 15
contemplated hereunder on the Closing Date which have been capitalized as
transaction costs; (ii) the amortization or write off of other fees and costs
paid prior to the Closing Date in respect of transactions consummated prior to
the Closing Date, which fees and expenses had previously been capitalized, and
(iii) interest paid in kind).
"Interest Period" has the meaning assigned to that term in subsection
2.2(B).
"Interest Rate" has the meaning assigned to that term in subsection
2.2(A).
"Inventory" means all "inventory" (as defined in the UCC), including,
without limitation, finished goods, raw materials, work in process and other
materials and supplies used or consumed in a Person's business and goods which
are returned or repossessed.
"Inventory Report" means a report duly executed by an officer of
Borrower appropriately completed and in substantially the form of Exhibit 8.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and all rules and regulations promulgated
thereunder.
"Lender" or "Lenders" has the meaning assigned to that term in the
preamble to this Agreement.
"Lender Addition Agreement" means an agreement among Agent, a Lender
and such Lender's assignee regarding their respective rights and obligations
with respect to assignments of the Loans, the Commitments and other interests
under this Agreement and the other Loan Documents substantially in the form of
Exhibit 9.
"Lender Letter of Credit" has the meaning assigned to that term in
subsection 2.1(G).
"Letter of Credit Liability" means, all reimbursement and other
liabilities of Borrower with respect to each Lender Letter of Credit, whether
contingent or otherwise, including: (a) the amount available to be drawn or
which may become available to be drawn; (b) all amounts which have been paid or
made available by the issuing bank to the extent not reimbursed; and (c) to the
extent due and payable, all unpaid interest, fees and expenses in connection
with such Lender Letter of Credit or such liabilities.
"Letter of Credit Reserve" means, at any time, an amount equal to (a)
the aggregate amount of Letter of Credit Liability with respect to all Lender
Letters of Credit outstanding at such time PLUS (without duplication) (b) the
aggregate amount theretofore paid by Agent or any Lender under Lender Letters of
Credit and not debited to the Loan Account pursuant to subsection 2.1(G)(2) or
otherwise reimbursed by Borrower.
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<PAGE> 16
"Liabilities" shall have the meaning given that term in accordance
with GAAP and shall include Indebtedness.
"LIBOR Rate" means, for each Interest Period, a rate of interest equal
to:
(a) the rate of interest determined by Agent at which deposits in
Dollars for the relevant Interest Period are offered based on information
presented on the Reuters Screen LIBOR Page as of 11:00 A.M. (London time) on the
day which is two (2) Business Days prior to the first day of such Interest
Period; provided, that if at least two such offered rates appear on the Reuters
Screen LIBOR Page in respect of such Interest Period, the arithmetic mean of all
such rates (as determined by Agent) will be the rate used; provided, further
that if Reuters ceases to provide LIBOR quotations, such rate shall be the
average rate of interest determined by Agent at which deposits in Dollars are
offered for the relevant Interest Period by Bankers Trust Company, The Chase
Manhattan Bank, N.A. and Chemical Bank (or their respective successors) to prime
banks in the London interbank market as of 11:00 A.M. (London time) on the
applicable interest rate determination date, divided by
(b) a number equal to 1.0 minus the aggregate (but without duplication)
of the rates (expressed as a decimal fraction) of reserve requirements in effect
on the day which is two (2) Business Days prior to the beginning of such
Interest Period (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other governmental authority having jurisdiction with
respect thereto, as now and from time to time in effect) for Eurocurrency
funding (currently referred to as "Eurocurrency liabilities" in Regulation D of
such Board) which are required to be maintained by a member bank of the Federal
Reserve System:
(such rate to be adjusted to the nearest one sixteenth of one percent (1/16 of
1%) or, if there is not a nearest one sixteenth of one percent (1/16 of 1%), to
the next higher one sixteenth of one percent (1/16 of 1%).
"LIBOR Rate Loan" means at any time that portion of the Loans bearing
interest at rates determined by reference to the LIBOR Rate.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan" or "Loans" means an advance or advances under the Term Loan
Commitment or the Revolving Loan Commitment.
"Loan Documents" means (i) this Agreement, the Revolving Notes, the
Term Notes, the Corporate Guaranty, the Pledge Agreement, the Mortgages, the
Assignment of Contract, the Patent and Trademark Assignments, the Subordination
Agreement and (ii) all other instruments, documents and agreements executed by
or on behalf of Borrower or any Corporate Guarantor and delivered
10
<PAGE> 17
concurrently herewith or at any time hereafter to or for Agent or any Lender in
connection with the Loans and other transactions contemplated by this Agreement,
all as amended, restated, supplemented or modified from time to time.
"Loan Party" means and includes each of Borrower and each Corporate
Guarantor.
"Loan Year" means each period of twelve (12) consecutive months
commencing on the Closing Date and on each anniversary thereof.
"Material Adverse Effect" means a material adverse effect upon (a) the
business, operations, prospects, properties, assets or condition (financial or
otherwise) of any Loan Party on an individual basis or taken as a whole or (b)
the ability of any Loan Party to perform its obligations under any Loan Document
to which it is a party or of Agent or any Lender to enforce or collect any of
the Obligations.
"Maximum Revolving Loan Amount" has the meaning assigned to that term
in subsection 2.1(B).
"Mortgage" means each of the mortgages, deeds of trust, leasehold
mortgages, leasehold deeds of trust, collateral assignments of leases or other
real estate security documents delivered by any Loan Party to Agent, on behalf
of Lenders, with respect to Mortgaged Property or Additional Mortgaged Property,
all in form and substance satisfactory to Agent.
"Mortgaged Property" means the real property owned by Borrower as
described on Schedule 1.1(A).
"Note Guarantee" means each guarantee, now existing or hereafter
created, made by GII or any Subsidiary thereof (other than FSC and other than
any Permitted Joint Venture) of the Senior Subordinated Notes.
"Notes" means the Revolving Notes and the Term Notes.
"Notice of Borrowing" has the meaning assigned to that term in
subsection 2.1(D).
"Obligations" means all obligations, liabilities and indebtedness of
every nature of each Loan Party from time to time owed to Agent or to any Lender
under the Loan Documents including the principal amount of all debts, claims and
indebtedness (whether incurred before or after the Termination Date), accrued
and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable.
"Operating Cash Flow" means, for any period, (a) EBITDA, LESS (b)
Capital Expenditures.
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<PAGE> 18
"Original Term" has the meaning assigned to that term in subsection
2.5.
"Parent Group" means GII and its Subsidiaries on a consolidated basis.
"Patent and Trademark Assignments" means the Security Agreement and
Mortgage - Trademarks and Patents and Copyrights, together with the
corresponding assignments, substantially in the form of Exhibit 10 hereto.
"Payment Default" means a default in the payment of any Obligation
which constitutes, or which, after the lapse of time, would constitute, an Event
of Default of the type described in clause (A) of subsection 8.1.
"Permitted Encumbrances" means the following types of Liens: (a) Liens
(other than Liens relating to Environmental Claims or ERISA) for taxes,
assessments or other governmental charges not yet due and payable or which are
(i) being contested in good faith by appropriate proceedings and in respect of
which any reserves required by GAAP shall have been established, (ii) as to
which any Lien in respect thereof does not have priority over any Lien in favor
of the Agent, whether for existing or after acquired Collateral and whether for
existing or future extensions of credit and (iii) as to which there is no
material risk of forfeiture of the property subject to such Lien; (b) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen and other
similar liens imposed by law, which are incurred in the ordinary course of
business for sums not more than thirty (30) days delinquent; (c) Liens (other
than any Lien imposed by ERISA) incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (d) easements, rights-of-way, servitudes,
covenants, conditions, restrictions, minor imperfections of title and other
similar charges or encumbrances not interfering in any material respect with the
ordinary conduct of the business of any Loan Party or any of its Subsidiaries;
(e) Liens for purchase money obligations and under Capital Leases, provided,
that (i) the purchase or Capital Lease of the asset subject to any such Lien is
permitted under subsection 6.5, (ii) the Indebtedness secured by any such Lien
is permitted under subsection 7.1, and (iii) such Lien encumbers only the asset
so purchased; (f) Liens in favor of Agent, on behalf of Lenders, (g) Liens in
respect of judgements, writs, warrants or similar process not constituting an
Event of Default under subsection 8.1(J); and (h) Liens set forth on Schedule
1.1(B), and, until the date fifteen (15) Business Days following the Closing
Date, the Liens set forth on Schedule 5.20(b) hereto..
"Permitted Joint Venture" shall mean a joint venture (i) in which
Borrower has incurred and will incur, whether contractually or as a matter of
law, voluntarily or involuntarily, no Liabilities in excess (together with all
other investments under subsection 7.4(d) and Liabilities of Borrower arising
therefrom) of the maximum amount of investment permitted under subsection
7.4(d), (ii) which is not a "Subsidiary" (as such term is defined in the
Securities Purchase Agreements), and (iii) which
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<PAGE> 19
conducts and will conduct no activities, other than business of the type
conducted by Borrower as of the Closing Date.
"Permitted Merger" means each of (i) the merger of GIC with and into
GII with GII being the surviving entity, so long as (w) no Change of Control
occurs, (x) the merger shall not effect any change in the capital structure or
outstanding securities or liabilities of GII (other than the assumption by GII
of all liabilities of GIC), (y) immediately after such merger GII shall own 100%
of all issued and outstanding shares of capital stock of Borrower subject only
to the Lien under the Pledge Agreement in favor of the Agent and (z) the Agent
shall have received such opinions, confirmations and other agreements and
instruments as the Agent shall have requested in connection with such merger;
and (ii) the merger of FSC with and into the Borrower with the Borrower being
the surviving entity.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Pledge Agreement" means the stock pledge agreement to be executed and
delivered by GIC and GII, in favor of Agent, on behalf of Lenders, in form and
substance satisfactory to Agent.
"Pro Forma" means the pro forma unaudited consolidated and
consolidating balance sheet of Borrower and its Subsidiaries annexed hereto as
Schedule 1.1(C).
"Pro Rata Share" means (a) with respect to matters relating to a
particular Commitment of a Lender, the percentage obtained by dividing (i) such
Commitment of that Lender by (ii) all such Commitments of all Lenders and (b)
with respect to all other matters, the percentage obtained by dividing (i) the
sum of (x) the Revolving Loan Commitment of a Lender, plus (y) prior to the
Closing Date the Term Loan Commitment, or on or after the Closing Date the
outstanding principal amount of Term Loan, held by such Lender, by (ii) the sum
of (x) the Revolving Loan Commitments of the Lenders plus (y) prior to the
Closing Date the Term Loan Commitments of the Lenders or on or after the Closing
Date the outstanding principal amount of the Term Loans, in either case as such
percentage may be adjusted by assignments permitted pursuant to subsection 9.1;
provided, however, if all Commitments are terminated pursuant to the terms
hereof, then "Pro Rata Share" means the percentage obtained by dividing (x) the
aggregate amount of such Lender's outstanding Loans by (y) the aggregate amount
of all outstanding Loans.
"Projections" means Parent Group's forecasted consolidated and
consolidating: (a) balance sheets, (b) profit and loss statements, (c) cash flow
statements, and (d) capitalization statements, all prepared on a Subsidiary by
Subsidiary (excluding for this purpose FSC) basis and otherwise consistent with
the historical financial statements of The Gradall Company, together with
appropriate supporting details and a statement of underlying assumptions.
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<PAGE> 20
"Quarterly Test Date" shall mean the last day of any fiscal quarter
which ends on or after March 31, 1997.
"Recapitalization Agreement" has the meaning set forth in the preamble
to this Agreement.
"Recapitalization Documents" has the meaning set forth in subsection
3.1(J).
"Reconciliation Report" means a report duly executed by the chief
executive officer or chief financial officer or controller of Borrower
appropriately completed and in substantially the form of Exhibit 11.
"Renewal Term" has the meaning assigned to that term in subsection 2.5.
"Requisite Lenders" means Lenders holding or being responsible for
sixty-six and two-thirds percent (66.66%) or more of the sum of (a) outstanding
Loans (b) outstanding Letter of Credit Liability and (c) unutilized Commitments.
"Restricted Junior Payment" means: (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Borrower now or hereafter outstanding, except a stock dividend; (b) any
payment or prepayment of principal of, premium, if any, or interest on, or any
redemption, conversion, exchange, retirement, defeasance, sinking fund or
similar payment, purchase or other acquisition for value, direct or indirect, of
any Subordinated Debt or any shares of any class of stock of Borrower now or
hereafter outstanding; (c) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Borrower now or hereafter outstanding; and (d)
any payment by Borrower of any management fees or similar fees to any Affiliate,
whether pursuant to a management agreement or otherwise.
"Revolving Loan" means all advances made by Lenders pursuant to
subsection 2.1(B) and any amounts added to the principal balance of the
Revolving Loan pursuant to this Agreement.
"Revolving Loan Commitment" means (a) as to any Lender, the commitment
of such Lender to make its Pro Rata share of the Revolving Loan and to purchase
participations in Lender Letters of Credit pursuant to subsection 2.1(G) as set
forth on the signature page of this Agreement opposite such Lender's signature
or in the most recent Lender Addition Agreement, if any, executed by such Lender
and (b) as to all Lenders, the aggregate commitment of all Lenders to make the
Revolving Loan and to purchase participations in Lender Letters of Credit
pursuant to subsection 2.1(G).
"Revolving Note" means each promissory note of Borrower in
substantially the form of Exhibit 12, issued pursuant to subsection 2.1(E).
"Risk Participation Agreement" has the meaning assigned to that term
in subsection 2.1(G).
"Scheduled Installment" has the meaning assigned to that term in
subsection 2.1(A).
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<PAGE> 21
"Securities Purchase Agreements" means and includes each Securities
Purchase Agreement each dated as of the date hereof among GII, the Borrower and
the purchaser party thereto.
"Senior Subordinated Notes" means each of the 12.5% senior subordinated
notes now or hereafter issued pursuant to the Securities Purchase Agreements for
an aggregate principal amount not exceeding $10,000,000 (plus amounts under
replacements for lost, stolen or mutilated notes).
"Settlement Date" has the meanings assigned to that term in subsection
9.6(A)(2).
"Stockholders' Agreement" means the Shareholders Agreement, dated as of
the date hereof, among GII, Investor, Rutherford, Shelby, and the "Managers" and
"Institutional Investors" named therein.
"Subordinated Debt" means (i) the Indebtedness of Borrower under the
Senior Subordinated Notes, (ii) the Indebtedness of Borrower arising after
October 1, 2000 in respect of the "put" rights under section 10 of the
Securities Purchase Agreement and under any promissory notes issued after
October 1, 2000 in connection therewith and (iii) all Liabilities of Borrower in
respect of expenses, indemnification, fees and costs under the Subordinated Debt
Documents.
"Subordinated Debt Documents" means and includes each Securities
Purchase Agreement, all Senior Subordinated Notes, the Note Guarantees, the
Stockholders' Agreement, the Warrants and all agreements, documents, and
instruments executed in connection with any of the foregoing.
"Subordination Agreement" means that certain Subordination Agreement to
be executed by each purchaser party to a Securities Purchase Agreement,
Borrower, GII and the Agent, substantially in the form of Exhibit 13 hereto.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the total voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other subsidiaries of that Person or a combination thereof. A
Permitted Joint Venture in which no investment in excess of the amount permitted
under subsection 7.4(d) has been invested shall not constitute a "Subsidiary"
under this Agreement.
"Term Loan" means the advance made pursuant to subsection 2.1(A).
"Term Loan Commitment" means (a) as to any Lender, the commitment of
such Lender to make a portion of the Term Loan in the amount set forth on the
signature page of this Agreement opposite such Lender's signature or in the most
recent Lender Addition Agreement, if any, executed by such Lender and (b) as to
all Lenders, the aggregate commitment of all Lenders to make the Term Loan.
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<PAGE> 22
"Term Note" or "Term Notes" means each promissory note of Borrower in
substantially the form of Exhibit 14, issued pursuant to subsection 2.1(E).
"Termination Date" has the meaning assigned to that term in subsection
2.5.
"Total Loan Commitment" means the aggregate commitments of any Lender
with respect to the Revolving Loan Commitment and the Term Loan Commitment.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of Illinois as amended from time to time, and any successor
statute.
"Warrants" means each of the warrants issued or to be issued pursuant
to the Securities Purchase Agreements for the purchase of not more in the
aggregate than 7.5% of the common stock of GII (calculated on a fully-diluted
basis).
1.2 ACCOUNTING TERMS. For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to such terms in conformity with GAAP. Financial statements and other
information furnished to Agent or any Lender pursuant to subsection 5.1 shall be
prepared in accordance with GAAP (as in effect at the time of such preparation)
on a consistent basis. In the event any "Accounting Changes" (as defined below)
shall occur and such changes affect financial covenants, standards or terms in
this Agreement, then Borrower and Lenders agree to enter into negotiations in
order to amend such provisions of this Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating the
financial condition of Borrower shall be the same after such Accounting Changes
as if such Accounting Changes had not been made, and until such time as such an
amendment shall have been executed and delivered by Borrower and Requisite
Lenders, (A) all financial covenants, standards and terms in this Agreement
shall be calculated and/or construed as if such Accounting Changes had not been
made, and (B) Borrower shall prepare footnotes to each Compliance Certificate
and the financial statements required to be delivered hereunder that show the
differences between the financial statements delivered (which reflect such
Accounting Changes) and the basis for calculating financial covenant compliance
(without reflecting such Accounting Changes). "Accounting Changes" means: (a)
changes in accounting principles required by GAAP and implemented by Borrower;
(b) changes in accounting principles recommended by Borrower's certified public
accountants; and (c) changes in carrying value of Borrower's (or any of its
Subsidiaries') assets, liabilities or equity accounts resulting from (i) the
application of purchase accounting principles (A.P.B. 16 and/or 17 and EITF
88-16 and FASB 109) to the transactions contemplated by the Recapitalization
Documents or (ii) any other adjustments that, in each case, were applicable to,
but not included in, the Pro Forma. All such adjustments resulting from
expenditures made subsequent to the Closing Date (including, but not limited to,
capitalization of costs and expenses or payment of pre-Closing Date liabilities)
shall be treated as expenses in the period the expenditures are made and
deducted as part of the calculation of EBITDA in such period.
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<PAGE> 23
1.3 OTHER DEFINITIONAL PROVISIONS. References to "Sections",
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection 1.1 may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference. In this Agreement, words importing any gender include the
other genders; the words "including," "includes" and "include" shall be deemed
to be followed by the words "without limitation"; references to agreements and
other contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
SECTION 2. LOANS AND COLLATERAL.
2.1 LOANS.
(A) TERM LOAN. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, each Lender, severally, agrees to lend to Borrower, on the
Closing Date, its Pro Rata Share of the Term Loan which is in the amount of
$10,000,000. The Term Loan shall be funded in one drawing. Amounts borrowed
under this subsection 2.1(A)(1) and repaid may not be reborrowed. Borrower shall
make principal payments in the amounts of the applicable Scheduled Installments
(or such lesser principal amount as shall then be outstanding) on the dates and
in the amounts set forth below.
"Scheduled Installment" means, for each date set forth below,
the amount set forth opposite such date.
<TABLE>
<CAPTION>
DATE SCHEDULED INSTALLMENT
---- ---------------------
<S> <C>
June 30, 1996 and each $450,000
September 30, December 31, March 31
and June 30 thereafter to and
including June 30, 2000
September 30, 2000 $2,350,000
</TABLE>
(B) REVOLVING LOAN. Subject to the terms and conditions of
this Agreement and in reliance upon the representations and warranties of
Borrower herein set forth, each Lender, severally, agrees to lend to Borrower
from time to time its Pro Rata Share of the Revolving Loan. The aggregate amount
of all Revolving Loan Commitments shall not exceed at any time $22,000,000.
Amounts borrowed under this subsection 2.1(B) may be repaid and reborrowed at
any time prior to the earlier of (i) the termination of the Revolving Loan
Commitment pursuant to subsection 8.3 or
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<PAGE> 24
(ii) the Termination Date. Except as otherwise provided herein, no Lender shall
have any obligation to make advances under this subsection 2.1(B) to the extent
any requested advance would cause the balance of the Revolving Loan then
outstanding (after giving effect to any immediate application of the proceeds
thereof) to exceed the Maximum Revolving Loan Amount.
(1) "Maximum Revolving Loan Amount" means, as of any date of
determination, the lesser of (a) the Revolving Loan Commitment minus the Letter
of Credit Reserve and (b) the Borrowing Base minus the Letter of Credit Reserve.
(2) "Borrowing Base" means, as of any date of determination,
an amount equal to the sum of (a) eighty five percent (85%) of Eligible Accounts
PLUS (b) the lesser of (i) (x) prior to January 1, 1998, $12,000,000 and (y)
from and after January 1, 1998, $13,250,000, and (ii) the sum of eighty percent
(80%) of Eligible Inventory consisting of finished goods, fifty seven percent
(57%) of Eligible Inventory consisting of purchased materials, and twenty-one
percent (21%) of Eligible Inventory consisting of manufactured materials less
(iii) in each case such reserves as Agent in its reasonable discretion elects to
establish. Without limitation on the right of the Agent to establish any and all
reserves which the Agent has the right under the foregoing sentence to
establish, the Agent may establish at any time such reserves in respect of
actual or potential liabilities relating to environmental matters as the Agent
may in its discretion elect, whether or not the report referred to in subsection
5.19 has been delivered and whether or not the recommendations therein have been
implemented.
(C) ELIGIBLE.
"Eligible Accounts" means, as at any date of determination,
the aggregate of all Accounts that Agent, in its reasonable judgment, deems to
be eligible for borrowing purposes. Without limiting the generality of the
foregoing, unless otherwise agreed by Agent, the following Accounts are not
Eligible Accounts:
(1) Accounts which, at the date of issuance of the
respective invoice therefor, were payable more than sixty (60) days after the
date of issuance of such invoice;
(2) Accounts which remain unpaid for more than sixty
(60) days after the due date specified in the original invoice or for more than
ninety (90) days after invoice date if no due date was specified;
(3) Accounts which are otherwise eligible with
respect to which the account debtor is owed a credit by Borrower, but only to
the extent of such credit;
(4) Accounts due from a customer whose principal
place of business is located outside the United States of America unless such
Account is backed by a letter of credit, in form and substance acceptable to
Agent and issued or confirmed by a bank that is organized under the laws of the
United States of America or a State thereof, that is acceptable to Agent;
provided, that
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<PAGE> 25
a copy of such letter of credit has been delivered to Agent as additional
collateral (Borrower hereby agreeing to deliver the original of any such letter
of credit to Agent as Collateral promptly upon request of Agent);
(5) Accounts due from a customer which Agent has
notified Borrower does not have a satisfactory credit standing (after taking
into account any credit enhancement);
(6) Accounts in excess of an aggregate face amount
of $200,000 with respect to which the customer is the United States of America
or any state or any municipality, or any department, agency or instrumentality
thereof unless Borrower has, with respect to such Accounts, complied with the
Federal Assignment of Claims Act (31 U.S.C. Section 3727) or any applicable
statute or municipal ordinance of similar purpose and effect;
(7) Accounts with respect to which the customer is
an Affiliate of Borrower or a director, officer, agent, stockholder or employee
of Borrower or any of its Affiliates; provided, that the Agent may consider as
eligible Accounts owing from entities controlled by Rutherford or Shelby which
arise pursuant to transactions permitted under subsection 7.8;
(8) Accounts due from a customer if more than
twenty-five percent (25%) of the aggregate amount of Accounts of such customer
have at the time remained unpaid for more than sixty (60) days after due date or
ninety (90) days after the invoice date if no due date was specified;
(9) Accounts with respect to which there is any
unresolved dispute with the respective customer (but only to the extent of such
dispute);
(10) Accounts evidenced by an "instrument" or
"chattel paper" (as defined in the UCC) not in the possession of Agent, on
behalf of Lenders;
(11) Accounts with respect to which Agent, on behalf
of Lenders, does not have a valid, first priority and fully perfected security
interest;
(12) Accounts subject to any Lien except those in
favor of Agent, on behalf of Lenders and Permitted Encumbrances of the type
described in clause (a) of the definition herein of Permitted Encumbrance;
(13) Accounts with respect to which the customer is
the subject of any bankruptcy or other insolvency proceeding;
(14) Accounts due from a customer to the extent that
such Accounts exceed in the aggregate an amount equal to twenty percent (20%) of
the aggregate of all Accounts at said date; provided, that during the period
beginning on January 1 and ending on June 30 of each calendar year, Accounts due
from Hertz Corporation shall not be ineligible under this clause (14) except to
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<PAGE> 26
the extent such Accounts exceed in the aggregate an amount equal to thirty
percent (30%) of all Accounts at said date;
(15) Accounts with respect to which the customer's
obligation to pay is conditional or subject to a repurchase obligation or right
to return or with respect to which the goods or services giving rise to such
Account have not been delivered or shipped (as required by the applicable
contract) (or performed, as applicable) and accepted by such account debtor,
including progress billings, bill and hold sales, guarantied sales, sale or
return transactions, sales on approval or consignment sales;
(16) Accounts with respect to which the customer is
located in Indiana, New Jersey, Minnesota, or any other state denying creditors
access to its courts in the absence of a Notice of Business Activities Report or
other similar filing, unless Borrower has either qualified as a foreign
corporation authorized to transact business in such state or has filed a Notice
of Business Activities Report or similar filing with the applicable state agency
for the then current year;
(17) Accounts with respect to which the customer is
a creditor of Borrower, provided, however, that any such Account shall only be
ineligible as to that portion of such Account which is less than or equal to the
amount owed by Borrower to such Person.
"Eligible Inventory" means, as at any date of determination,
the value (determined at the lower of cost or market on a first-in, first-out
basis) of all Inventory owned by and in the possession of Borrower and located
in the United States of America that Agent, in its reasonable credit judgment,
deems to be eligible for borrowing purposes. Without limiting the generality of
the foregoing, unless otherwise agreed by Agent, the following is not Eligible
Inventory: (a) finished goods which do not meet the specifications of a purchase
order for such goods and are not standard products of the Borrower and its
Subsidiaries; (b) Inventory which Agent determines, is unacceptable for
borrowing purposes due to age, quality, type, category and/or quantity; (c)
Inventory with respect to which Agent, on behalf of Lenders, does not have a
valid, first priority and fully perfected security interest; (d) Inventory with
respect to which there exists any Lien in favor of any Person other than Agent,
on behalf of Lenders and other than any Permitted Encumbrance of the type
described in clause (a) of the definition herein of Permitted Encumbrance; (e)
Inventory produced in violation of the Fair Labor Standards Act and subject to
the so-called "hot goods" provisions contained in Title 29 U.S.C. 215 (a)(i);
and (f) Inventory located at any location other than (x) Borrower's principal
location or (y) a location not owned by Borrower as to which a waiver, in form
and substance satisfactory to Agent, has been executed and delivered by the
owner of such premises.
(D) BORROWING MECHANICS. (1) LIBOR Rate Loans made on any
Funding Date shall be in an aggregate minimum amount of $250,000 and integral
multiples of $50,000 in excess of such amount. (2) On any day when Borrower
desires to borrow under this subsection 2.1, Borrower shall give Agent
telephonic notice of the proposed borrowing by 11:00 a.m. Central time on the
Funding Date of a Base Rate Loan and two (2) Business Days in advance of the
Funding Date of a LIBOR Rate Loan, which notice (a "Notice of Borrowing") must
also specify the proposed Funding
20
<PAGE> 27
Date (which shall be a Business Day), whether such Loans shall consist of Base
Rate Loans or LIBOR Rate Loans and for LIBOR Rate Loans the Interest Period
applicable thereto. Any such telephonic notice shall be confirmed in writing (in
substantially the form of Exhibit 15 hereto) on the same day. Neither Agent nor
any Lender shall incur any liability to Borrower for acting upon any telephonic
notice Agent believes in good faith to have been given by a duly authorized
officer or other person authorized to borrow on behalf of Borrower or for
otherwise acting in good faith under this subsection 2.1(D). Neither Agent nor
any Lender will make any advance pursuant to any telephonic notice unless Agent
has also received the most recent Borrowing Base Certificate and all other
documents required under subsection 5.1(F) by 11:00 a.m. Central time. Each such
advance made to Borrower under the Revolving Loan shall be deposited by wire
transfer in immediately available funds in such account as Borrower may from
time to time designate to Agent in writing. Unless payment is otherwise timely
made by Borrower, the becoming due of any amount required to be paid under this
Agreement or any of the other Loan Documents as principal, accrued interest and
fees shall be deemed irrevocably to be a request by Borrower for a Base Rate
Revolving Loan on the due date of, and in the amount required to pay, such
principal, accrued interest and fees, and the proceeds of each such Revolving
Loan if made by Agent or any Lender shall be disbursed by Agent or such Lender
by way of direct payment of the relevant obligation.
(E) NOTES. Borrower shall execute and deliver to each Lender
(i) a Term Note to evidence such Lender's portion of the Term Loan, such Term
Note to be in the principal amount of the Term Loan Commitment of such Lender
and with other appropriate insertions and (ii) a Revolving Note to evidence such
Lender's portion of the Revolving Loan, such Revolving Note to be in the
principal amount of the Revolving Loan Commitment of such Lender and with other
appropriate insertions. In the event of an assignment under subsection 9.1,
Borrower shall, upon surrender of the assigning Lender's Notes, issue new Notes
to reflect the new Commitments of the assigning Lender and its assignee (or, in
the case of Term Notes, the outstanding principal amount of the assigning
Lender's and its assignee's portions of the Term Loan).
(F) EVIDENCE OF REVOLVING LOAN OBLIGATIONS. The advances
constituting the Revolving Loan shall be evidenced by this Agreement, the
Revolving Notes, and notations made from time to time by Agent in its books and
records, including computer records. Agent shall record in its books and
records, including computer records, the principal amount of the Revolving Loans
owing to each Lender from time to time. Agent's books and records shall
constitute presumptive evidence, absent manifest error, of the accuracy of the
information contained therein. Failure by Agent to make any such notation or
record shall not affect the obligations of Borrower to Lenders with respect to
the Revolving Loans.
(G) LETTERS OF CREDIT. Subject to the terms and conditions of
this Agreement and in reliance upon the representations and warranties of
Borrower herein set forth, the Revolving Loan Commitments may, in addition to
advances under the Revolving Loan, be utilized, upon the request of Borrower,
for (i) the issuance of letters of credit by Agent; or with Agent's consent any
Lender, or (ii) the issuance by Agent of risk participations (a "Risk
Participation Agreement") to the banks to induce such banks to issue Bank
Letters of Credit (each of (i) and (ii), a "Lender Letter of Credit").
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Each Lender shall be deemed to have purchased a participation in each Lender
Letter of Credit issued for the account of Borrower (which Lender Letter of
Credit may be issued in connection with a purchase by or obligation of a
Subsidiary) in an amount equal to its Pro Rata Share thereof. In no event shall
any Lender Letter of Credit be issued to the extent that the issuance of such
Lender Letter of Credit would cause the sum of the Letter of Credit Reserve
(after giving effect to such issuance) plus the outstanding principal balance of
the Revolving Loan to exceed the lesser of (x) the Borrowing Base and (y) the
Revolving Loan Commitment.
(1) MAXIMUM AMOUNT. The aggregate amount of Letter
of Credit Liability with respect to all Lender Letters of Credit outstanding at
any time shall not exceed $1,500,000.
(2) REIMBURSEMENT. Borrower shall be irrevocably and
unconditionally obligated forthwith without presentment, demand, protest or
other formalities of any kind, to reimburse Agent or the issuer for any amounts
paid with respect to a Lender Letter of Credit including all fees, costs and
expenses paid to any bank that issues Bank Letters of Credit. Borrower hereby
authorizes and directs Agent, at Agent's option, to debit Borrower's account (by
increasing the principal balance of the Revolving Loan) in the amount of any
payment made with respect to any Lender Letter of Credit. All amounts paid with
respect to any Lender Letter of Credit that are not immediately repaid by
Borrower with the proceeds of a Revolving Loan or otherwise shall bear interest
at the Default Rate applicable to Revolving Loans. In the event that Borrower
shall fail to reimburse Agent on the date of any payment under a Lender Letter
of Credit in an amount equal to the amount of such payment, Agent shall promptly
notify each Lender of the unreimbursed amount of such payment together with
accrued interest thereon and each Lender, on the next Business Day, shall
deliver to Agent an amount equal to its respective participation in same day
funds. The obligation of each Lender to deliver to Agent an amount equal to its
respective participation pursuant to the foregoing sentence shall be absolute
and unconditional and such remittance shall be made notwithstanding the
occurrence or continuation of an Event of Default or Default or the failure to
satisfy any condition set forth in Section 3. In the event any Lender fails to
make available to Agent the amount of such Lender's participation in such Lender
Letter of Credit, Agent shall be entitled to recover such amount on demand from
such Lender together with interest at the Base Rate.
(3) CONDITIONS OF ISSUANCE. In addition to all other
terms and conditions set forth in this Agreement, the issuance of any Lender
Letter of Credit shall be subject to the conditions precedent that the letter of
credit which Borrower requests be in such form, be for such amount, contain such
terms and support purchases of inventory in the ordinary course of business and
such other transactions as are reasonably satisfactory to Agent. The expiration
date of each Lender Letter of Credit shall be on a date which is at least thirty
(30) days prior to the Termination Date.
(4) REQUEST FOR LETTERS OF CREDIT. Borrower shall
give Agent at least five (5) Business Days prior notice specifying the date a
Lender Letter of Credit is to be issued, identifying the beneficiary and
describing the nature of the transactions proposed to be supported thereby. The
notice shall be accompanied by the form of the letter of credit being requested.
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(H) OTHER LETTER OF CREDIT PROVISIONS.
(1) OBLIGATIONS ABSOLUTE. The obligation of Borrower to
reimburse Agent or any Lender for payments made under any Lender Letter of
Credit shall be unconditional and irrevocable and shall be paid strictly in
accordance with the terms of this Agreement under all circumstances including
the following circumstances:
(a) any lack of validity or enforceability of any
Lender Letter of Credit or any other agreement;
(b) the existence of any claim, set-off, defense or
other right which Borrower, any of its Affiliates, Agent or any Lender, on the
one hand, may at any time have against any beneficiary or transferee of any
Lender Letter of Credit or Bank Letter of Credit (or any Persons for whom any
such transferee may be acting), Agent, any Lender or any other Person, on the
other hand, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any underlying
transaction between Borrower or any of its Affiliates and the beneficiary of the
letter of credit);
(c) any draft, demand, certificate or any other
document presented under any Lender Letter of Credit or Bank Letter of Credit
which is forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(d) payment under any Lender Letter of Credit
against presentation of a demand, draft or certificate or other document which
does not comply with the terms of such letter of credit; provided, that, in the
case of any payment by Lender under any Lender Letter of Credit, Lender has not
acted with gross negligence or willful misconduct (as determined by a court of
competent jurisdiction) in determining that the demand for payment under such
Lender Letter of Credit complies on its face with any applicable requirements
for a demand for payment under such Lender Letter of Credit;
(e) any other circumstance or happening whatsoever,
which is similar to any of the foregoing; or
(f) the fact that a Default or an Event of Default
shall have occurred and be continuing.
(2) NATURE OF ISSUER'S DUTIES. As between Agent and Lenders,
on the one hand, and Borrower, on the other hand, Borrower assumes all risks of
the acts and omissions of, or misuse of any Lender Letter of Credit by the
beneficiary thereof. In furtherance and not in limitation of the foregoing,
neither Agent nor any Lender shall be responsible: (a) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document by any party
in connection with the application for and issuance of any Lender Letter of
Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (b) for the validity or
sufficiency of any
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instrument transferring or assigning or purporting to transfer or assign any
Lender Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for
any reason; (c) for failure of the beneficiary of any Lender Letter of Credit to
comply fully with conditions required in order to demand payment thereunder;
provided, that, in the case of any payment by Agent or any Lender under any
Lender Letter of Credit, Agent or Lender has not acted with gross negligence or
willful misconduct (as determined by a court of competent jurisdiction) in
determining that the demand for payment under such Lender Letter of Credit
complies on its face with any applicable requirements for a demand for payment
thereunder; (d) for errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (e) for errors in interpretation of technical
terms; (f) for any loss or delay in the transmission or otherwise of any
document required in order to make a payment under any Lender Letter of Credit ;
(g) for the credit of the proceeds of any drawing under any Lender Letter of
Credit; and (h) for any consequences arising from causes beyond the control of
Agent or any Lender as the case may be. None of the above shall affect, impair,
or prevent the vesting of any of Agent's or any Lender's rights or powers
hereunder.
(3) LIABILITY. In furtherance and extension of and
not in limitation of, the specific provisions herein above set forth, any action
taken or omitted by Agent or any Lender under or in connection with any Lender
Letter of Credit, if taken or omitted in good faith, shall not put Agent or any
Lender under any resulting liability to Borrower.
2.2 INTEREST.
(A) RATE OF INTEREST. The Loans and all other
Obligations shall bear interest from the date such Loans are made or such other
Obligations become due to the date paid at a rate per annum equal to (i) in the
case of Base Rate Loans and Obligations not constituting Loans, the Base Rate
plus (a) three quarters of one percent (3/4%) with respect to the Revolving
Loan, and (b) one percent (1%) with respect to the Term Loan and Obligations not
constituting Loans, and (ii) in the case of LIBOR Rate Loans, the LIBOR Rate
plus (a) two and three quarters percent (2-3/4%) with respect to the Revolving
Loan, and (b) three percent (3%) with respect to the Term Loan (the "Interest
Rate"). The applicable basis for determining the rate of interest shall be
selected by Borrower initially at the time a Notice of Borrowing is given
pursuant to subsection 2.1(D). The basis for determining the interest rate with
respect to any Loan or a portion of any Loan may be changed from time to time
pursuant to subsection 2.2(E). If on any day a Loan or a portion of any Loan is
outstanding with respect to which notice has not been delivered to Agent in
accordance with the terms of this Agreement specifying the basis for determining
the rate of interest, then for that day that Loan or portion thereof shall bear
interest determined by reference to the Base Rate.
After the occurrence and during the continuance of an Event of
Default (i) the Loans and all other Obligations shall, at the option of
Requisite Lenders, bear interest at a rate per annum equal to two percent (2%)
plus the applicable Interest Rate (the "Default Rate"), (ii) each LIBOR Rate
Loan shall automatically convert to a Base Rate Loan at the end of any
applicable Interest Period and (iii) no Loans may be converted to LIBOR Rate
Loans.
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(B) INTEREST PERIODS. In connection with each LIBOR Rate Loan,
Borrower shall elect an interest period (each an "Interest Period") to be
applicable to such Loan, which Interest Period shall be either a one, two, three
or six month period; provided, that:
(1) the initial Interest Period for any Loan shall
commence on the Funding Date of such Loan;
(2) in the case of successive Interest Periods, each
successive Interest Period shall commence on the day on which the immediately
preceding Interest Period expires;
(3) if an Interest Period expiration date is not a
Business Day, such Interest Period shall expire on the next succeeding Business
Day; provided, that if any Interest Period expiration date is not a Business Day
but is a day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the immediately preceding Business
Day;
(4) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to part (5), below, end on the last Business Day of a calendar
month;
(5) no Interest Period shall extend beyond the
Termination Date; and
(6) there shall be no more than five (5) Interest
Periods relating to LIBOR
Rate Loans outstanding at any time.
(C) COMPUTATION AND PAYMENT OF INTEREST. Interest on the Loans
and all other Obligations shall be computed on the daily principal balance on
the basis of a 360 day year for the actual number of days elapsed in the period
during which it accrues. In computing interest on any Loan, the date of funding
of the Loan or the first day of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted from a LIBOR Rate Loan, the
date of conversion of such LIBOR Rate Loan to such Base Rate Loan, shall be
included and the date of payment of such Loan or the expiration date of an
Interest Period applicable to such Loan, or with respect to a Base Rate Loan
being converted to a LIBOR Rate Loan, the date of conversion of such Base Rate
Loan to such LIBOR Rate Loan, shall be excluded; provided, that if a Loan is
repaid on the same day on which it is made, one day's interest shall be paid on
that Loan. Interest on Base Rate Loans and all other Obligations other than
LIBOR Rate Loans shall be payable to Agent for benefit of Lenders monthly in
arrears on the first day of each month, on the date of any prepayment of Loans
and at maturity, whether by acceleration or otherwise. Interest on LIBOR Rate
Loans shall be payable to Agent for benefit of Lenders on the last day of the
applicable Interest Period for such Loan, on the date of any prepayment of the
Loans, and at maturity, whether by acceleration or otherwise. In addition, for
each LIBOR Rate Loan having an Interest Period longer than three (3) months,
interest accrued on such Loan shall also be payable on the last day of each
three (3) month interval during such Interest Period.
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(D) INTEREST LAWS. Notwithstanding any provision to the
contrary contained in this Agreement or any other Loan Document, Borrower shall
not be required to pay, and neither Agent nor any Lender shall be permitted to
collect, any amount of interest in excess of the maximum amount of interest
permitted by law ("Excess Interest"). If any Excess Interest is provided for or
determined by a court of competent jurisdiction to have been provided for in
this Agreement or in any other Loan Document, then in such event: (1) the
provisions of this subsection shall govern and control; (2) neither Borrower nor
any Loan Party shall be obligated to pay any Excess Interest; (3) any Excess
Interest that Agent or any Lender may have received hereunder shall be, at such
Lender's option, (a) applied as a credit against the outstanding principal
balance of the Obligations or accrued and unpaid interest (not to exceed the
maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any
combination of the foregoing; (4) the interest rate(s) provided for herein shall
be automatically reduced to the maximum lawful rate allowed from time to time
under applicable law (the "Maximum Rate"), and this Agreement and the other Loan
Documents shall be deemed to have been and shall be, reformed and modified to
reflect such reduction; and (5) neither Borrower nor any Loan Party shall have
any action against Agent or any Lender for any damages arising out of the
payment or collection of any Excess Interest. Notwithstanding the foregoing, if
for any period of time interest on any Obligations is calculated at the Maximum
Rate rather than the applicable rate under this Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate, the rate of interest payable
on such Obligations shall remain at the Maximum Rate until each Lender shall
have received the amount of interest which such Lender would have received
during such period on such Obligations had the rate of interest not been limited
to the Maximum Rate during such period.
(E) CONVERSION OR CONTINUATION. Subject to the provisions of
subsection 2.2(B) Borrower shall have the option to (1) convert at any time all
or any part of outstanding Loans equal to $250,000 and integral multiples of
$50,000 in excess of that amount from Base Rate Loans to LIBOR Rate Loans or (2)
upon the expiration of any Interest Period applicable to a LIBOR Rate Loan, to
(a) continue all or any portion of such Loan equal to $250,000 and integral
multiplies of $50,000 in excess of that amount as a LIBOR Rate Loan or (b)
convert all or any portion of such Loan to a Base Rate Loan. The succeeding
Interest Period(s) of such continued or converted Loan commence on the last day
of the Interest Period of the Loan to be continued or converted; provided, that
no outstanding Loan may be continued as, or be converted into, a LIBOR Rate
Loan, when any Event of Default or Payment Default has occurred and is
continuing.
Borrower shall deliver a notice of conversion/continuation to
Agent no later than 11:00 A.M. (Central time) at least two (2) Business Days in
advance of the proposed conversion/ continuation date ("Notice of
Conversion/Continuation"). A Notice of Conversion/Continuation shall certify:
(1) the proposed conversion/continuation date (which shall be a Business Day);
(2) the amount of the Loan to be converted/continued; (3) the nature of the
proposed conversion/continuation; (4) in the case of conversion to, or a
continuation of, a LIBOR Rate Loan, the requested Interest Period; and (5) that
no Event of Default or Payment Default has occurred and is continuing or would
result from the proposed conversion/continuation.
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In lieu of delivering the Notice of Conversion/Continuation,
Borrower may give Agent telephonic notice by the required time of any proposed
conversion/continuation under this subsection 2.2(E); provided, that such notice
shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Agent on or before the proposed
conversion/continuation date.
Neither Agent nor any Lender shall incur any liability to
Borrower in acting upon any telephonic notice referred to above that Agent
believes in good faith to have been given by a duly authorized officer or other
person authorized to act on behalf of Borrower or for otherwise acting in good
faith under this subsection 2.2(E) and upon conversion/continuation by Lenders
in accordance with this Agreement pursuant to any telephonic notice, Borrower
shall have effected such conversion or continuation, as the case may be,
hereunder.
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2.3 FEES.
(A) UNUSED LINE FEE. Borrower shall pay to Agent,
for the benefit of Lenders, a fee in an amount equal to the Revolving Loan
Commitment less the sum of the average daily balance of the Revolving Loan plus
the average daily face amount of the Letter of Credit Reserve during the
preceding month multiplied by 1/2 percent per annum, such fee to be calculated
on the basis of a 360 day year for the actual number of days elapsed and to be
payable monthly in arrears on the first day of the first calendar month
following the Closing Date and the first day of each month thereafter.
(B) LETTER OF CREDIT FEES. Borrower shall pay to
Agent for the account of Lenders, a fee with respect to the Lender Letters of
Credit in the amount of the average daily amount of Letter of Credit Liability
outstanding during such month multiplied by one percent (1%) per annum. Such
fees will be calculated on the basis of a 360 day year for the actual number of
days elapsed and will be payable monthly in arrears on the first day of each
month. Borrower shall also reimburse Agent for any and all fees and expenses, if
any, paid by Agent or any Lender to the issuer of the Bank Letters of Credit.
(C) PREPAYMENT FEES. If Borrower voluntarily prepays
in full the Obligations (other than voluntary prepayments of the Revolving Loan
which do not terminate the Revolving Loan Commitment), Borrower at the time of
prepayment shall pay to Agent, for the benefit of Lenders, as compensation for
the costs of being prepared to make funds available to Borrower under this
Agreement, and not as a penalty, an amount equal to $320,000 upon a prepayment
during the first Loan Year, and $160,000 upon a prepayment during the second
Loan Year.
(D) COLLATERAL MONITORING FEE. On the Closing Date
and on first day of each calendar month thereafter, the Borrower shall pay to
Agent, for its own account, a nonrefundable collateral monitoring fee of $2,667.
(E) AUDIT FEES. Borrower agrees to pay to Agent for
its own account an audit fee for each inspection equal to $600 per day, together
with reasonable out of pocket expenses.
(F) OTHER FEES AND EXPENSES. Borrower shall pay to
Agent, for its own account, all charges for returned items and all other bank
charges incurred by Agent, as well as Agent's standard wire transfer charges for
each wire transfer made under this Agreement.
(G) OTHER FEES. Borrower shall pay to Agent for its
own account the fees set forth in the letter dated the date hereof between
Borrower and Agent.
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2.4 PAYMENTS AND PREPAYMENTS.
(A) MANNER AND TIME OF PAYMENT. In its sole
discretion, Agent may charge interest and other amounts payable hereunder to the
Revolving Loan, all as set forth on Agent's books and records. If Agent elects
to bill Borrower for any amount due hereunder, such amount shall be immediately
due and payable with interest thereon as provided herein. All payments made by
Borrower with respect to the Obligations shall be made without deduction,
defense, setoff or counterclaim. All payments to Agent hereunder shall, unless
otherwise directed by Agent, be made to Agent's Account or in accordance with
subsection 5.6. Proceeds remitted to Agent's Account other than in accordance
with the next sentence shall be credited to the Obligations on the first
Business Day following the day such proceeds were received; provided, however,
for the purpose of calculating interest on the Obligations, such funds shall be
deemed received on the second Business Day after such proceeds were received.
Proceeds remitted to Agent's Account by wire transfer shall be credited to the
Obligations on the Business Day received; provided, however, for the purpose of
calculating interest on the Obligations such funds shall be deemed received the
first Business Day thereafter.
(B) MANDATORY PREPAYMENTS.
(1) OVERADVANCE. At any time that the principal
balance of the Revolving Loan exceeds the Maximum Revolving Loan Amount,
Borrower shall, upon demand by Agent, immediately repay the Revolving Loan to
the extent necessary to reduce the principal balance to an amount that is equal
to or less than the Maximum Revolving Loan Amount.
(2) PROCEEDS OF ASSET DISPOSITIONS. Immediately upon
receipt by Borrower or any of its Subsidiaries of proceeds of any Asset
Disposition (in one or a series of related transactions), which proceeds exceed
$50,000 (it being understood that if the proceeds exceed $50,000, the entire
amount and not just the portion above $50,000 shall be subject to this
subsection 2.4(B)(2)), Borrower shall prepay the Obligations in an amount equal
to such proceeds. If Borrower reasonably expects the proceeds of any Asset
Disposition to be reinvested within 180 days to repair or replace such assets
with like assets, Borrower shall deliver the proceeds to Agent to be applied to
the Revolving Loan, and Borrower may, so long as no Event of Default or Payment
Default shall have occurred and be continuing, reborrow such proceeds only for
such repair or replacement. If Borrower fails to reinvest such proceeds within
180 days, Borrower hereby authorizes Lenders to make a Revolving Loan to repay
the Term Loan as required hereby and/or if the Term Loan has been repaid, the
Revolving Loan Commitment shall be permanently reduced as provided herein. All
such prepayments shall first be applied in payment of Scheduled Installments in
the inverse order of maturity and, at any time after the Term Loan shall have
been repaid in full, such payments shall be applied as a permanent reduction of
the Revolving Loan Commitment.
(3) PREPAYMENTS FROM EXCESS CASH FLOW. Within one
hundred fifty (150) days after the end of each Fiscal Year beginning with the
fiscal year ending on December 31, 1996,
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Borrower shall prepay the Obligations in an amount equal to fifty percent (50%)
of Excess Cash Flow for such Fiscal Year calculated on the basis of the audited
financial statements for such Fiscal Year delivered to Agent and Lenders
pursuant to subsection 5.1(c); provided, however, that the amount of prepayment
under this paragraph (3) in respect of any Fiscal Year ending on or prior to
December 31, 1997 shall not exceed $1,000,000. All such prepayments from Excess
Cash Flow shall first be applied in payment of Scheduled Installments of the
Term Loan in inverse order of maturity and, at any time after the Term Loan
shall have been repaid in full, such payments shall be applied as a permanent
reduction of the Revolving Loan Commitment. Concurrently with the making of any
such payment, Borrower shall deliver to Agent and Lenders a certificate of
Borrower's chief executive officer or chief financial officer demonstrating its
calculation of the amount required to be paid.
(4) PREPAYMENTS FROM REDUCED CAPITAL EXPENDITURES.
Within sixty (60) days after the end of Borrower's Fiscal Year ending December
31, 1996, Borrower shall prepay the Obligations in an amount equal to 75% of the
difference, if positive, of $4,000,000 minus Borrower's actual Capital
Expenditures, such amount to be applied in payment of the Scheduled Installments
of the Term Loan in inverse order of maturity.
(C) VOLUNTARY PREPAYMENTS AND REPAYMENTS. Borrower may, at any
time upon not less than three Business Days' prior notice to Agent, prepay the
Term Loan in full at any time, or in part from time to time, in amounts of at
least $250,000 or any larger multiple of $50,000, or terminate the Revolving
Loan Commitment in full at any time, or reduce the Revolving Loan Commitment
from time to time in amounts of $250,000 or any larger multiple of $50,000;
provided, however, that (i) the Revolving Loan Commitment may not be terminated
by Borrower until the Term Loan is paid in full, (ii) the Revolving Loan
Commitment may not be reduced by Borrower to an amount which is less than than
the sum of (x) the Letter of Credit Reserve at such time and (y) the outstanding
principal balance of the Term Loan at such time, and (iii) upon the giving of
notice of any such reduction or termination, the Term Loan or Revolving Loan (in
the case of prepayment in full of the Term Loan or termination of the Revolving
Loan Commitment), the portion of the Term Loan to be prepaid (in case of partial
prepayment of the Term Loan) or the amount by which the Revolving Loan exceeds
the Maximum Revolving Loan Amount (in the case of reduction of the Revolving
Loan Commitment and after giving effect thereto) shall become due and payable on
the date specified in such notice. Upon termination of the Revolving Loan
Commitment, Borrower shall cause Agent and each Lender to be released from all
liability under any Lender Letters of Credit or, at Agent's option, Borrower
will deposit cash collateral with Agent in an amount equal to 105% of the Letter
of Credit Reserve that will remain outstanding after prepayment or repayment.
(D) PAYMENTS ON BUSINESS DAYS. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, the
payment may be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the amount of interest or fees due
hereunder.
2.5 TERM OF THIS AGREEMENT. This Agreement shall be effective
until the fifth anniversary of the Closing Date (the "Original Term") and shall
automatically renew from year to year
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thereafter (each such year a "Renewal Term") unless terminated by (a) Borrower
giving to Agent or (b) any Lender giving to Borrower and Agent not less than
sixty (60) days prior written notice of its intention to terminate at the end of
the Original Term or at the end of any Renewal Term (the "Termination Date").
The Commitments shall (unless earlier terminated) terminate upon the earlier of
(i) the time that the Obligations become immediately due and payable (whether
automatically or by declaration) under subsection 8.3 or (ii) the Termination
Date. Upon termination in accordance with subsection 8.3 or on the Termination
Date, all Obligations shall become immediately due and payable without notice or
demand. Notwithstanding any termination, until all Obligations have been fully
paid and satisfied, Agent, on behalf of Lenders, shall be entitled to retain
security interests in and liens upon all Collateral, and even after payment of
all Obligations hereunder, Borrower's obligation to indemnify Agent and each
Lender in accordance with the terms hereof shall continue.
2.6 STATEMENTS. Agent shall render a monthly statement of
account to Borrower within twenty (20) days after the end of each month. Such
statement of account shall constitute an account stated unless Borrower makes
written objection thereto within thirty (30) days from the date such statement
is mailed to Borrower. Borrower promises to pay all of its Obligations as such
amounts become due or are declared due pursuant to the terms of this Agreement.
2.7 GRANT OF SECURITY INTEREST. To secure the payment and
performance of the Obligations, including all renewals, extensions,
restructurings and refinancings of any or all of the Obligations, Borrower
hereby grants to Agent, on behalf of Lenders, a continuing security interest,
lien and mortgage in and to all right, title and interest of Borrower in the
following property of Borrower, whether now owned or existing or hereafter
acquired or arising and regardless of where located (all being collectively
referred to as the "Collateral"): (A) Accounts, and all guaranties and security
therefor (including, without limitation, all security interests and security
agreements securing same and all financing statements filed in respect of such
security interests), and all goods and rights represented thereby or arising
therefrom including the right of stoppage in transit, replevin and reclamation;
(B) Inventory; (C) general intangibles (as defined in the UCC); (D) documents
(as defined in the UCC) or other receipts covering, evidencing or representing
goods; (E) instruments, letters of credit, and certificated and uncertificated
securities (each as defined in the UCC); (F) chattel paper (as defined in the
UCC); (G) Equipment; (H) Mortgaged Property; (I) Intellectual Property; (J) all
deposit accounts of Borrower maintained with any bank or financial institution;
(K) all cash and other monies and property of Borrower in the possession or
under the control of Agent, any Lender or any participant; (L) all books,
records, ledger cards, files, correspondence, computer programs, tapes, disks
and related data processing software that at any time evidence or contain
information relating to any of the property described above or are otherwise
necessary or helpful in the collection thereof or realization thereon; and (M)
proceeds of all or any of the property described above, including, without
limitation, the proceeds of any insurance policies covering any of the above
described property.
2.8 CAPITAL ADEQUACY AND OTHER ADJUSTMENTS. In the event
Agent or any Lender shall have determined that the adoption after the date
hereof of any law, treaty, governmental (or quasi-governmental) rule,
regulation, guideline or order regarding capital adequacy, reserve
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requirements or similar requirements or compliance by Agent or such Lender or
any corporation controlling Agent or such Lender with any request or directive
issued after the date hereof regarding capital adequacy, reserve requirements or
similar requirements (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) from any central bank or
governmental agency or body having jurisdiction does or shall have the effect of
increasing the amount of capital, reserves or other funds required to be
maintained by Agent or such Lender or any corporation controlling Agent or such
Lender and thereby reducing the rate of return on Agent's or such Lender's or
such corporation's capital as a consequence of its obligations hereunder, then
Borrower shall from time to time within fifteen (15) days after notice and
demand from such Lender (with a copy to Agent) or Agent (together with the
certificate referred to in the next sentence) pay to Agent or such Lender
additional amounts sufficient to compensate Agent or such Lender for such
reduction. A certificate as to the amount of such cost and showing the basis of
the computation of such cost submitted by Agent or any Lender to Borrower shall,
absent manifest error, be final, conclusive and binding for all purposes. Each
Lender shall use reasonable efforts to promptly notify Borrower of the
occurrence of an event which such Lender has determined entitles such Lender to
payment under this subsection 2.8, provided, that the failure to give such
notice promptly by any Lender shall not impair such Lender's right to demand
payment under this subsection 2.8 for any period of not more than 180 days prior
to the date notice is actually given by such Lender to Borrower.
2.9 TAXES.
(A) NO DEDUCTIONS. Any and all payments or
reimbursements made hereunder or under the Notes shall be made without setoff or
counterclaim and free and clear of and without deduction for any and all taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto; excluding, however, the following: income, franchise and
similar taxes based on, or determined by reference to, net income that are
imposed on any Lender or Agent by the jurisdiction under the laws of which Agent
or such Lender is organized or doing business or any political subdivision
thereof and income, franchise and similar taxes based on, or determined by
reference to, net income that are imposed on any Lender or Agent by the
jurisdiction of Agent's or such Lender's applicable lending office or any
political subdivision thereof (all such taxes, levies, imposts, deductions,
charges or withholdings and all liabilities with respect thereto, excluding such
income, franchise and similar taxes based on, or determined by reference to, net
income, herein "Tax Liabilities"). If Borrower shall be required by law to
deduct any such Tax Liabilities from or in respect of any sum payable hereunder
to Agent or any Lender, then the sum payable hereunder shall be increased as may
be necessary so that, after making all required deductions, Agent or such Lender
receives an amount equal to the sum it would have received had no such
deductions been made.
(B) CHANGES IN TAX LAWS In the event that,
subsequent to the Closing Date, (i) any changes in any existing law, regulation,
treaty or directive or in the interpretation or application thereof, (ii) any
new law, regulation, treaty or directive enacted or any interpretation or
application thereof, or (iii) compliance by Lender with any request or directive
(whether or not having the force of law) from any governmental authority, agency
or instrumentality:
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(1) does or shall subject Agent or any Lender to any
tax of any kind whatsoever with respect to this Agreement, the other Loan
Documents or any Loans made or Lender Letters of Credit issued hereunder, or
change the basis of taxation of payments to Agent or such Lender of principal,
fees, interest or any other amount payable hereunder (except for net income
taxes, or franchise taxes imposed in lieu of net income taxes, imposed generally
by federal, state or local taxing authorities with respect to interest or
commitment or other fees payable hereunder or changes in the rate of tax on the
overall net income of Agent or such Lender); or
(2) does or shall impose on Agent or any Lender any
other condition or increased cost in connection with the transactions
contemplated hereby or participations herein; and the result of any of the
foregoing is to increase the cost to Agent or such Lender of issuing any Lender
Letter of Credit or making or continuing any Loan hereunder, as the case may be,
or to reduce any amount receivable hereunder,
then, in any such case, Borrower shall promptly pay to Agent or such Lender,
upon its demand, any additional amounts necessary to compensate Agent or such
Lender, on an after-tax basis, for such additional cost or reduced amount
receivable, as determined by Agent or such Lender with respect to this Agreement
or the other Loan Documents. If Agent or any Lender becomes entitled to claim
any additional amounts pursuant to this subsection, it shall promptly notify
Borrower of the event by reason of which Agent or such Lender has become so
entitled. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Agent or any Lender to Borrower shall, absent
manifest error, be final, conclusive and binding for all purposes.
(C) FOREIGN LENDERS. Each Lender organized under the
laws of a jurisdiction outside the United States (a "Foreign Lender") shall
provide to Borrower and Agent, on or prior to the date upon which it shall have
become a Lender hereunder, and from time to time thereafter, if requested in
writing by the Borrower, (but only so long as Lender remains lawfully able to do
so) a properly completed and executed Internal Revenue Service Form 4224 or Form
1001 or other applicable form, certificate or document prescribed by the
Internal Revenue Service of the United States certifying as to such Foreign
Lender's entitlement to such exemption from United States withholding tax with
respect to payments to be made to such Foreign Lender under this Agreement and
under the Notes (a "Certificate of Exemption"). Prior to becoming a Lender under
this Agreement and within fifteen (15) days after a reasonable written request
of Borrower or Agent from time to time thereafter, each Foreign Lender that
becomes a Lender under this Agreement shall provide a Certificate of Exemption.
If a Foreign Lender does not provide a Certificate
of Exemption to Borrower and Agent within the time periods set forth in the
preceding paragraph (unless such failure is due to a change in treaty, law or
regulation occurring subsequent to the date upon which such Lender became a
Lender hereunder), Borrower shall withhold taxes from payments to such Foreign
Lender at the applicable statutory rates and Borrower shall not be required to
pay any additional amounts as a result of such withholding; provided, however,
that all such withholding shall cease upon delivery by such Foreign Lender of a
Certificate of Exemption to Borrower and Agent.
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2.10 REQUIRED TERMINATION AND PREPAYMENT. If on any
date any Lender shall have reasonably determined (which determination shall be
final and conclusive and binding upon all parties) that the making or
continuation of its LIBOR Rate Loans has become unlawful or impossible by
compliance by Lender in good faith with any law, governmental rule, regulation
or order (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful), then, and in any such event, that Lender
shall promptly give notice (by telephone confirmed in writing) to Borrower and
Agent of that determination. Subject to prior withdrawal of a Notice of
Borrowing or a Notice of Conversion/Continuation or prepayment of the LIBOR Rate
Loans as contemplated by the subsection 2.11, the obligation of Lender to make
or maintain its LIBOR Rate Loans during any such period shall be terminated at
the earlier of the termination of the Interest Period then in effect or when
required by law and Borrower shall no later than the termination of the Interest
Period in effect at the time any such determination pursuant to this subsection
2.10 is made or, when required by law, earlier, repay or prepay the LIBOR Rate
Loans together with all interest accrued thereon or convert the LIBOR Rate Loans
to Base Rate Loans.
2.11 OPTIONAL PREPAYMENT/REPLACEMENT OF AGENT OR LENDERS IN
RESPECT OF INCREASED COSTS. Within fifteen (15) days after receipt by Borrower
of written notice and demand from Agent or any Lender (an "Affected Lender") for
payment of additional costs or additional amounts as provided in subsection 2.8
or subsection 2.9 or of a determination that such Affected Lender may not make
or maintain LIBOR Rate Loans, as provided in subsection 2.10, Borrower may, at
its option, notify Agent and such Affected Lender of its intention to do one of
the following:
(A) Borrower may obtain, at Borrower's expense, a replacement
Lender ("Replacement Lender") for such Affected Lender, which Replacement Lender
shall be reasonably satisfactory to Agent. In the event Borrower obtains a
Replacement Lender within ninety (90) days following notice of its intention to
do so, the Affected Lender shall sell and assign its Loans and Commitments to
such Replacement Lender provided, that Borrower has reimbursed such Affected
Lender for its increased costs for which it is entitled to reimbursement under
this Agreement through the date of such sale and assignment.
(B) Borrower may prepay in full all outstanding Obligations
owed to such Affected Lender and terminate such Affected Lender's Commitments.
Borrower shall, within ninety (90) days following notice of its intention to do
so, prepay in full all outstanding Obligations owed to such Affected Lender
(including such Affected Lender's increased costs for which it is entitled to
reimbursement under this Agreement through the date of such prepayment but
excluding the prepayment fee referenced in subsection 2.3(C)) and terminate such
Affected Lender's Commitments.
2.12 COMPENSATION. Borrower shall compensate Lender, upon
written request by Lender (which request shall set forth in reasonable detail
the basis for requesting such amounts and which shall, absent manifest error, be
conclusive and binding upon all parties hereto), for all reasonable losses,
expenses and liabilities (including, without limitation, any loss (including
interest paid) sustained by Lender in connection with the re-employment of such
funds), Lender may sustain: (i) if for any reason (other than a default by
Lender) a borrowing of any LIBOR Rate Loan does not
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occur on a date specified therefor in a Notice of Borrowing, a Notice of
Conversion/Continuation or a telephonic request for borrowing or
Conversion/Continuation; (ii) if any prepayment or conversion to a Base Rate
Loan of any of its LIBOR Rate Loans occurs on a date that is not the last day of
an Interest Period applicable to that Loan; (iii) if any prepayment of any of
its LIBOR Rate Loans is not made on any date specified in a notice of prepayment
given by Borrower; or (iv) as a consequence of any other default by Borrower to
repay its LIBOR Rate Loans when required by the terms of this Agreement;
provided, that during the period while any such amounts have not been paid,
Lender shall reserve an equal amount from amounts otherwise available to be
borrowed under the Revolving Loan.
2.13 BOOKING OF LIBOR RATE LOANS. Lender may make, carry or
transfer LIBOR Rate Loans at, to, or for the account of, any of its branch
offices or the office of an Affiliate of Lender.
2.14 ASSUMPTIONS CONCERNING FUNDING OF LIBOR RATE LOANS.
Calculation of all amounts payable to Lender under subsection 2.12 shall be made
as though Lender had actually funded its relevant LIBOR Rate Loan through the
purchase of a LIBOR deposit bearing interest at the LIBOR Rate in an amount
equal to the amount of that LIBOR Rate Loan and having maturity comparable to
the relevant Interest Period and through the transfer of such LIBOR deposit from
an offshore office to a domestic office in the United States of America;
provided, however, that Lender may fund each of its LIBOR Rate Loans in any
manner it sees fit and the foregoing assumption shall be utilized only for the
calculation of amounts payable under subsection 2.12.
SECTION 3. CONDITIONS TO LOAN.
3.1 CONDITIONS TO LOANS. The obligations of Agent and each
Lender to make Loans and the obligation of Agent or any Lender to issue Lender
Letters of Credit on the Closing Date and on each Funding Date are subject to
satisfaction of all of the conditions set forth below.
(A) CLOSING DELIVERIES. Agent shall have received,
in form and substance satisfactory to Agent and Lenders, all documents,
instruments and information identified on Schedule 3.1(A) and all other
agreements, notes, certificates, orders, authorizations, financing statements,
mortgages and other documents which Agent may at any time reasonably request.
(B) SECURITY INTERESTS. Agent and Lenders shall have
received satisfactory evidence that all security interests and liens granted to
Agent for the benefit of Lenders pursuant to this Agreement or the other Loan
Documents have been duly perfected (except to the extent that arrangements
satisfactory to the Agent for such perfection have been made) and constitute (or
as to security interests and liens as to which such arrangements have been made,
will constitute) first priority security interests and liens on the Collateral,
subject only to Permitted Encumbrances.
(C) CLOSING DATE AVAILABILITY. After giving effect
to the consummation of the transactions contemplated hereunder on the Closing
Date and the payment by Borrower of all
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costs, fees and expenses relating thereto, the Maximum Revolving Loan Amount on
the Closing Date shall exceed the principal balance of the Revolving Loans plus
the Letter of Credit Reserve by at least $3,000,000 and such excess shall have
been created without any deferral by Borrower of its accounts payable not in the
ordinary course of business.
(D) REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein and in the Loan Documents shall
be true, correct and complete in all material respects on and as of that Funding
Date to the same extent as though made on and as of that date, except for any
representation or warranty limited by its terms to a specific date and taking
into account any amendments to the Schedules or Exhibits as a result of any
disclosures made by Borrower to Agent after the Closing Date and approved by
Agent.
(E) FEES. With respect to Loans or Lender Letters of
Credit to be made or issued on the Closing Date, Borrower shall have paid the
fees payable on the Closing Date referred to in subsection 2.3.
(F) NO DEFAULT. No event shall have occurred and be
continuing or would result from the consummation of the requested borrowing or
notice requesting issuance of a Lender Letter of Credit that would constitute an
Event of Default or a Default.
(G) PERFORMANCE OF AGREEMENTS. Each Loan Party shall
have performed in all material respects all agreements and satisfied all
conditions which any Loan Document provides shall be performed by it on or
before that Funding Date.
(H) NO PROHIBITION. No order, judgment or decree of
any court, arbitrator or governmental authority shall purport to enjoin or
restrain Agent or any Lender from making any Loans or issuing any Lender Letters
of Credit.
(I) NO LITIGATION. There shall not be pending or, to
the knowledge of Borrower, threatened, any action, charge, claim, demand, suit,
proceeding, petition, governmental investigation or arbitration by, against or
affecting any Loan Party or any of its Subsidiaries or any property of any Loan
Party, or any of its Subsidiaries that has not been disclosed by Borrower in
writing, and there shall have occurred no development in any such action,
charge, claim, demand, suit, proceeding, petition, governmental investigation or
arbitration that would reasonably be expected to have a Material Adverse Effect
or which involves any of the transactions contemplated under the
Recapitalization Documents.
(J) RECAPITALIZATION. The Recapitalization Agreement
and all agreements entered into in connection therewith (collectively, the
"Recapitalization Documents") shall, on the Closing Date, be in form and
substance and contain terms satisfactory to Agent and Lenders. All conditions
precedent to the consummation of the transactions contemplated by the
Recapitalization Documents shall have been satisfied without any waiver and all
transactions which were to have occurred upon the closing under the
Recapitalization Agreement shall have occurred. Pursuant to
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the Recapitalization Documents Investor shall have invested not less than
$10,500,000 in cash equity in GII.
(K) SUBORDINATED DEBT. On the Closing Date, the
Subordinated Debt shall be on terms and conditions satisfactory to Agent and
Lenders and Borrower shall have received gross proceeds of not less than
$10,000,000 in cash. The holders of Subordinated Debt shall have entered into a
Subordination Agreement, which shall be in form and substance satisfactory to
Agent and Lenders.
(L) ADDITIONAL DOCUMENTS. The Agent shall have
received a certified copy of the Recapitalization Documents and all documents
entered into in connection with the Subordinated Debt.
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES.
In order to induce Agent and each Lender to enter into this
Agreement, and to make Loans and to issue Lender Letters of Credit, Borrower
represents and warrants to Agent and each Lender that the following statements
are and, on the Closing Date and each other Funding Date, will be true, correct
and complete:
4.1 ORGANIZATION, POWERS, CAPITALIZATION.
(A) ORGANIZATION AND POWERS. Each of the Loan
Parties is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and qualified to do business
in all states where such qualification is required, except where failure to be
so qualified could not be reasonably expected to have a Material Adverse Effect.
Each of the Loan Parties has all requisite corporate power and authority to own
and operate its properties, to carry on its business as now conducted and
proposed to be conducted and to enter into each Loan Document.
(B) CAPITALIZATION. The authorized capital stock of
each of the Loan Parties is, as of the Closing Date, as set forth on Schedule
4.1(B). All issued and outstanding shares of capital stock of each of the Loan
Parties are duly authorized and validly issued, fully paid, nonassessable, free
and clear of all Liens other than those in favor of Agent for the benefit of
Lenders, and such shares were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. As of the Closing Date, the
capital stock of each of the Loan Parties is owned by the stockholders and in
the amounts set forth on Schedule 4.1(B). As of the Closing Date, no shares of
the capital stock of any Loan Party, other than those described above, are
issued and outstanding. There are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or understandings for
the purchase or acquisition from any Loan Party, of any shares of capital stock
or other securities of any such entity other than pursuant to the Stockholders'
Agreement and the Subordinated Debt Documents.
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4.2 AUTHORIZATION OF BORROWING, NO CONFLICT.
Borrower has the corporate power and authority to incur the Obligations and to
grant security interests in the Collateral. On the Closing Date, the execution,
delivery and performance of the Loan Documents by each Loan Party signatory
thereto will have been duly authorized by all necessary corporate and
shareholder action. The execution, delivery and performance by each Loan Party
of each Loan Document to which it is a party and the consummation of the
transactions contemplated by this Agreement and the other Loan Documents by each
Loan Party do not contravene and will not be in contravention of any applicable
law, the corporate charter or bylaws of any Loan Party or any agreement or order
by which any Loan Party or any Loan Party's property is bound. This Agreement is
and each of the other Loan Docu ments when executed and delivered in accordance
with this Agreement will be, the legally valid and binding obligation of the
each Loan Party party thereto, enforceable against such Loan Party in accordance
with its terms.
4.3 FINANCIAL CONDITION. The financial statements
concerning Borrower and its Subsidiaries as of and for the fiscal years ended
December 31, 1992, December 31, 1993 and December 31, 1994, and as of and for
the nine months ended September 30, 1995, copies of which have been furnished by
Borrower and its Subsidiaries to Agent or any Lender pursuant to this Agreement
have been prepared in accordance with GAAP consistently applied throughout the
periods involved (except as disclosed therein and not including, in the case of
such interim financial statements normal year end adjustments) and present
fairly the financial condition of the corporations covered thereby as at the
dates thereof and the results of their operations for the periods then ended.
The Pro Forma was prepared by Borrower based on the unaudited balance sheet of
Borrower dated September 30, 1995. The Projections delivered and to be delivered
have been and will be prepared by Borrower in light of the past operations of
the business of Borrower and its Subsidiaries, and, to the extent of the first
12 month period covered by such Projections, such Projections represent and will
represent the good faith estimate of Borrower and its senior management
concerning the most probable course of its business for such 12 month period as
of the date such Projections are prepared and delivered.
4.4 INDEBTEDNESS AND LIABILITIES. As of the Closing
Date, neither Borrower nor any of its Subsidiaries has (a) any Indebtedness
except as reflected on the Pro Forma or (b) any Liabilities other than as
reflected on the Pro Forma or as incurred in the ordinary course of business
following the date of the most recent financial statements delivered to Agent
and Lenders.
4.5 ACCOUNT WARRANTIES. As to each Account reflected
on any Borrowing Base Certificate: at the time of its creation, the Account is a
valid, bona fide account, representing an undisputed indebtedness incurred by
the named account debtor for goods actually sold and delivered or shipped as
required by the applicable contract or for services completely rendered; there
are no setoffs, offsets or counterclaims, genuine or otherwise, against the
Account against such Account other than any reflected on the Borrowing Base
Certificate delivered to the Agent; the Account does not represent a sale to an
Affiliate or a consignment, sale or return or a bill and hold transaction; no
specific agreement exists permitting any deduction or discount (other than the
discount stated on the invoice) other than deductions or discounts taken in the
ordinary course of business; Borrower is the
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lawful owner of the Account and has the right to assign the same to Agent, for
the benefit of Lenders; the Account is free of all security interests, liens and
encumbrances other than those in favor of Agent, on behalf of Lenders, and the
Account is due and payable in accordance with its terms.
4.6 NAMES. Schedule 4.6 sets forth all names, trade names or
fictitious names and business names under which Borrower currently conducts
business or has at any time during the past five years conducted business.
4.7 LOCATIONS; FEIN. Schedule 4.7 sets forth the location of
Borrower's principal place of business, the location of Borrower's books and
records, the location of all other offices of Borrower and all Collateral
locations, and such locations are Borrower's sole locations for its business and
the Collateral. Borrower's federal employer identification number is set forth
on the signature page hereof.
4.8 TITLE TO PROPERTIES; LIENS. Borrower and each of its
Subsidiaries has good, sufficient and legal title, subject to Permitted
Encumbrances, to all its respective material properties and assets. Except for
Permitted Encumbrances, all such properties and assets are free and clear of
Liens. To the best knowledge of Borrower after due inquiry, there are no actual,
threatened or alleged defaults with respect to any leases of real property under
which Borrower or any of its Subsidiaries is lessee or lessor which would have a
Material Adverse Effect.
4.9 LITIGATION; ADVERSE FACTS. There are no judgments
outstanding against any Loan Party or affecting any property of any Loan Party
nor is there any action, charge, claim, demand, suit, proceeding, petition,
governmental investigation or arbitration now pending or, to the best knowledge
of Borrower after due inquiry, threatened against or affecting any Loan Party or
any property of any Loan Party which could reasonably be expected to result in
any Material Adverse Effect. No Loan Party has received any opinion or
memorandum or legal advice from legal counsel to the effect that it is exposed
to any liability which could reasonably be expected to result in any Material
Adverse Effect.
4.10 PAYMENT OF TAXES. All material tax returns and reports of
GII and each of its Subsidiaries required to be filed by any of them (either
separately or as members of an affiliated group of corporations) have been
timely filed (and as of the time of filing, such returns correctly reflected the
facts regarding the income, business, assets, operations, activities and status
of each of them), and all taxes, assessments, fees and other governmental
charges upon such Persons and upon their respective properties, assets, income
and franchises which are shown on such returns as due and payable have been paid
when due and payable. As of the Closing Date, none of the United States income
tax returns of Borrower or any of its Subsidiaries are under audit. No tax liens
have been filed and no claims (except as otherwise permitted by Section 5.9) are
being asserted with respect to any such taxes. The charges, accruals and
reserves on the books of Borrower and each of its Subsidiaries in respect of any
taxes or other governmental charges are in accordance with GAAP.
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4.11 PERFORMANCE OF AGREEMENTS. None of the Loan Parties and
none of their respective Subsidiaries is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any contractual obligation of any such Person that could reasonably
be expected to result in a Material Adverse Effect, and no condition exists
that, with the giving of notice or the lapse of time or both, would constitute
such a default.
4.12 EMPLOYEE BENEFIT PLANS. Borrower, each of its
Subsidiaries, each ERISA Affiliate and each Employee Benefit Plan is in
compliance in all material respects with all applicable provisions of ERISA, the
IRC and all other applicable laws and the regulations and interpretations
thereof with respect to all Employee Benefit Plans. No material liability has
been incurred by Borrower, any Subsidiaries or any ERISA Affiliate which remains
unsatisfied for any funding obligation, taxes or penalties with respect to any
Employee Benefit Plan. Except as set forth on Schedule 4.12, none of the
Employee Benefit Plans which is an employee welfare benefit plan (whether funded
or not funded) provides any post-retirement benefits.
4.13 INTELLECTUAL PROPERTY. Borrower and each of its
Subsidiaries owns, is licensed to use or otherwise has the right to use, all
Intellectual Property used in or necessary for the conduct of its business as
currently conducted, and all such Intellectual Property is identified on
Schedule 4.13.
4.14 BROKER'S FEES. Other than as provided in the
Recapitalization Agreement, no broker's or finder's fee or commission will be
payable with respect to any of the transactions contemplated hereby.
4.15 ENVIRONMENTAL COMPLIANCE. Each Loan Party has been and is
currently in compliance with all applicable Environmental Laws, including
obtaining and maintaining in effect all permits, licenses or other
authorizations required by applicable Environmental Laws other than any
noncompliance that could not reasonably be expected to have a Material Adverse
Effect. There are no claims, liabilities, investigations, litigation,
administrative proceedings, whether pending or threatened, or judgments or
orders relating to any Hazardous Materials asserted or threatened against any
Loan Party or relating to any real property currently or formerly owned, leased
or operated by any Loan Party other than any claims, liabilities,
investigations, litigation, administrative proceedings, judgments or orders that
could not reasonably be expected to have a Material Adverse Effect.
4.16 SOLVENCY. As of the date of this Agreement and the
Closing Date, Borrower: (a) owns and will own assets the fair salable value of
which are (i) greater than the total amount of its liabilities (including
contingent liabilities) and (ii) greater than the amount that will be required
to pay the probable liabilities of Borrower as they mature; (b) has capital that
is not unreasonably small in relation to its business as presently conducted or
any contemplated or undertaken transaction; and (c) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due.
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4.17 DISCLOSURE. The representations and warranties of
Borrower, its Subsidiaries and the other Loan Parties contained in this
Agreement, the financial statements, the other Loan Documents, and other
documents, certificates and written statements furnished to Agent or any Lender
by or on behalf of any such Person for use in connection with the Loan
Documents, taken as a whole, do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained herein and therein not misleading in light of the circumstances in
which the same were made. The Projections contained in such materials are based
upon good faith estimates and assumptions believed by such Persons to be
reasonable at the time made, it being recognized by Agent and Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may differ
from the projected results. There is no material fact (other than general
economic conditions) known to Borrower that has had or will have a Material
Adverse Effect and that has not been disclosed herein or in such other
documents, certificates and statements furnished to Agent or any Lender for use
in connection with the transactions contemplated hereby.
4.18 INSURANCE. Borrower and each of its Subsidiaries
maintains adequate insurance policies for public liability, property damage for
its business and properties, product liability, and business interruption; no
notice of cancellation has been received with respect to such policies and
Borrower; and each of its Subsidiaries is in compliance with all conditions
contained in such policies, the noncompliance with which could result in denial
of coverage by the insurer.
4.19 COMPLIANCE WITH LAWS. Neither Borrower nor any of its
Subsidiaries is in violation of any law, ordinance, rule, regulation, order,
policy, guideline or other requirement of any domestic or foreign government or
any instrumentality or agency thereof, having jurisdiction over the conduct of
its business or the ownership of its properties, including, without limitation,
any violation relating to any use, release, storage, transport or disposal of
any Hazardous Material, which violation would subject Borrower or any of its
Subsidiaries, or any of their respective officers to criminal liability or have
a Material Adverse Effect and no such violation has been alleged.
4.20 BANK ACCOUNTS. Schedule 4.20 sets forth the account
numbers and locations of all bank accounts of Borrower and its Subsidiaries.
4.21 SUBSIDIARIES. GII has no Subsidiaries other than GIC.
GIC has no Subsidiaries other than Borrower. Borrower has no Subsidiaries other
than as set forth on Schedule 4.21.
4.22 EMPLOYEE MATTERS. Except as set forth on Schedule 4.22,
(a) no Loan Party nor any of such Loan Party's employees is subject to any
collective bargaining agreement, (b) no petition for certification or union
election is pending with respect to the employees of any Loan Party and no union
or collective bargaining unit has sought such certification or recognition with
respect to the employees of any Loan Party and (c) there are no strikes,
slowdowns, work stoppages or controversies pending or, to the best knowledge of
Borrower after due inquiry, threatened between any Loan Party and its respective
employees, other than employee grievances arising in the ordinary course of
business which could reasonably be expected to have, either individually or in
the
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aggregate, a Material Adverse Effect. Except as set forth on Schedule 4.22,
neither Borrower nor any of its Subsidiaries is party to any employment contract
providing for total cash compensation in excess of $150,000.
4.23 GOVERNMENTAL REGULATION. None of the Loan Parties is, or
after giving effect to any loan will be, subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act or the Investment
Company Act of 1940 or to any federal or state statute or regulation limiting
its ability to incur indebtedness for borrowed money.
4.24 RECAPITALIZATION DOCUMENTS. As of the Closing Date, all
representations made by or on behalf of the Borrower or with respect to the
Borrower's business, assets, liabilities, or operations, and all other
representations of each party to each of the Recapitalization Documents are true
and accurate in all material respects.
The Borrower may, at any time and from time to time (and
subject to subsection 5.13), amend any one or more of the Schedules referred to
in this Section 4 upon not less than five (5) Business Days' prior written
notice to the Agent, and any representation or warranty contained herein which
refers to any such Schedule shall from and after the date of any such amendment
refer to such Schedule as so amended, provided, however, that in no event may
the Borrower amend any such Schedule if such amendment would reflect or evidence
a Default or Event of Default; and provided, further, that in the event that any
such notice relates to the Collateral or perfection of Agent's security interest
therein, Borrower shall (at Borrower's cost and expense) execute and deliver and
cause to be filed or recorded any and all financing statements and other
documents and take such other action, in each case, as may be necessary in the
opinion of Agent to perfect the Agent's security interest in Collateral or to
continue the perfection thereof.
SECTION 5. AFFIRMATIVE COVENANTS.
Each of Borrower, GIC and GII covenants and agrees that, so
long as any of the Commitments hereunder shall be in effect and until payment in
full of all Obligations and termination of all Lender Letters of Credit, unless
Requisite Lenders shall otherwise give their prior written consent, Borrower
shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 5 applicable to such Person.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. Each member of
Parent Group will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Borrower will deliver or cause to be delivered to Agent and each
Lender (unless specified to be delivered solely to Agent) the financial
statements and other reports described below.
(A) MONTHLY FINANCIALS. As soon as available and in
any event within twenty (20) days after the end of each month, Borrower will
deliver or cause to be delivered (1) the
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consolidated and consolidating balance sheet of Parent Group as at the end of
such month and the related consolidated and consolidating statements of income,
stockholders' equity and cash flow for such month and for the period from the
beginning of the then current Fiscal Year to the end of such month, and (2) a
schedule of the outstanding Indebtedness for borrowed money of Parent Group
describing in reasonable detail each such debt issue or loan outstanding and the
principal amount and amount of accrued and unpaid interest with respect to each
such debt issue or loan.
(B) [Omitted].
(C) YEAR-END FINANCIALS. As soon as available and in
any event within one hundred twenty (120) days after the end of each Fiscal
Year, Borrower will deliver or cause to be delivered: (1) the consolidated
balance sheet of Parent Group as at the end of such year and the related
consolidated statements of income, stockholders' equity and cash flow for such
Fiscal Year; (2) a schedule of the outstanding Indebtedness of Parent Group
describing in reasonable detail each such debt issue or loan outstanding and the
principal amount and amount of accrued and unpaid interest with respect to each
such debt issue or loan; (3) a report with respect to the financial statements
from a "Big 6" firm of independent certified public accountants selected by
Borrower or other independent certified public accountants selected by Borrower
and acceptable to Agent, which report shall be unqualified as to going concern
and scope of audit of Parent Group and shall state that (a) such consolidated
financial statements present fairly the consolidated financial position of
Parent Group as at the dates indicated and the results of its operations and
cash flow for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years and (b) that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards ; and (4) copies of the
consolidating financial statements of Parent Group, including (a) consolidating
balance sheets of Parent Group as at the end of such Fiscal Year showing
intercompany eliminations and (b) related consolidating statements of earnings
of Parent Group showing intercompany eliminations.
(D) ACCOUNTANTS' CERTIFICATION AND REPORTS. Together
with each delivery of consolidated financial statements of Parent Group pursuant
to subsection 5.1(C), Borrower will deliver (1) a written statement by its
independent certified public accountants (a) stating that the examination has
included a review of the terms of this Agreement as same relate to accounting
matters and (b) stating whether, in connection with the examination, any
condition or event that constitutes a Default or an Event of Default has come to
their attention and, if such a condition or event has come to their attention,
specifying the nature and period of existence thereof and (2) to the extent that
the Borrower is able to obtain such a letter through the use of commercially
reasonable efforts to do so, a letter addressed to Agent and Lenders from such
accountants stating that such accountants have been informed that a primary
intent of Borrower was to have the professional services such accountants
provided to Parent Group in preparing their audit report and the letter referred
to in this subsection 5.1(D) benefit or influence Agent and Lenders, and
identifying Agent and Lenders as parties that Borrower has indicated intend to
rely on such professional services provided to Parent Group by such accountants;
provided, however, that in the event that the Borrower's independent accountants
provide to any holders of Subordinated Debt a writing as to
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reliance contemplated by section 7(b) of the Securities Purchase Agreements,
Borrower shall cause such accountants to provide to the Agent and Lenders
concurrently with the delivery to such holders a substantially similar writing
as to reliance. Promptly upon receipt thereof, Borrower will deliver copies of
all significant reports submitted to any member of Parent Group by independent
public accountants in connection with each annual, interim or special audit of
the financial statements of Parent Group made by such accountants, including the
comment letter submitted by such accountants to management in connection with
their annual audit.
(E) COMPLIANCE CERTIFICATE. Together with the
delivery of each set of financial statements referenced in subparts (A) (for any
period ending at the end of any fiscal quarter) and (C) of this subsection 5.1,
Borrower will deliver a Compliance Certificate, together with copies of the
calculations and work-up employed to determine compliance or noncompliance by
Borrower with the financial covenants set forth in Section 6.
(F) BORROWING BASE CERTIFICATES, REGISTERS AND
JOURNALS. On each Business Day, Borrower shall deliver to Agent: (1) a Borrowing
Base Certificate updated to reflect the most recent sales and collections of
Borrower and an assignment schedule of all Accounts created by Borrower on that
day; (2) an invoice register or sales journal describing all sales of Borrower
for that day, in form and substance satisfactory to Agent, and, if Agent so
requests, copies of invoices evidencing such sales and proofs of delivery
relating thereto; and (3) a cash receipts journal.
(G) RECONCILIATION REPORTS, INVENTORY REPORTS AND
LISTINGS AND AGINGS. On the Closing Date and within ten (10) Business Days after
the last day of each month and from time to time upon the request of Agent,
Borrower will deliver to Agent: (1) an aged trial balance of all then existing
Accounts; and (2) an Inventory Report as of the last day of such period. As soon
as available and in any event within ten (10) Business Days after the last day
of each month, and from time to time upon the request of Agent, Borrower will
deliver to Agent: (1) a Reconciliation Report as at the last day of such period;
(2) an aged trial balance of all then existing accounts payable; and (3) a
detailed inventory listing and cover summary report. All such reports shall be
in form and substance satisfactory to Agent.
(H) MANAGEMENT REPORT. Together with each delivery
of financial statements of Parent Group pursuant to subdivisions (A) and (C) of
this subsection 5.1, Borrower will deliver a management report: (1) describing
the operations and financial condition of Parent Group for the month then ended
and the portion of the current Fiscal Year then elapsed (or for the Fiscal Year
then ended in the case of year-end financials); (2) setting forth in comparative
form the corresponding figures for the corresponding periods of the previous
Fiscal Year and the corresponding figures from the most recent Projections for
the current Fiscal Year delivered to Lenders pursuant to 5.1(P); and (3)
discussing the reasons for any significant variations. The information above
shall be presented in reasonable detail and shall be certified by the chief
financial officer of Borrower to the effect that such information fairly
presents the results of operations and financial condition of Parent Group as at
the dates and for the periods indicated.
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(I) APPRAISALS. From time to time, upon the request
of Agent, Borrower will obtain and deliver to Agent, at Borrower's expense,
appraisal reports in form and substance and from appraisers satisfactory to
Agent, stating the then current fair market and orderly liquidation values of
all or any portion of the Collateral; provided, however, that so long as no
Event of Default is continuing, Agent shall not request an appraisal, as to any
particular category of Collateral, to be performed more than once every Loan
Year.
(J) GOVERNMENT NOTICES. Borrower will deliver to
Agent promptly after receipt copies of all notices, requests, subpoenas,
inquiries or other writings received by any member of the Parent Group from any
governmental agency concerning any Employee Benefit Plan, the violation or
alleged violation of any Environmental Laws, the storage, use or disposal of any
Hazardous Material, the violation or alleged violation of the Fair Labor
Standards Act or payment or non-payment of any taxes by any member of Parent
Group including any tax audit.
(K) EVENTS OF DEFAULT, ETC. Promptly upon any
officer of Borrower obtaining knowledge of any of the following events or
conditions, Borrower shall deliver a certificate of Borrower's chief executive
officer specifying the nature and period of existence of such condition or event
and what action Borrower has taken, is taking and proposes to take with respect
thereto: (1) any condition or event that constitutes an Event of Default or
Default; (2) any notice of default that any Person has given to any Loan Party
or any other action taken with respect to a claimed default; or (3) any Material
Adverse Effect.
(L) TRADE NAMES. Borrower and each of its
subsidiaries will give Agent at least thirty (30) days advance written notice of
any change of name or of any new trade name or fictitious business name and will
(at Borrower's expense) execute and deliver and cause to be filed or recorded
any and all financing statements and other documents and take such other action,
in any case, which Agent deems necessary to obtain or continue the perfection of
Agent's security interests and liens on the Collateral or any portion thereof.
Borrower's use of any trade name or fictitious business name will be in
compliance with all laws regarding the use of such names.
(M) LOCATIONS. Borrower will give Agent at least
thirty (30) days advance written notice of any change in the principal place of
business of any Loan Party or any change in the location of the books and
records of any Loan Party or of any portion of the Collateral or of any new
location for books and records of any Loan Party or any portion of the
Collateral and will (at Borrower's expense) execute and deliver and cause to be
filed or recorded any and all financing statements and other documents and take
such other action, in any case, which Agent deems necessary to obtain or
continue the perfection of Agent's security interests and liens on the
Collateral or any portion thereof.
(N) BANK ACCOUNTS. Borrower will give Agent prompt
notice of any new bank accounts which any Loan Party intends to establish prior
to their opening same.
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(O) LITIGATION. Promptly upon any officer of
Borrower obtaining knowledge of (1) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Loan Party or any property of any Loan Party not previously disclosed by
Borrower to Agent or (2) any material development in any action, suit,
proceeding, governmental investigation or arbitration at any time pending
against or affecting any Loan Party or any property of any Loan Party which (in
the case of (1) or (2) above) is reasonably likely to have a Material Adverse
Effect, Borrower will promptly give notice thereof to Agent and provide such
other information as may be reasonably available to them to enable Agent and its
counsel to evaluate such matter.
(P) PROJECTIONS. As soon as available and in any
event no later than thirty (30) days after the start of each Fiscal Year of
Borrower, Borrower will deliver consolidated and consolidating Projections of
Parent Group for the forthcoming Fiscal Year, month by month.
(Q) SUBORDINATED DEBT AND OTHER INDEBTEDNESS
NOTICES. Borrower shall promptly deliver copies of all notices given or received
by Borrower with respect to noncompliance with any term or condition related to
any Subordinated Debt and other material Indebtedness, and shall promptly notify
Lenders and Agent of any potential or actual event of default with respect to
any Subordinated Debt or other material Indebtedness.
(R) OTHER INFORMATION. With reasonable promptness,
Borrower will deliver such other information and data with respect to any Loan
Party or the Collateral as Agent or any Lender may reasonably request from time
to time.
(S) OPENING BALANCE SHEET. As soon as available and
in any event within one hundred twenty (120) days after the Closing Date,
Borrower will deliver an audited consolidated and consolidating Closing Date
balance sheet of Parent Group prepared by a firm of independent certified public
accountants reasonably acceptable to Agent.
5.2 ACCESS TO ACCOUNTANTS. Each of Borrower, GII and GIC
authorizes Agent and Lenders to discuss the financial condition and financial
statements of Parent Group with Parent Group's independent public accountants
upon reasonable notice to Borrower of its intention to do so, and authorizes
such accountants to respond to all of Agent's and Lenders' inquiries.
5.3 INSPECTION. Each of Borrower, GII and GIC shall permit
Agent and any authorized representatives designated by Agent to visit and
inspect any of the properties of any one or more Loan Parties including its and
their financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and business with its
and their officers and independent public accountants, at such reasonable times
during normal business hours and as often as may be reasonably requested. Each
of Borrower, GII and GIC, acknowledges that Agent intends to make such
inspections on at least a quarterly basis. Each Lender may with the consent of
Agent, which will not be unreasonably denied, accompany Agent on any such visit
or inspection.
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5.4 COLLATERAL RECORDS. Each of Borrower, GII and GIC, shall
keep and shall cause each other Loan Party to keep, full and accurate books and
records relating to the Collateral and shall mark such books and records to
indicate Agent's security interests in the Collateral, for the benefit of
Lenders.
5.5 ACCOUNT COVENANTS; VERIFICATION. Borrower shall, at its
own expense: (a) cause all invoices evidencing Accounts and all copies thereof
to bear a notice that such invoices are payable to the lockboxes established in
accordance with subsection 5.6 and (b) use its best efforts to assure prompt
payment of all amounts due or to become due under the Accounts. Borrower will
promptly reflect on each Borrowing Base Certificate any dispute or claim with
respect to an Account alleged by a customer or of any other circumstances known
to Borrower that may impair the validity or collectibility of an Account. Except
in the ordinary course of business in conformity with past practice, no
discounts, credits or allowances will be issued, granted or allowed by Borrower
to customers and, except as aforesaid, no returns will be accepted without
Agent's prior written consent; provided, that until Agent notifies Borrower to
the contrary, Borrower may presume consent. Agent shall have the right, at any
time or times hereafter, to verify the validity, amount or any other matter
relating to an Account, by mail, telephone or in person. While an Event of
Default is continuing, Borrower shall not, without the prior consent of Agent,
adjust, settle or compromise the amount or payment of any Account, or release
wholly or partly any customer or obligor thereof, or allow any credit or
discount thereon, other than, unless otherwise directed by the Agent, in the
ordinary course of business.
5.6 COLLECTION OF ACCOUNTS AND PAYMENTS. Borrower shall
establish lockboxes and blocked accounts (collectively, "Blocked Accounts") in
Borrower's name with such banks ("Collecting Banks") as are acceptable to Agent
(subject to irrevocable instructions acceptable to Agent as hereinafter set
forth) to which all account debtors shall directly remit all payments on
Accounts and in which Borrower will immediately deposit all payments received on
account of the sale or lease of Inventory or other payments constituting
proceeds of Collateral in the identical form in which such payment was received,
whether by cash or check. The Collecting Banks shall acknowledge and agree, in a
manner satisfactory to Agent, that all payments made to the Blocked Accounts are
the sole and exclusive property of Agent, for the benefit of Lenders, and that,
except as otherwise agreed to in writing by the Agent, the Collecting Banks have
no right of setoff against the Blocked Accounts and that all such payments
received will be promptly transferred to Agent's Account. Borrower hereby agrees
that all payments received by Agent, whether by cash, check, wire transfer or
any other instrument, made to such Blocked Accounts or otherwise received by
Agent and whether on the Accounts or as proceeds of other Collateral or
otherwise will be the sole and exclusive property of Agent, for the benefit of
Lenders. Borrower shall irrevocably instruct each Collecting Bank to promptly
transfer all payments or deposits to the Blocked Accounts into Agent's Account.
Borrower, and any of its Affiliates, employees, agents or other Persons acting
for or in concert with Borrower, shall, acting as trustee for Agent, receive, as
the sole and exclusive property of Agent, any monies, checks, notes, drafts or
any other payments relating to and/or proceeds of Accounts or other Collateral
which come into the possession or under the control of Borrower or any of
Borrower's Affiliates, employees, agents or other Persons acting for or in
concert with Borrower,
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and immediately upon receipt thereof, Borrower or such Persons shall remit the
same or cause the same to be remitted, in kind, to the Blocked Accounts or to
Agent at its address set forth in subsection 10.4 below.
5.7 ENDORSEMENT. Borrower hereby constitutes and appoints
Agent and all Persons designated by Agent for that purpose as Borrower's true
and lawful attorney-in-fact, with power to endorse Borrower's name to any of the
items of payment or proceeds described in subsection 5.6 above and all proceeds
of Collateral that come into Agent's possession or under Agent's control. Both
the appointment of Agent as Borrower's attorney and Agent's rights and powers
are coupled with an interest and are irrevocable until payment in full and
complete performance of all of the Obligations.
5.8 CORPORATE EXISTENCE. Each of Borrower, GII and GIC will,
and will cause each other Loan Party to, at all times preserve and keep in full
force and effect its corporate existence and all rights and franchises material
to its business; provided, however, that nothing contained in this subsection
5.8 shall prohibit a Permitted Merger. Borrower will promptly notify Agent of
any change in the ownership or corporate structure of any Loan Party.
5.9 PAYMENT OF TAXES. Each of Borrower, GII and GIC will, and
will cause each other Loan Party to, pay all taxes, assessments and other
governmental charges imposed upon it or any of its properties or assets or with
respect to any of its franchises, business, income or property before any
penalty accrues thereon provided, that no such tax need be paid if any Loan
Party is contesting same in good faith by appropriate proceedings promptly
instituted and diligently conducted and if such Loan Party has established
appropriate reserves, if any, as shall be required in conformity with GAAP.
5.10 MAINTENANCE OF PROPERTIES; INSURANCE. Borrower will
maintain or cause to be maintained in good repair, working order and condition
all material properties used in the business of Borrower and the other Loan
Parties, normal wear and tear excepted, and will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Borrower will maintain
or cause to be maintained, with financially sound and reputable insurers, public
liability and property damage insurance with respect to Borrower's business and
properties and the business and properties of the other Loan Parties against
loss or damage of the kinds customarily carried or maintained by corporations of
established reputation engaged in similar businesses and in amounts acceptable
to Agent. Borrower shall cause Agent, for the benefit of Lenders, to be named as
loss payee on all insurance policies relating to any Collateral and as
additional insured under all liability policies, in each case pursuant to
appropriate endorsements in form and substance satisfactory to Agent and shall
collaterally assign to Agent, for the benefit of Lenders, as security for the
payment of the Obligations all business interruption insurance of Borrower.
Borrower shall apply any proceeds received from any policies of insurance
relating to any Collateral to the Obligations as set forth in subsection
2.4(B)(2).
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5.11 COMPLIANCE WITH LAWS. Each of Borrower, GII and GIC will,
and will cause each other Loan Party to, comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority as
now in effect and which may be imposed in the future in all jurisdictions in
which any Loan Party is now doing business or may hereafter be doing business,
other than those laws the noncompliance with which would not have a Material
Adverse Effect.
5.12 FURTHER ASSURANCES. Each of Borrower, GII and GIC shall,
and shall cause each other Loan Party to, from time to time, execute such
guaranties, financing or continuation statements, documents, security
agreements, reports and other documents or deliver to Agent such instruments,
certificates of title or other documents as Agent at any time may reasonably
request to evidence, perfect or otherwise implement the guaranties and security
for payment of the Obligations provided for in the Loan Documents. At Agent's
request, (i) each of Borrower, GII and GIC shall and shall cause any Subsidiary
(other than FSC) of such Person promptly to guaranty the Obligations and to
grant to Agent, on behalf of Lenders, security interests in the real, personal
and mixed property of such Person or Subsidiary to secure the Obligations and
(ii) upon acquisition or formation by any Loan Party of a Subsidiary, such Loan
Party shall pledge to the Agent a first priority security interest in all
capital stock of such Subsidiary (other than FSC) owned or acquired by such Loan
Party and shall execute and deliver to the Agent a pledge agreement covering
such stock and all documents required to be delivered pursuant to such pledge
agreement (it being understood that nothing contained in this subsection 5.12
shall be deemed to constitute consent by Agent or any one or more Lenders to any
such acquisition or formation).
5.13 COLLATERAL LOCATIONS. Unless and until Borrower shall
have complied with the next sentence of this subsection 5.13, Borrower will keep
the Collateral at the locations specified on Schedule 4.7. With respect to any
new location (which in any event shall be within the continental United States),
Borrower will execute such documents and take such actions as Agent deems
necessary to perfect and protect the security interests of the Agent, on behalf
of Lenders, in the Collateral prior to the transfer or removal of any Collateral
to such new location. Upon compliance by Borrower with the foregoing sentence to
the satisfaction of the Agent, Schedule 4.7 shall be amended to include the new
location as to which such compliance has occurred.
5.14 BAILEES. If any Collateral is at any time in the
possession or control of any warehouseman, bailee or any of Borrower's agents or
processors, Borrower shall, upon the request of Lenders, notify such
warehouseman, bailee, agent or processor of the security interests in favor of
Agent, for the benefit of Lenders, created hereby and shall instruct such Person
to hold all such Collateral for Agent's account subject to Agent's instructions.
5.15 MORTGAGES; TITLE INSURANCE; SURVEYS. (A) TITLE INSURANCE.
On the Closing Date (or within thirty (30) days following delivery of any
Mortgage with respect to Additional Mortgaged Property), Borrower shall deliver
or cause to be delivered to Agent ALTA lender's title insurance policies issued
by Chicago Title Insurance Company (through its agent, Title Associates, Inc.)
or other title insurers selected by Borrower and reasonably satisfactory to
Agent (the "Mortgage Policies") in form and substance reasonably satisfactory to
Agent and in an amount not less than
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120% of the fair market value of the Mortgaged Property or the Additional
Mortgaged Property, as the case may be, as determined by appraisal, assuring
Agent that the Mortgages are valid and enforceable first priority mortgage liens
on the respective Mortgaged Property or Additional Mortgaged Property, free and
clear of all defects and encumbrances except Permitted Encumbrances. The
Mortgage Policies shall be in form and substance reasonably satisfactory to
Agent and subject to applicable laws, regulations and requirements of the title
insurer shall include an endorsement insuring against the effect of future
advances under this Agreement, for mechanics' liens and for any other matter
that Agent may reasonably request, and subject to applicable laws, regulations
and requirements of the title insurer shall provide for affirmative insurance
and such reinsurance as Agent may reasonably request. In the case of each
leasehold constituting Mortgaged Property or Additional Mortgaged Property,
Agent shall have received such estoppel letters, consents and waivers from the
landlords and non-disturbance agreements from any holders of mortgages or deeds
of trust on such real estate as may have been requested by Agent, which letters
shall be in form and substance satisfactory to Agent.
(B) ADDITIONAL MORTGAGED PROPERTY. Additional
Mortgaged Property. Agent may from time to time designate real property or
leasehold interests of any Loan Party or any Subsidiary of any Loan Party after
the date hereof as "Additional Mortgaged Property", in which case Borrower shall
as promptly as possible (and in any event within sixty (60) days after such
designation) deliver to Agent a fully executed Mortgage, in substantially the
same form as the Mortgage on the Mortgaged Property (with such changes as the
Agent may reasonably request in order to comply with or take advantage of
applicable law if such Additional Mortgaged Property is located in a state other
than Ohio) together with title insurance policies and surveys as required by
this subsection 5.15. Borrower agrees that, following the taking of the actions
with respect to any Additional Mortgaged Property required by the immediately
preceding sentence, Agent, on behalf of Lenders, shall have a valid and
enforceable first priority mortgage on the respective Additional Mortgaged
Property, free and clear of all defects and encumbrances except for Permitted
Encumbrances.
(C) SURVEYS. On or before the Closing Date (or
within thirty (30) days following delivery of any Mortgage with respect to
Additional Mortgaged Property), Borrower shall deliver or cause to be delivered
to Agent current surveys, certified by a licensed surveyor, for all real
property that is the subject of the Mortgage Policies including Additional
Mortgaged Property for which a Mortgage Policy is issued. All such surveys shall
be sufficient to allow the issuer of the mortgage policy to issue an ALTA
lender's policy without a survey exception. Notwithstanding the foregoing, the
survey of the Mortgaged Property heretofore delivered to the Agent captioned
"Map of Land" prepared by D.Y. Miskimen dated February, 1953 and last revised
September 21, 1983 is satisfactory to the Agent as of the Closing Date,
provided, that the Agent receives as of the Closing Date a Mortgage Policy as
aforesaid with the survey exception omitted. Within ninety (90) days following
the Closing Date, Borrower shall, at Borrower's sole cost and expense, deliver
to Agent a current survey of the Mortgaged Property prepared in accordance with
the Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys and
certified to the Agent.
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5.16 USE OF PROCEEDS AND MARGIN SECURITY. Borrower shall use
the proceeds of all Loans for proper business purposes (as described in the
recitals to this Agreement) consistent with all applicable laws, statutes, rules
and regulations. No portion of the proceeds of any Loan shall be used by
Borrower or any of its Subsidiaries for the purpose of purchasing or carrying
margin stock within the meaning of Regulation G or Regulation U, or in any
manner that might cause the borrowing or the application of such proceeds to
violate Regulation T or Regulation X or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Exchange Act. The
proceeds of the initial advance under the Revolving Loan and of the Term Loan
shall first be used to refinance indebtedness of Borrower described on Schedule
5.16 hereto outstanding as of the Closing Date until such indebtedness shall
have been paid in full.
5.17 PURCHASE OF CAPITAL ASSETS. On or prior to March 31,
1996, Borrower shall purchase (for cash and without financing, other than under
the Revolving Loans) and take delivery at its plant in New Philadelphia, Ohio,
of the property described on Schedule 5.17.
5.18 INVENTORY REPORTING. As soon as practicable and in any
event within sixty (60) days following the Closing Date, Borrower shall complete
a review of its inventory reporting system and shall, within such period (a)
report to the Agent Borrower's conclusions regarding such review, (b) implement
a cycle count program with respect to its inventory reporting in a manner
acceptable to Borrower and Agent, (c) make such improvements to its assembly
line inventory reporting as shall be acceptable to Borrower and Agent such that
Borrower shall be able to accurately report the value and quantity of inventory
on Borrower's assembly line, and (d) in connection with such review, implement
such of the recommendations made by Coopers & Lybrand as to inventory reporting
as may be acceptable to Borrower.
5.19 ENVIRONMENTAL PROGRAM. On or before June 30, 1996,
Borrower shall develop and deliver to Agent a written plan, developed by
Borrower and an independent environmental consultant, with respect to ongoing
compliance by Borrower with Environmental Laws and thereafter shall implement
the recommendations of such report.
5.20 POST-CLOSING MATTERS. (a) Within five (5) Business Days
following the Closing Date, the Borrower shall execute and deliver and cause to
be filed or recorded any and all financing statements (or analogous documents)
and take such other action, in each case, as may be necessary in the opinion of
the Agent to perfect the Agent's security interest (for the benefit of the
Lenders) in the Patents and Trademarks identified on Schedule 5.20(a) annexed
hereto.
(b) Within fifteen (15) Business Days following the Closing
Date, the Borrower shall deliver to the Agent any and all termination
statements, releases or other documents and take such other action, in each
case, as may be necessary in the opinion of the Agent to terminate the Liens set
forth on Schedule 5.20(b) annexed hereto.
(c) Within ten (10) Business Days following the Closing Date,
the Borrower shall deliver to the Agent a schedule identifying all of the
certificated vehicles owned by the Borrower.
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<PAGE> 58
SECTION 6. FINANCIAL COVENANTS.
Each of Borrower, GII and GIC covenants and agrees that so
long as any of the Commitments remain in effect and until payment in full of all
Obligations and termination of all Lender Letters of Credit, unless Borrower,
GII and GIC has received the prior written consent of Requisite Lenders, each of
Borrower, GII and GIC shall comply with and shall cause each other Loan Party to
comply with all covenants in this Section 6 applicable to such Person.
6.1 OMITTED.
6.2 OMITTED.
6.3 MINIMUM EBITDA. Subject to subsection 6.8, as of the last
day of each fiscal quarter set forth below, Borrower shall cause EBITDA for the
period of four consecutive fiscal quarters ending on such day of at least the
amount set forth below opposite such day:
<TABLE>
<CAPTION>
<S> <C>
FISCAL QUARTER ENDING ON MINIMUM EBITDA
------------------------ --------------
March 31, 1996 and the last
day of each fiscal quarter ending
thereafter through and including
December 31, 1997 $12,500,000
The last day of each fiscal quarter
ending on or after March 31, 1998 $10,000,000
</TABLE>
6.4 OMITTED.
6.5 CAPITAL EXPENDITURE LIMITS. The aggregate amount of all
Capital Expenditures of Parent Group (excluding trade-ins and excluding Capital
Expenditures in respect of replacement assets to the extent funded with casualty
insurance or condemnation proceeds) will not exceed, for any period set forth
below, the amount set forth below opposite such period. In the event that any
member of Parent Group enters into a Capital Lease or other contract with
respect to fixed assets, for purposes of calculating Capital Expenditures under
this subsection only, the amount of the Capital Lease or contract initially
capitalized on such member's balance sheet prepared in accordance with GAAP
(including, without limitation, any cash down payments made under Capital
Leases) shall be considered expended in full on the date that such member enters
into such Capital Lease or contract.
<TABLE>
<CAPTION>
PERIOD AMOUNT
------ ------
<S> <C>
</TABLE>
52
<PAGE> 59
<TABLE>
<CAPTION>
<S> <C> <C>
Four consecutive fiscal quarters
ending December 31, 1996 $4,250,000
Each period of four consecutive
fiscal quarters ending after
December 31, 1996 $4,000,000
</TABLE>
6.6 FIXED CHARGE COVERAGE. Subject to subsection 6.8, Borrower
shall not permit the Fixed Charge Coverage for any period of four consecutive
fiscal quarters ending on the last day of any fiscal quarter set forth below to
be less than the amount set forth below for such period.
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<PAGE> 60
<TABLE>
<CAPTION>
PERIOD OF FOUR
FISCAL QUARTERS ENDING ON MINIMUM FIXED CHARGE COVERAGE
------------------------- -----------------------------
<S> <C> <C>
March 31, 1996 and the last
day of each fiscal quarter ending
thereafter through and including
December 31, 1996 1.00:1.00
the last day of each fiscal quarter
ending on or after March 31, 1997 1.05:1.00
</TABLE>
6.7 INTEREST COVERAGE. Subject to subsection 6.8, Borrower
shall not permit the Interest Coverage for any period of four consecutive fiscal
quarters ending on the last day of each fiscal quarter set forth below to be
less than the amount set forth below for such periods.
<TABLE>
<CAPTION>
PERIOD OF FOUR
FISCAL QUARTERS ENDING ON MINIMUM INTEREST COVERAGE
------------------------- -------------------------
<S> <C> <C>
March 31, 1996 and on the last
day of each fiscal quarter ending
thereafter through and including
December 31, 1996 2.00:1.00
March 31, 1997 and on the last
day of each fiscal quarter ending
thereafter through and including
December 31, 1997 2.10:1.00
March 31, 1998 and on the last day
of each fiscal quarter ending
thereafter 2.25:1.00
</TABLE>
6.8 ALTERNATIVE COVENANT COMPLIANCE. In the event that as of
any Quarterly Test Date, Borrower shall fail to comply with any one or more of
the covenants set forth in subsections 6.3, 6.6 or 6.7, such failure shall not
constitute a Default or Event of Default in the event that all of the following
conditions shall be met: (a) the Borrower shall have delivered to the Agent on
or prior to the date on which the Borrower is required to deliver a Compliance
Certificate with respect to such Quarterly Test Date pursuant to subsection
5.1(E), an Alternative Covenant Compliance Certificate, (b) the average daily
amount, for the 45 day period ending on such Quarterly Test Date, by which (A)
the lesser of the Borrowing Base or the Revolving Loan Commitment exceeded (B)
the sum of (i) the outstanding principal balance of the Revolving Loan plus (ii)
the Letter of Credit Reserve, shall have been more than $2,000,000, (c) if such
failure or failures shall be (i) as to the covenant set forth
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<PAGE> 61
in subsection 6.3, EBITDA for the period of four consecutive fiscal quarters
ending on such Quarterly Test Date shall have been not less than $6,400,000,
(ii) as to the covenant set forth in subsection 6.6, Fixed Charge Coverage for
the period of four consecutive fiscal quarters ending on such date shall have
been not less than 0.85:1.00 and/or (iii) as to the covenant set forth in
subsection 6.7, Interest Coverage for the period of four consecutive fiscal
quarters ending on such Quarterly Test Date shall have been not less than
1.50:1.00, (d) the Borrower shall not have delivered more than three Alternative
Covenant Compliance Certificates prior to the delivery of such Alternative
Compliance Certificate, and (e) such Quarterly Test Date shall be not more than
5 consecutive Quarterly Test Dates following the first Quarterly Test Date in
respect of which the Borrower delivered an Alternative Covenant Compliance
Certificate under this subsection 6.8.
SECTION 7. NEGATIVE COVENANTS.
Each of Borrower, GII and GIC covenants and agrees that so long as any
of the Commitments remains in effect and until payment in full of all
Obligations and termination of all Lender Letters of Credit, unless Borrower has
received the prior written consent of Requisite Lenders, each of Borrower, GII
and GIC shall not and shall not suffer or permit any other Loan Party to:
7.1 INDEBTEDNESS AND LIABILITIES. Directly or indirectly
create, incur, assume, guaranty, or otherwise become or remain directly or
indirectly liable, on a fixed or contingent basis, with respect to any
Indebtedness except: (a) the Obligations; (b) the Subordinated Debt, (c)
Indebtedness (excluding Capital Leases) of Borrower and its Subsidiaries (other
than FSC) not to exceed $250,000 in the aggregate at any time outstanding
secured by purchase money Liens; (d) Indebtedness of Borrower and its
Subsidiaries (other than FSC) under Capital Leases not to exceed $2,000,000
outstanding at any time in the aggregate (less the aggregate amount of
Indebtedness outstanding at any time under the Capital Leases identified on
Schedule 7.1(f)); (e) unsecured Indebtedness of Borrower and its Subsidiaries
(other than FSC) not to exceed $250,000 in aggregate principal amount
outstanding at any time, and (f) Indebtedness existing on the Closing Date and
identified on Schedule 7.1(f). Except for Indebtedness permitted under the
preceding sentence, Borrower will not, and will not permit any of its
Subsidiaries to, incur any Liabilities except for trade payables and normal
accruals in the ordinary course of business not yet due and payable or with
respect to which Borrower or any of its Subsidiaries is contesting in good faith
the amount or validity thereof by appropriate proceedings and then only to the
extent that Borrower or any of its Subsidiaries has established adequate
reserves therefor, if appropriate under GAAP.
7.2 GUARANTIES. Except for endorsements of instruments or
items of payment for collection in the ordinary course of business and except
for guaranties and the like described on Schedule 7.2, guaranty, endorse, or
otherwise in any way become or be responsible for any obligations of any other
Person, whether directly or indirectly by agreement to purchase the indebtedness
of any other Person or through the purchase of goods, supplies or services, or
maintenance of working capital or other balance sheet covenants or conditions,
or by way of stock purchase, capital contribution, advance or loan for the
purpose of paying or discharging any indebtedness or obligation of such other
Person or otherwise; provided, however, that GII and GIC
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<PAGE> 62
may guarantee any Indebtedness of Borrower to the extent such Indebtedness of
the Borrower is permitted under this Agreement.
7.3 TRANSFERS, LIENS AND RELATED MATTERS.
(A) TRANSFERS. Sell, assign (by operation of law or otherwise)
or otherwise dispose of, or grant any option with respect to any of the
Collateral or the assets of such Person, except that Borrower and its
Subsidiaries may (i) sell inventory in the ordinary course of business; (ii)
make Asset Dispositions if all of the following conditions are met: (1) the
market value of assets sold or otherwise disposed of in any single transaction
or series of related transactions does not exceed $500,000 and the aggregate
market value of assets sold or otherwise disposed of in any Fiscal Year does not
exceed $1,000,000; (2) the consideration received is at least equal to the fair
market value of such assets; (3) the sole consideration received is cash; (4)
the net proceeds of such Asset Disposition are applied as required by subsection
2.4(B); (5) after giving effect to the sale or other disposition of the assets
included within the Asset Disposition and the repayment of the Obligations with
the proceeds thereof, Borrower is in compliance on a pro forma basis with the
covenants set forth in Section 6 recomputed for the most recently ended month
for which information is available and is in compliance with all other terms and
conditions contained in this Agreement; and (6) no Default or Event of Default
shall result from such sale or other disposition and (iii) dispositions of used,
worn out or obsolete equipment in the ordinary course of business.
(B) LIENS. Except for Permitted Encumbrances, directly or
indirectly create, incur, assume or permit to exist any Lien on or with respect
to any of the Collateral or the assets of such Person or any proceeds, income or
profits therefrom.
(C) NO NEGATIVE PLEDGES. Enter into or assume any agreement
(other than the Loan Documents and Subordinated Debt Documents) prohibiting the
creation or assumption of any Lien upon its properties or assets, whether now
owned or hereafter acquired.
(D) NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO BORROWER.
Except as provided herein or in the Subordinated Debt Documents, directly or
indirectly create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any
Subsidiary of Borrower to: (1) pay dividends or make any other distribution on
any of such Subsidiary's capital stock owned by Borrower or any Subsidiary of
Borrower; (2) subject to subordination provisions, pay any indebtedness owed to
Borrower or any other Subsidiary; (3) make loans or advances to Borrower or any
other Subsidiary; or (4) transfer any of its property or assets to Borrower or
any other Subsidiary.
7.4 INVESTMENTS AND LOANS. Make or permit to exist investments
in or loans to any other Person, except: (a) Cash Equivalents; (b) loans and
advances to employees for moving, entertainment, travel and other similar
expenses in the ordinary course of business in an aggregate outstanding amount
not in excess of $150,000 at any time, (c) investments existing on the Closing
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<PAGE> 63
Date and described on Schedule 7.4 hereto and (d) investments not exceeding
$200,000 in the aggregate in Permitted Joint Ventures.
7.5 RESTRICTED JUNIOR PAYMENTS. Directly or indirectly
declare, order, pay, make or set apart any sum for any Restricted Junior
Payment, except that: (a)subject to the provisions of the Subordination
Agreement, Borrower may make regularly scheduled payments of interest on the
Subordinated Debt as and when due and payable and, on or after October 1, 2000,
mandatory payments of principal under the Securities Purchase Agreements as and
when due and payable, and (b) so long as no Event of Default or Payment Default
is continuing, (i) repurchases by GII of stock of former employees upon the
death, retirement or other cessation of employment of such employee, in an
aggregate amount for all such former employees not to exceed $250,000 plus the
amount of any cash consideration paid after the Closing Date (and not required
to be paid as of the Closing Date) by employees of Borrower for common stock of
GII and contributed by GII, directly or indirectly, to the common equity of
Borrower, and (ii) dividends by Borrower to GIC (or following a Permitted Merger
of GIC into GII, to GII) and, prior to such Permitted Merger, by GIC to GII, of
amounts necessary to fund such repurchases and used therefor.
7.6 RESTRICTION ON FUNDAMENTAL CHANGES. (a) Enter into any
transaction of merger or consolidation; (b) liquidate, wind-up or dissolve
itself (or suffer any liquidation or dissolution); (c) except as permitted under
subsection 7.3(A), convey, sell, lease, sublease, transfer or otherwise dispose
of, in one transaction or a series of transactions, all or any substantial part
of its business or assets, or the capital stock of any of its Subsidiaries,
whether now owned or hereafter acquired; or (d) acquire by purchase or otherwise
all or any substantial part of the business or assets of, or stock or other
evidence of beneficial ownership of, any Person; provided, however, that (i) any
Subsidiary of Borrower may be merged with and into Borrower or another
wholly-owned Subsidiary of Borrower so long as no Default or Event of Default
shall exist as a result of such merger and the Borrower or such wholly-owned
Subsidiary is the surviving entity of such merger and (ii) nothing contained in
this subsection 7.6 shall prohibit any Permitted Merger.
7.7 CHANGES RELATING TO SUBORDINATED DEBT. Change or amend the
terms of the Subordinated Debt if the effect of such amendment is to: (a)
increase the interest rate on such Indebtedness; (b) accelerate any date upon
which any payment of principal or interest is due on such Indebtedness; (c)
change any event of default (if such change is adverse to the Borrower, the
Agent or any Lender) or add any covenant with respect to such Indebtedness; (d)
change any payment provision of such Indebtedness (if such change is adverse to
the Borrower, the Agent or any Lender); (e) change the subordination provisions
thereof; or (f) change or amend any other term if such change or amendment would
materially increase the obligations of the obligor or confer additional material
rights on the holder of such Indebtedness in a manner adverse to Borrower, any
of its Subsidiaries, Agent or any Lender.
7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly,
enter into or permit to exist any transaction (including the purchase, sale or
exchange of property or the rendering of any service) with any Affiliate, except
for (i) transactions in the ordinary course of and pursuant to the reasonable
57
<PAGE> 64
requirements of Borrower's business and upon fair and reasonable terms which, in
the case of any transaction or series of related transactions involving $25,000
or more, are fully disclosed to Agent and Lenders and which, in any event and
regardless of amount, are no less favorable to Borrower than it would obtain in
a comparable arm's length transaction with an unaffiliated Person, (ii) the
transactions described on Schedule 7.8 and (iii) transactions between the
Borrower and any wholly-owned Subsidiary (other than FSC) of the Borrower or
between two wholly-owned Subsidiaries of Borrower (neither of which is FSC).
7.9 ENVIRONMENTAL LIABILITIES. (a) Violate any applicable
Environmental Law; or (b) dispose of any Hazardous Materials into or onto or
from, any real property owned, leased or operated by any Loan Party (other than
any migration, leaching or further spread of any Hazardous Material already
present as of the Closing Date), in each case if such violation or disposal
alone or together with all other such violations and dispositions could
reasonably be expected to involve penalties, costs or expenses of $250,000 or
more in the aggregate or has had or could reasonably be expected to have a
Material Adverse Effect.
7.10 CONDUCT OF BUSINESS. From and after the Closing Date (i)
Borrower shall not engage in any business other than businesses of the type
engaged in by Borrower or such Subsidiary on the Closing Date, (ii) neither GII
nor GIC shall engage in any business, enter into any transaction, incur any
liability or acquire any asset other than, in the case of GII, continued
ownership of the stock of GIC (or, following the Permitted Merger, of Borrower)
and the incurrence of Liabilities incident thereto, and in the case of GIC
continued ownership of the stock of Borrower and the incurrence of Liabilities
incident thereto and (iii) FSC shall not engage in any business, enter into any
transaction, incur any liability or acquire any asset, provided, that (A)
nothing contained in this subsection 7.10 shall prohibit any Permitted Merger
and (B) GII and GIC may be parties to and perform their respective obligations
under the Recapitalization Documents, the Subordinated Debt Documents and the
Loan Documents.
7.11 COMPLIANCE WITH ERISA. Neither Borrower nor any
Subsidiary shall fail to establish, maintain and operate each Employee Benefit
Plan in compliance in all material respects with the provisions of ERISA, the
IRC and all other applicable laws and the regulations and interpretations
thereof; Borrower and each Subsidiary of Borrower shall take all steps necessary
to avoid the imposition of a Lien in connection with any Employee Benefit Plan
and shall not adopt an amendment to any Employee Benefit Plan requiring the
provision of security under section 307 of ERISA or section 401(a)(29) of the
IRC.
7.12 TAX CONSOLIDATIONS. File or consent to the filing of any
consolidated income tax return for any period beginning on or after the Closing
Date with any Person other than a Corporate Guarantor; provided, that in the
event Borrower files a return with a Corporate Guarantor, Borrower's
contribution with respect to taxes as a result of the filing of such
consolidated return shall not be greater, nor the receipt of tax benefits less,
than they would have been had Borrower not filed a consolidated return with a
Corporate Guarantor.
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<PAGE> 65
7.13 SUBSIDIARIES. Establish, create or acquire any new
Subsidiaries.
7.14 FISCAL YEAR. Change its Fiscal Year.
7.15 PRESS RELEASE; PUBLIC OFFERING MATERIALS. Disclose the
name of Agent or any Lender in any press release or in any prospectus, proxy
statement or other materials filed with any governmental entity relating to a
public offering of the capital stock of any Loan Party except as may be required
by law.
7.16 BANK ACCOUNTS. Establish any new bank accounts, or
amend or terminate any Blocked Account or lockbox agreement without Agent's
prior written consent, which consent shall not be unreasonably withheld.
SECTION 8. DEFAULT, RIGHTS AND REMEDIES.
8.1 EVENT OF DEFAULT. "Event of Default" shall mean the
occurrence or existence of any one or more of the following:
(A) PAYMENT. failure to make payment of the principal of any
Loan or the reimbursement of any amounts paid upon drawing under any Lender
Letter of Credit when due or the failure to pay any interest payable under any
Loan Document or to pay any other Obligation within five (5) days of the
applicable due date; or
(B) DEFAULT IN OTHER AGREEMENTS. (1) failure of Borrower or
any of its Subsidiaries to pay when due (or within any applicable grace period)
any principal or interest on any Indebtedness (other than the Obligations) or
(2) breach or default of Borrower or any of its Subsidiaries with respect to any
Indebtedness (other than the Obligations); if such failure to pay, breach or
default entitles the holder to cause such Indebtedness having an individual
principal amount in excess of $250,000 or having an aggregate principal amount
in excess of $500,000 to become or be declared due prior to its stated maturity;
or
(C) BREACH OF CERTAIN PROVISIONS. failure of Borrower to
perform or comply with any term or condition contained in subsections 5.1 (A)
(and, in the case of subsection 5.1(A) only, continuation of such failure for
five days) , (C) or (S), 5.3, 5.5 or 5.6 or contained in Section 6 or Section 7;
or
(D) BREACH OF WARRANTY. any representation, warranty,
certification or other statement made by any Loan Party in any Loan Document or
in any statement or certificate at any time given by such Person in writing
pursuant or in connection with any Loan Document is false in any material
respect on the date made; or
(E) OTHER DEFAULTS UNDER LOAN DOCUMENTS. any Loan Party
defaults in the performance of or compliance with any term contained in this
Agreement or the other Loan
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<PAGE> 66
Documents and such default is not remedied or waived within ten (10) days after
receipt by such Loan Party of notice from Agent, or Requisite Lenders of such
default (other than occurrences described in other provisions of this subsection
8.1 for which a different grace or cure period is specified or which constitute
immediate Events of Default); or
(F) CHANGE IN CONTROL. a Change of Control shall occur; or
(G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (1)
a court enters a decree or order for relief with respect to any Loan Party in an
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, which decree or
order is not stayed or other similar relief is not granted under any applicable
federal or state law; or (2) the continuance of any of the following events for
sixty (60) days unless dismissed, bonded or discharged: (a) an involuntary case
is commenced against any Loan Party under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect; or (b) a decree or order of a
court for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over any Loan Party or over all
or a substantial part of their respective property, is entered; or (c) an
interim receiver, trustee or other custodian is appointed without the consent of
any Loan Party for all or a substantial part of the property of such Loan Party;
or
(H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (1) an
order for relief is entered with respect to any Loan Party or any Loan Party
commences a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case or to the
conversion of an involuntary case to a voluntary case under any such law or
consents to the appointment of or taking possession by a receiver, trustee or
other custodian for all or a substantial part of its property; or (2) any Loan
Party makes any assignment for the benefit of creditors; or (3) the board of
directors of any Loan Party adopts any resolution or otherwise authorizes action
to approve any of the actions referred to in this subsection 8.1(H); or
(I) OMITTED.
(J) JUDGMENT AND ATTACHMENTS. any one or more money judgments,
writs or warrants of attachment, or similar process involving an amount in the
aggregate at any time in excess of $250,000 (in either case not adequately
covered by insurance as to which the insurance company has acknowledged
coverage) are entered or filed against any Loan Party or any of their respective
assets and remain undischarged, unvacated, unbonded or unstayed for a period of
thirty (30) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(K) DISSOLUTION. any order, judgment or decree is entered
against any Loan Party decreeing the dissolution or split up of such Loan Party
and such order remains undischarged or unstayed for a period in excess of twenty
(20) days; or
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<PAGE> 67
(L) SOLVENCY. any Loan Party admits in writing its present or
prospective inability to pay its debts as they become due; or
(M) INJUNCTION. any Loan Party is enjoined, restrained or in
any way prevented by the order of any court or any administrative or regulatory
agency from conducting all or any material part of its business and such order
continues for more than thirty (30) days; or
(N) INVALIDITY OF LOAN DOCUMENTS. any of the Loan Documents
for any reason, other than a partial or full release in accordance with the
terms thereof, ceases to be in full force and effect or is declared to be null
and void, or any Loan Party denies that it has any further liability under any
Loan Documents to which it is party, or gives notice to such effect; or
(O) FAILURE OF SECURITY. Agent, on behalf of Lenders, does not
have or ceases to have a valid and perfected first priority security interest in
any material portion of the Collateral (subject to Permitted Encumbrances), in
each case, for any reason other than the failure of Agent or any Lender to take
any action within its control; or
(P) DAMAGE, STRIKE, CASUALTY. any material damage to, or loss,
theft or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condem nation, act of God or public enemy, or
other casualty which causes, for more than fifteen (15) consecutive days, the
cessation or substantial curtailment of revenue producing activities at any
facility of Borrower or any of its Subsidiaries if any such event or
circumstance could reasonably be expected to have a Material Adverse Effect; or
(Q) LICENSES AND PERMITS. the loss, suspension or revocation
of, or failure to renew, any license or permit not held or hereafter acquired by
any Loan Party if such loss, suspension, revocation or failure to renew could
reasonably be expected to have a Material Adverse Effect;
(R) FORFEITURE. there is filed against any Loan Party any
civil or criminal action, suit or proceeding under any federal or state
racketeering statute (including, without limitation, the Racketeer Influenced
and Corrupt Organization Act of 1970), which action, suit or proceeding (1) is
not dismissed within one hundred twenty (120) days; and (2) could reasonably be
expected to result in the confiscation or forfeiture of any material portion of
the Collateral or have a Material Adverse Effect; or
(S) SUBORDINATED DEBT EVENTS. if there shall occur a
"Prepayment Event", "Repurchase Event" (each as defined in the Securities
Purchase Agreements) or any other event, act or occurrence which shall result in
the Borrower being required to make any prepayment, redemption or other payment
of principal of the Senior Subordinated Notes or of Subordinated Debt of the
type described in clause (b) of the definition of Subordinated Debt.
8.2 SUSPENSION OF COMMITMENTS. Upon the occurrence of any
Default or Event of Default, notwithstanding any grace period or right to cure,
Agent may or upon demand by
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<PAGE> 68
Requisite Lenders shall, without notice or demand, immediately cease making
additional Loans and the Commitments shall be suspended; provided, that, in the
case of a Default, if the subject condition or event is waived or cured within
any applicable grace or cure period, the Commitments shall be reinstated.
8.3 ACCELERATION. Upon the occurrence of any Event of Default
described in the foregoing subsections 8.1(G) or 8.1(H), all Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Borrower, and the Commitments shall thereupon terminate. Upon the
occurrence and during the continuance of any other Event of Default, Agent may,
and upon demand by Requisite Lenders shall, by written notice to Borrower, (a)
declare all or any portion of the Obligations to be, and the same shall
forthwith become, immediately due and payable and the Commitments shall
thereupon terminate and (b) demand that Borrower immediately deposit with Agent
an amount equal to one hundred five percent (105%) of the Letter of Credit
Reserve to enable Lender to make payments under the Lender Letters of Credit
when required and such amount shall become immediately due and payable.
8.4 REMEDIES. If any Event of Default shall have occurred and
be continuing, in addition to and not in limitation of any other rights or
remedies available to Agent and Lenders at law or in equity, Agent may and shall
upon the request of Requisite Lenders exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the right and remedies of a secured party on default under
the UCC (whether or not the UCC applies to the affected Collateral) and may also
(a) notify any or all obligors on the Accounts to make all payments directly to
Agent; (b) require Borrower to, and Borrower hereby agrees that it will, at its
expense and upon request of Agent forthwith, assemble all or part of the
Collateral as directed by Agent and make it available to Agent at a place to be
designated by Agent which is reasonably convenient to both parties; (c) withdraw
all cash in the Blocked Accounts and apply such monies in payment of t he
Obligations in the manner provided in subsection 8.7; (d) without notice or
demand or legal process but without breach of the peace, enter upon any premises
of Borrower and take possession of the Collateral; and (e) without notice except
as specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Agent's offices or elsewhere,
at such time or times, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as Agent may deem commercially
reasonable. Borrower agrees that, to the extent notice of sale shall be required
by law, at least ten (10) days notice to Borrower of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. At any sale of the Collateral, if permitted
by law, Agent or any Lender may bid (which bid may be, in whole or in part, in
the form of cancellation of indebtedness) for the purchase of the Collateral or
any portion thereof for the account of Agent or such Lender. Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Borrower shall remain liable for any deficiency. Agent may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. To the extent permitted by law,
Borrower hereby specifically waives all rights of redemption, stay or appraisal
which it has or may
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have under any law now existing or hereafter enacted. Agent shall not be
required to proceed against any Collateral but may proceed against Borrower
directly.
8.5 APPOINTMENT OF ATTORNEY-IN-FACT. Borrower hereby
constitutes and appoints Agent as Borrower's attorney-in-fact with full
authority in the place and stead of Borrower and in the name of Borrower, Agent
or otherwise, from time to time in Agent's discretion while an Event of Default
is continuing (except in the case of clause (c) below as to which no Event of
Default must be continuing) to take any action and to execute any instrument
that Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, including: (a) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral; (b) to adjust, settle or compromise the
amount or payment of any Account, or release wholly or partly any customer or
obligor thereunder or allow any credit or discount thereon; (c) to receive,
endorse, and collect any drafts or other instruments, documents and chattel
paper, in connection with clause (a) above; (d) to file any claims or take any
action or institute any proceedings that Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the rights
of Agent and Lenders with respect to any of the Collateral; and (e) to sign and
endorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, assignments, verifications and notices in connection with
Accounts and other documents relating to the Collateral. The appointment of
Agent as Borrower's attorney and Agent's rights and powers are coupled with an
interest and are irrevocable until payment in full and complete performance of
all of the Obligations.
8.6 LIMITATION ON DUTY OF AGENT WITH RESPECT TO COLLATERAL.
Beyond the safe custody thereof, Agent and each Lender shall have no duty with
respect to any Collateral in its possession or control (or in the possession or
control of any agent or bailee) or with respect to any income thereon or the
preservation of rights against prior parties or any other rights pertaining
thereto. Agent shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which Agent accords its own
property. Neither Agent nor any Lender shall be liable or responsible for any
loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any warehouseman, carrier,
forwarding agency, consignee or other agent or bailee selected by Agent in good
faith.
8.7 APPLICATION OF PROCEEDS. Upon the occurrence and during
the continuance of an Event of Default, (a) Borrower irrevocably waives the
right to direct the application of any and all payments at any time or times
thereafter received by Agent from or on behalf of Borrower, and Borrower hereby
irrevocably agrees that Agent shall have the continuing exclusive right to apply
and to reapply any and all payments received at any time or times after the
occurrence and during the continuance of an Event of Default against the
Obligations in such manner as Agent may deem advisable notwithstanding any
previous entry by Agent upon any books and records and (b) the proceeds of any
sale of, or other realization upon, all or any part of the Collateral shall be
applied: FIRST, to all fees, costs and expenses incurred by Agent or any Lender
with respect to this Agreement, the other Loan Documents or the Collateral;
SECOND, to all fees due and owing to Agent and Lenders;
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THIRD, to accrued and unpaid interest on the Obligations; FOURTH, to the
principal amounts of the Obligations outstanding; and FIFTH, to any other
indebtedness or obligations of Borrower or any other Loan Party owing to Agent
or any Lender under the Loan Documents.
8.8 LICENSE OF INTELLECTUAL PROPERTY. Borrower hereby assigns,
transfers and conveys to Agent, for the benefit Lenders, effective upon the
occurrence of any Event of Default hereunder, the non-exclusive right and
license to use all Intellectual Property owned or used by Borrower together with
any goodwill associated therewith, all to the extent necessary to enable Agent
to realize on the Collateral and any successor or assign to enjoy the benefits
of the Collateral. This right and license shall inure to the benefit of all
successors, assigns and transferees of Agent and its successors, assigns and
transferees, whether by voluntary conveyance, operation of law, assignment,
transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and
license is granted free of charge, without requirement that any monetary payment
whatsoever be made to Borrower by Agent.
8.9 WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the part of
Agent or any Lender to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement or the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise by Agent or any Lender of any right under this Agreement or any other
Loan Document preclude any other or further exercise thereof or the exercise of
any other right. The rights in this Agreement and the other Loan Documents are
cumulative and are not exclusive of any other remedies provided by law.
SECTION 9. ASSIGNMENT AND PARTICIPATION.
9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS.
(A) Each Lender may assign its rights and delegate its
obligations under this Agreement to another Person; provided, that (a) such
Lender shall first obtain the written consent of Agent and Borrower, which
consents shall not be unreasonably withheld, (b) the amount of Commitments and
Loans of the assigning Lender being assigned shall in no event be less than the
lesser of (i) $5,000,000 or (ii) the entire amount of the Commitments and Loans
of such assigning Lender and (c)(i) each such assignment shall be of a pro rata
portion of all such assigning Lender's Loans and Commitments hereunder, and (ii)
the parties to such assignment shall execute and deliver to Agent for acceptance
and recording a Lender Addition Agreement together with (x) a processing and
recording fee of $2,500 payable to Agent and (y) the Notes originally delivered
to the assigning Lender. Upon receipt of all of the foregoing, Agent shall
notify Borrower of such assignment and Borrower shall comply with its
obligations under the last sentence of subsection 2.1(E). In the case of an
assignment authorized under this subsection 9.1, the assignee shall have, to the
extent of such assignment, the same rights, benefits and obligations as it would
if it were a Lender hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Commitment or assigned portion
thereof. Borrower hereby acknowledges and agrees that any assignment will give
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rise to a direct obligation of Borrower to the assignee and that the assignee
shall be considered to be a "Lender".
(B) Each Lender may sell participations in all or any part of
any Loans made by it to another Person; provided, that any such participation
shall be in a minimum amount of $5,000,000, and provided, further, that all
amounts payable by Borrower hereunder shall be determined as if that Lender had
not sold such participation and the holder of any such participation shall not
be entitled to require such Lender to take or omit to take any action hereunder
except action directly effecting (a) any reduction in the principal amount,
interest rate or fees payable with respect to any Loan in which such holder
participates; (b) any extension of the Termination Date or the date fixed for
any payment of principal, interest or fees payable with respect to any Loan in
which such holder participates; and (c) any release of substantially all of the
Collateral (other than in accordance with the terms of this Agreement or the
Loan Documents). Notwithstanding the foregoing, but subject to subsection (D)
below, any holder of any such participation shall be entitled to the benefits of
subsections 2.8, 2.9, 2.10, 9.4 and 10.2 as if it were a Lender hereunder.
(C) Except as otherwise provided in this subsection 9.1 no
Lender shall, as between Borrower and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans or
other Obligations owed to such Lender. Each Lender may furnish any information
concerning Borrower and its Subsidiaries in the possession of that Lender from
time to time to assignees and participants (including prospective assignees and
participants) provided that the Persons obtaining such information agrees to
maintain the confidentiality of such information to the extent required by
subsection 10.21.
(D) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Loans owing to it and the Notes held by it in favor of any Federal Reserve Bank
in accordance with Regulation A of the Board of Governors of the Federal Reserve
System). No assignee, participant or other transferee of any Lender's rights
shall be entitled to receive any greater payment under subsection 2.8, 2.9 or
9.4 than such Lender would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrower's prior
written consent, which consent shall not be unreasonably withheld, or at a time
when the circumstances giving rise to such greater payment did not exist.
9.2 AGENT.
(A) APPOINTMENT. Each Lender hereby designates and appoints
Heller as its agent under this Agreement and the Loan Documents, and each Lender
hereby irrevocably authorizes Agent to take such action or to refrain from
taking such action on its behalf under the provisions of this Agreement and the
Loan Documents and to exercise such powers as are set forth herein or therein,
together with such other powers as are reasonably incidental thereto. Agent is
authorized and empowered to amend, modify, or waive any provisions of this
Agreement or the other Loan
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Documents on behalf of Lenders subject to the requirement that certain of
Lenders' consent be obtained in certain instances as provided in subsection 9.3.
Agent agrees to act as such on the express conditions contained in this
subsection 9.2. The provisions of this subsection 9.2 are solely for the benefit
of Agent and Lenders and neither Borrower nor any Loan Party shall have any
rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, Agent shall act solely
as an administrative representative of Lenders and does not assume and shall not
be deemed to have assumed any obligation toward or relationship of agency or
trust with or for Lenders, Borrower or any Loan Party. Agent may perform any of
its duties hereunder, or under the Loan Documents, by or through its agents or
employees. Without limitation of the foregoing, Agent is authorized to execute
and deliver and perform its obligations under the Bank One Letter Agreement.
(B) NATURE OF DUTIES. Agent shall have no duties, obligations
or responsibilities except those expressly set forth in this Agreement or in the
Loan Documents. The duties of Agent shall be mechanical and administrative in
nature. Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender. Each Lender shall make its own
independent investigation of the financial condition and affairs of Borrower in
connection with the extension of credit hereunder and shall make its own
appraisal of the credit worthiness of Borrower, and Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect thereto, whether coming into
its possession before the Closing Date or at any time or times thereafter. If
Agent seeks the consent or approval of any Lenders to the taking or refraining
from taking any action hereunder, then Agent shall send notice thereof to each
Lender. Agent shall promptly notify each Lender any time that the applicable
percentage of Lenders have instructed Agent to act or refrain from acting
pursuant hereto.
(C) RIGHTS, EXCULPATION, ETC. Neither Agent nor any of its
officers, directors, employees or agents shall be liable to any Lender for any
action taken or omitted by them hereunder or under any of the Loan Documents, or
in connection herewith or therewith, except that Agent shall be obligated on the
terms set forth herein for performance of its express obligations hereunder, and
except that Agent shall be liable with respect to its own gross negligence or
willful misconduct. Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith and if any such apportionment
or distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them). In performing its
functions and duties hereunder, Agent shall exercise the same care which it
would in dealing with loans for its own account, but Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectible, or sufficiency of this Agreement or any of the Loan
Documents or the transactions contemplated thereby, or for the financial
condition of any Loan Party. Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any of the Loan Documents or the financial
condition of any Loan Party, or the existence or possible existence of any
Default or Event
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of Default. Agent may at any time request instructions from Lenders with respect
to any actions or approvals which by the terms of this Agreement or of any of
the Loan Documents Agent is permitted or required to take or to grant, and Agent
shall be absolutely entitled to refrain from taking any action or to withhold
any approval and shall not be under any liability whatsoever to any Person for
refraining from any action or withholding any approval under any of the Loan
Documents until it shall have received such instructions from the applicable
percentage of the Lenders. Without limiting the foregoing, no Lender shall have
any right of action whatsoever against Agent as a result of Agent acting or
refraining from acting under this Agreement or any of the other Loan Documents
in accordance with the instructions of the applicable percentage of the Lenders
and notwithstanding the instructions of Lenders, Agent shall have no obligation
to take any action if it, in good faith believes that such action exposes Agent
to any liability.
(D) RELIANCE. Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents or any telephone
message or other communication (including any writing, telex, telecopy or
telegram) believed by it in good faith to be genuine and correct and to have
been signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the Loan Documents and its duties
hereunder or thereunder, upon advice of counsel selected by it. Agent shall be
entitled to rely upon the advice of legal counsel, independent accountants, and
other experts selected by Agent in its sole discretion.
(E) INDEMNIFICATION. Each Lender, severally, agrees to
reimburse and indemnify Agent for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, advances or disbursements of any kind or nature whatsoever which may
be imposed on, incurred by, or asserted against Agent in any way relating to or
arising out of this Agreement or any of the Loan Documents or any action taken
or omitted by Agent under this Agreement for any of the Loan Documents, in
proportion to each Lender's Pro Rata Share, provided, however, that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, advances or
disbursements resulting from Agent's gross negligence or willful misconduct. The
obligations of Lenders under this subsection 9.2(E) shall survive the payment in
full of the Obligations and the termination of this Agreement.
(F) HELLER INDIVIDUALLY. With respect to its Commitments and
the Loans made by it, and the Term Notes and Revolving Notes issued to it,
Heller shall have and may exercise the same rights and powers hereunder and is
subject to the same obligations and liabilities as and to the extent set forth
herein for any other Lender. The terms "Lenders" or "Requisite Lenders" or any
similar terms shall, unless the context clearly otherwise indicates, include
Heller in its individual capacity as a Lender or one of the Requisite Lenders.
Heller may lend money to, and generally engage in any kind of banking, trust or
other business with any Loan Party as if it were not acting as Agent pursuant
hereto.
(G) SUCCESSOR AGENT.
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(1) RESIGNATION. Agent may resign from the performance of all
its functions and duties hereunder at any time by giving at least thirty (30)
Business Days' prior written notice to Borrower and the Lenders. Such
resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clause (2) below or as otherwise provided below.
(2) APPOINTMENT OF SUCCESSOR. Upon any such notice of
resignation pursuant to clause (G)(1) above, Requisite Lenders shall, upon
receipt of Borrower's prior consent which shall not unreasonably be withheld,
appoint a successor Agent. If a successor Agent shall not have been so appointed
within said thirty (30) Business Day period, the retiring Agent, upon notice to
Borrower, shall then appoint a successor Agent who shall serve as Agent until
such time as Requisite Lenders, upon receipt of Borrower's prior written
consent, which shall not be unreasonably withheld, appoint a successor Agent as
provided above.
(3) SUCCESSOR AGENT. Upon the acceptance of any appointment as
Agent under the Loan Documents by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under the Loan Documents. After any retiring
Agent's resignation as Agent under the Loan Documents, the provisions of this
subsection 9.2 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under the Loan Documents.
(H) COLLATERAL MATTERS.
(1) RELEASE OF COLLATERAL. Lenders hereby
irrevocably authorize Agent, and Agent shall, release any Lien granted to or
held by Agent upon any property covered by this Agreement or the Loan Documents
(i) upon termination of the Commitments and payment and satisfaction of all
Obligations; (ii) constituting property being sold or disposed of if (except in
the case of Inventory sold in the ordinary course of business) Borrower
certifies to Agent that the sale or disposition is made in compliance with the
provisions of this Agreement (and Agent may rely in good faith conclusively on
any such certificate, without further inquiry); or (iii) constituting property
leased to Borrower under a lease which has expired or been terminated in a
transaction permitted under this Agreement or is about to expire and which has
not been, and is not intended by Borrower to be, renewed or extended. In
addition during any Fiscal Year (x) Agent may release Collateral having a book
value of not more than 10% of the book value of all Collateral, (y) Agent, with
the consent of Requisite Lenders, may release Collateral having a book value of
not more than 25% of the book value of all Collateral and (z) Agent, with the
consent of Lenders having 90% of (i) the Total Loan Commitments and (ii) Loans,
may release all the Collateral.
(2) CONFIRMATION OF AUTHORITY; EXECUTION OF RELEASES.
Without in any manner limiting Agent's authority to act without any specific or
further authorization or consent by Lenders (as set forth in subsection
9.2(H)(1)), each Lender agrees to confirm in writing, upon request by Borrower,
the authority to release any property covered by this Agreement or the Loan
Documents conferred upon Agent under subsection 9.2(H)(1). So long as no Event
of Default is then
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continuing, upon receipt by Agent of confirmation from the requisite percentage
of Lenders, of its authority to release any particular item or types of property
covered by this Agreement or the Loan Documents, and upon at least five (5)
Business Days prior written request by Borrower, Agent shall (and is hereby
irrevocably authorized by Lenders to) execute such documents as may be necessary
to evidence the release of the Liens granted to Agent for the benefit of Lenders
herein or pursuant hereto upon such Collateral; provided, however, that (i)
Agent shall not be required to execute any such document on terms which, in
Agent's opinion, would expose Agent to liability or create any obligation or
entail any consequence other than the release of such Liens without recourse or
warranty, and (ii) except in the case of a release described in clause (i) of
subsection 9.2(H)(1), such release shall not in any manner discharge, affect or
impair the Obligations or any Liens upon (or obligations of any Loan Party, in
respect of), all interests retained by any Loan Party, including, without
limitation, the proceeds of any sale, all of which shall continue to constitute
part of the property covered by this Agreement or the Loan Documents.
(3) ABSENCE OF DUTY. Agent shall have no obligation
whatsoever to any Lender or any other Person to assure that the property covered
by this Agreement or the Loan Documents exists or is owned by Borrower or is
cared for, protected or insured or has been encumbered or that the Liens granted
to Agent on behalf of Lenders herein or pursuant hereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
Agent in this subsection 9.2(H) or in any of the Loan Documents, it being
understood and agreed that in respect of the property covered by this Agreement
or the Loan Documents or any act, omission or event related thereto, Agent may
act in any manner it may deem appropriate, in its discretion, given Agent's own
interest in property covered by this Agreement or the Loan Documents as one of
the Lenders and that Agent shall have no duty or liability whatsoever to any of
the other Lenders; provided, that Agent shall exercise the same care which it
would in dealing with loans for its own account.
(I) AGENCY FOR PERFECTION. Each Lender hereby appoints each
other Lender as agent for the purpose of perfecting Lenders' security interest
in Collateral which, in accordance with ARTICLE 9 of the Uniform Commercial Code
in any applicable jurisdiction, can be perfected only by possession. Should any
Lender (other than Agent) obtain possession of any such Collateral, such Lender
shall notify Agent thereof, and, promptly upon Agent's request therefor, shall
deliver such Collateral to Agent or in accordance with Agent's instructions.
(J) EXERCISE OF REMEDIES. Each Lender agrees that it will not
have any right individually to enforce or seek to enforce this Agreement or any
Loan Document or to realize upon any collateral security for the Loans, it being
understood and agreed that such rights and remedies may be exercised only by
Agent.
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9.3 CONSENTS.
(A) In the event Agent requests the consent of a Lender and
does not receive a written denial thereof within five (5) Business Days after
such Lender's receipt of such request, then such Lender will be deemed to have
given such consent.
(B) In the event Agent requests the consent of a Lender and
such consent is denied, then Heller may, at its option, require such Lender to
assign its interest in the Loans to Heller for a price equal to the then
outstanding principal amount thereof PLUS accrued and unpaid interest and fees
due such Lender, which interest and fees will be paid when collected from
Borrower. In the event that Heller elects to require any Lender to assign its
interest to Heller, Heller will so notify such Lender in writing within
forty-five (45) days following such Lender's denial, and such Lender will assign
its interest to Heller no later than five (5) days following receipt of such
notice.
9.4 SET OFF AND SHARING OF PAYMENTS. In addition to any rights
now or hereafter granted under applicable law and not by way of limitation of
any such rights, upon the occurrence and during the continuance of any Event of
Default, each Lender is hereby authorized by Borrower at any time or from time
to time, with reasonably prompt subsequent notice to Borrower or to any other
Person (any prior or contemporaneous notice being hereby expressly waived) to
set off and to appropriate and to apply any and all (A) balances held by such
Lender or such holder at any of its offices for the account of Borrower or any
of its Subsidiaries (regardless of whether such balances are then due to
Borrower or its Subsidiaries), and (B) other property at any time held or owing
by such Lender or such holder to or for the credit or for the account of
Borrower or any of its Subsidiaries, against and on account of any of the
Obligations which are not paid when due; except that no Lender or any such
holder shall exercise any such right without the prior written consent of Agent.
Any Lender which has exercised its right to set off shall, to the extent the
amount of any such set off exceeds its Pro Rata Share of the Obligations,
purchase for cash (and the other Lenders or holders shall sell) participations
in each such other Lender's or holder's Pro Rata Share of the Obligations as
would be necessary to cause such Lender to share such excess with each other
Lender or holder in accordance with their respective Pro Rata Shares. Borrower
agrees, to the fullest extent permitted by law, that (a) any Lender or holder
may exercise its right to set off with respect to amounts in excess of its Pro
Rata Share of the Obligations and may sell participations in such excess to
other Lenders and holders, and (b) any Lender or holder so purchasing a
participation in the Loans made or other Obligations held by other Lenders or
holders may exercise all rights of set-off, bankers' lien, counterclaim or
similar rights with respect to such participation as fully as if such Lender or
holder were a direct holder of Loans and other Obligations in the amount of such
participation.
9.5 DISBURSEMENT OF FUNDS. Agent may, on behalf of Lenders,
disburse funds to Borrower for Loans requested. Each Lender shall reimburse
Agent on demand for all funds disbursed on its behalf by Agent, or if Agent so
requests, each Lender will remit to Agent its Pro Rata Share of any Loan before
Agent disburses same to Borrower. If Agent elects to require that funds be made
available prior to disbursement to Borrower, Agent shall advise each Lender by
telephone, telex or
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telecopy of the amount of such Lender's Pro Rata Share of such requested Loan no
later than (a) one (1) Business Day prior to the Funding Date applicable thereto
for LIBOR Rate Loans and (b) by 1:00 p.m. Central time on the Funding Date for
Base Rate Loans, and each such Lender shall pay Agent such Lender's Pro Rata
Share of such requested Loan, in same day funds, by wire transfer to Agent's
account not later than 10:00 a.m. Central time on such Funding Date for LIBOR
Rate Loans and 3:00 p.m. Central time for Base Rate Loans. If any Lender fails
to pay the amount of its Pro Rata Share forthwith upon Agent's demand, Agent
shall promptly notify Borrower, and Borrower shall immediately repay such amount
to Agent. Any repayment required pursuant to this subsection 9.5 shall be
without premium or penalty. Nothing in this subsection 9.5 or elsewhere in this
Agreement or the other Loan Documents, including without limitation the
provisions of subsection 9.6, shall be deemed to require Agent to advance funds
on behalf of any Lender or to relieve any Lender from its obligation to fulfill
its Commitments hereunder or to prejudice any rights that Agent or Borrower may
have against any Lender as a result of any default by such Lender hereunder.
9.6 SETTLEMENTS, PAYMENTS AND INFORMATION.
(A) REVOLVING LOAN ADVANCES AND PAYMENTS; FEE PAYMENTS
(1) The Revolving Loan balance may fluctuate from day
to day through Agent's disbursement of funds to, and receipt of funds from,
Borrower. In order to minimize the frequency of transfers of funds between Agent
and each Lender notwithstanding terms to the contrary set forth in Section 2 and
subsection 9.5, Revolving Loan advances and payments may be settled according to
the procedures described in subsection 9.6(A)(2) and 9.6(A)(3) of this
Agreement. Payments of principal, interest and fees in respect of the Term Loan
will be settled on the Business Day received in accordance with the provisions
of Section 2. Notwithstanding these procedures, each Lender's obligation to fund
its portion of any advances made by Agent to Borrower will commence on the date
such advances are made by Agent. Such payments will be made by such Lender
without set-off, counterclaim or reduction of any kind.
(2) Once each week, or more frequently (including
daily), if Agent so elects (each such day being a "Settlement Date"), Agent will
advise each Lender by 1 p.m. Central time by telephone, telex, or telecopy of
the amount of each such Lender's Pro Rata Share of the Revolving Loan balance.
In the event that payments are necessary to adjust the amount of such Lender's
share of the Revolving Loan balance to such Lender's Pro Rata Share of the
Revolving Loan, the party from which such payment is due will pay the other, in
same day funds, by wire transfer to the other's account not later than 3:00 p.m.
Central time on the Business Day following the Settlement Date.
(3) On the first Business Day of each month
("Interest Settlement Date"), Agent will advise each Lender by telephone,
telefax or telecopy of the amount of interest and fees charged to and collected
from Borrower for the proceeding month. Provided that such Lender has made all
payments required to be made by it under this Agreement, Agent will pay to such
Lender, by wire transfer to such Lender's account (as specified by such Lender
on the signature page of this
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Agreement as amended by such Lender from time to time after the date hereof
pursuant to the notice provisions contained herein or in the applicable Lender
Addition Agreement) not later than 3 p.m. Central time on the next Business Day
following the Interest Settlement Date such Lender's share of such interest and
fees.
(B) AVAILABILITY OF LENDER'S PRO RATA SHARE.
(1) Unless Agent has been notified by a Lender
prior to a Funding Date of such Lender's intention not to fund its Pro Rata
Share of the Loan amount requested by Borrower, Agent may assume that such
Lender will make such amount available to Agent on the Funding Date or the next
Settlement Date, as applicable. If such amount is not, in fact, made available
to Agent by such Lender when due, Agent will be entitled to recover such amount
on demand from such Lender without set-off, counterclaim or deduction of any
kind.
(2) Nothing contained in this subsection 9.6(B) will
be deemed to relieve a Lender of its obligation to fulfill its Commitments or to
prejudice any rights Agent or Borrower may have against such Lender as a result
of any default by such Lender under this Agreement.
(3) Without limiting the generality of the foregoing,
each Lender shall be obligated to fund its Pro Rata Share of any Revolving Loan
made with respect to any draw on a Lender Letter of Credit.
(C) RETURN OF PAYMENTS.
(1) If Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has been or will
be received by Agent from Borrower and such related payment is not received by
Agent, then Agent will be entitled to recover such amount from such Lender
without set-off, counterclaim or deduction of any kind.
(2) If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to Borrower or paid to
any other person pursuant to any solvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement, Agent will not be
required to distribute any portion thereof to any Lender. In addition, each
Lender will repay to Agent on demand any portion of such amount that Agent has
distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to Borrower or such other Person, without set-off,
counterclaim or deduction of any kind.
9.7 DISSEMINATION OF INFORMATION. Agent will provide Lenders
with any information received by Agent from Borrower which is required to be
provided to a Lender hereunder; provided, however, that Agent shall not be
liable to Lenders for any failure to do so, except to the extent that such
failure is attributable to Agent's gross negligence or willful misconduct.
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9.8 DISCRETIONARY ADVANCES. Agent may, in its sole discretion,
(i) provided that no Event of Default exists, make Revolving Loans of up to 10%
in excess of the limitations set forth in subsection 2.1(B)(1)(b) but not in
excess of the limitation set forth in subsection 2.1(B)(1)(a) and (ii) during
the continuance of an Event of Default, make Revolving Loans in an aggregate
amount of not more than $1,500,000 in excess of the limitations set forth in
subsection 2.1(B)(1) for the purpose of preserving or protection the Collateral.
SECTION 10. MISCELLANEOUS.
10.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the
transactions contemplated hereby shall be consummated, Borrower agrees to
promptly pay all fees, costs and expenses incurred by Agent in connection with
any matters contemplated by or arising out of this Agreement or the other Loan
Documents including the following, and all such fees, costs and expenses shall
be part of the Obligations, payable on demand and secured by the Collateral: (a)
reasonable fees, costs and expenses (including attorneys' fees, allocated costs
of internal counsel and fees of environmental consultants, accountants and other
professionals retained by Agent) incurred in connection with the examination,
review, due diligence investigation, documentation and closing of the financing
arrangements evidenced by the Loan Documents; (b) reasonable fees, costs and
expenses (including attorneys' fees, allocated costs of internal counsel and
fees of environmental consultants, accountants and other professionals retained
by Agent) incurred in connection with the review, negotiation, preparation,
documentation, execution and administration of the Loan Documents, the Loans,
and any amendments, waivers, consents, forbearances and other modifications
relating thereto or any subordination or intercreditor agreements; (c)
reasonable fees, costs and expenses incurred by Agent in creating, perfecting
and maintaining perfection of Liens in favor of Agent, on behalf of Lenders; (d)
reasonable fees, costs and expenses incurred by Agent in connection with
forwarding to Borrower the proceeds of Loans including Agent's or any Lenders'
standard wire transfer fee; (e) reasonable fees, costs, expenses and bank
charges, including bank charges for returned checks, incurred by Agent or any
Lender in establishing, maintaining and handling lock box accounts, blocked
accounts or other accounts for collection of the Collateral; (f) fees, costs,
expenses (including attorneys' fees and allocated costs of internal counsel)
incurred in collecting upon or enforcing rights against the Collateral,
including, without limitation, costs of settlement, or incurred in any action to
enforce this Agreement or the other Loan Documents or to collect any payments
due from Borrower or any other Loan Party under this Agreement or any other Loan
Document or incurred in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement, whether in the nature of a
"workout" or in connection with any insolvency or bankruptcy proceedings or
otherwise, in each case, incurred by Agent, and, if an Event of Default has
occurred, of any one or more Lenders.
10.2 INDEMNITY. In addition to the payment of expenses
pursuant to subsection 10.1, whether or not the transactions contemplated hereby
shall be consummated, Borrower agrees to indemnify, pay and hold Agent and each
Lender and any holder of any of the Notes, and the officers, directors,
employees, agents, consultants, auditors, persons engaged by Agent or any Lender
and any holder of any of the Notes to evaluate or monitor the Collateral,
affiliates and attorneys of
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Agent, Lender and such holders (collectively called the "Indemnitees") harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including the fees and disbursements of
counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
such Indemnitee shall be designated a party thereto) that may be imposed on,
incurred by, or asserted against that Indemnitee, in any manner relating to or
arising out of this Agreement or the other Loan Documents, the consummation of
the transactions contemplated by this Agreement, the statements contained in the
commitment letters, if any, delivered by Agent or any Lender, Agent's and each
Lender's agreement to make the Loans hereunder, the use or intended use of the
proceeds of any of the Loans or the exercise of any right or remedy hereunder or
under the other Loan Documents (the "Indemnified Liabilities"); provided, that
Borrower shall have no obligation to an Indemnitee hereunder with respect to
Indemnified Liabilities arising from the gross negligence or willful misconduct
of that Indemnitee as determined by a court of competent jurisdiction.
10.3 AMENDMENTS AND WAIVERS.
(A) Except as otherwise provided herein, no amendment,
modification, termination or waiver of any provision of this Agreement, the
Notes or any other Loan Document, or consent to any departure by any Loan Party
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Requisite Lenders or Agent, as applicable; provided, that no
amendment, modification, termination or waiver shall, unless in writing and
signed by all Lenders, do any of the following: (i) increase the Commitment of
any Lender; (ii) reduce the principal of, rate of interest on or fees payable
with respect to any Loan; (iii) extend the scheduled due date of any installment
of principal of the Loans; (iv) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Loans, or the percentage of Lenders
which shall be required for Lenders or any of them to take any action hereunder;
(v) amend or waive this subsection 10.3 or the definitions of the terms used in
this subsection 10.3 insofar as the definitions affect the substance of this
subsection 10.3; (vi) consent to the assignment or other transfer by any Loan
Party of any of its rights and obligations under any Loan Document; and (vii)
increase the percentages contained in the definition of Borrowing Base and
provided, further, that no amendment, modification, termination or waiver
affecting the rights or duties of Agent under any Loan Document shall in any
event be effective, unless in writing and signed by Agent, in addition to the
Lenders required herein above to take such action.
(B) Each amendment, modification, termination or waiver shall
be effective only in the specific instance and for the specific purpose for
which it was given. No amendment, modifica tion, termination or waiver shall be
required for Agent to take additional Collateral pursuant to any Loan Document.
(C) No amendment, modification or waiver of any provision of
any Lender Letter of Credit shall be applicable without the written concurrence
of the issuer of such Lender Letter of Credit. No notice to or demand on
Borrower or any other Loan Party in any case shall entitle
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<PAGE> 81
Borrower or any other Loan Party to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this subsection 10.3 shall be binding
upon each holder of the Notes at the time outstanding, each future holder of the
Notes, and, if signed by a Loan Party, on such Loan Party.
(D) In the event Agent waives (1) any Default arising under
subsection 8.1(E) as a result of the breach of any of the provisions of Section
5 of this Agreement (other than any such breach which constitutes an Event of
Default) or (2) any Default constituting a condition to the funding of any
Revolving Loan or issuance of any Lender Letter of Credit, such waiver shall
expire on the date upon which the Default which was the subject of such waiver
matures into an Event of Default pursuant to the terms of this Agreement.
10.4 NOTICES. Unless otherwise specifically provided herein,
all notices shall be in writing addressed to the respective party as set forth
below and may be personally served, telecopied or sent by overnight courier
service or United States mail and shall be deemed to have been given: (a) if
delivered in person, when delivered; (b) if delivered by telecopy, on the date
of transmission if transmitted on a Business Day before 4:00 p.m. Central time
or, if not, on the next succeeding Business Day; (c) if delivered by overnight
courier, two (2) days after delivery to such courier properly addressed; or (d)
if by U.S. Mail, four (4) Business Days after depositing in the United States
mail, with postage prepaid and properly addressed.
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If to Borrower, GII or GIC:
The Gradall Company
406 Mill Avenue S.W.
New Philadelphia, Ohio 44663
Attention: Chief Financial Officer
Telecopy No.: (216) 339-5224
With a copy to:
Black, McCuskey, Souers & Arbaugh
1000 United Bank Plaza
Canton, Ohio 44702
Attention: Gust Callas, Esq.
Telecopy No.: (216) 456-8341
If to Agent or to Heller:
HELLER FINANCIAL, INC.
500 West Monroe
Chicago, Illinois, 60661
Attn: HBC Portfolio Manager
Telecopy No.: (312) 441-7026
With a copy to:
HELLER FINANCIAL, INC.
500 West Monroe
Chicago, Illinois 60661
Attn: Legal Department
Telecopy No.: (312) 441-7456
If to any other Lender: As specified in the Lender Addition
Agreement for such Lender or to such other address as the party addressed shall
have previously designated by written notice to the serving party, given in
accordance with this subsection 10.4.
10.5 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement and the making of the Loans hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Borrower set forth in subsections 10.1 and 10.2 shall survive
the payment of the Loans and the termination of this Agreement.
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<PAGE> 83
10.6 INDULGENCE NOT WAIVER. No failure or delay on the part of
Agent, any Lender or any holder of any Note in the exercise of any power, right
or privilege hereunder or under the Notes shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.
10.7 MARSHALING; PAYMENTS SET ASIDE. Neither Agent nor any
Lender shall be under any obligation to marshal any assets in favor of any Loan
Party or any other party or against or in payment of any or all of the
Obligations. To the extent that any Loan Party makes a payment or payments to
Agent and/or any Lender or Agent and/or any Lender enforces its security
interests or exercises its rights of setoff, and such payment or payments or the
proceeds of such enforcement or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the Obligations or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
10.8 ENTIRE AGREEMENT. This Agreement, the Notes, and the
other Loan Documents referred to herein embody the final, entire agreement among
the parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties hereto.
10.9 INDEPENDENCE OF COVENANTS. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
10.10 SEVERABILITY. The invalidity, illegality or
unenforceability in any jurisdiction of any provision in or obligation under
this Agreement or the other Loan Documents shall not affect or impair the
validity, legality or enforceability of the remaining provisions or obligations
under this Agreement, or the other Loan Documents or of such provision or
obligation in any other jurisdiction.
10.11 LENDERS' OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF
LENDERS' RIGHTS. The obligation of each Lender hereunder is several and not
joint and neither Agent nor any Lender shall be responsible for the obligation
or commitment of any other Lender hereunder. In the event that any Lender at any
time should fail to make a Loan as herein provided, the Lenders, or any of them,
at their sole option, may make the Loan that was to have been made by the Lender
so failing to make such Loan. Nothing contained in any Loan Document and no
action taken by Agent or any Lender pursuant hereto or thereto shall be deemed
to constitute Lenders to be a partnership, an association,
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a joint venture or any other kind of entity. The amounts payable at any time
hereunder to each Lender shall be a separate and independent debt, and, provided
Agent fails or refuses to exercise any remedies against Borrower after receiving
the direction of the Requisite Lenders, each Lender shall be entitled to protect
and enforce its rights arising out of this Agreement and it shall not be
necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose.
10.12 HEADINGS. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
10.13 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
10.14 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns except that Borrower may not assign its rights or
obligations hereunder without the written consent of Lenders.
10.15 NO FIDUCIARY RELATIONSHIP; LIMITATION OF LIABILITIES.
(A) No provision in this Agreement or in any of the other Loan
Documents and no course of dealing between the parties shall be deemed to create
any fiduciary duty by Agent or any Lender to Borrower.
(B) Neither Agent nor any Lender, nor any affiliate, officer,
director, shareholder, employee, attorney, or agent of Agent or any Lender shall
have any liability with respect to, and Borrower hereby waives, releases, and
agrees not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by Borrower in
connection with, arising out of, or in any way related to, this Agreement or any
of the other Loan Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan Documents. Borrower hereby waives, releases,
and agrees not to sue Agent or any Lender or any of Agent's or any Lender's
affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the transactions
contemplated hereby.
10.16 CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS
TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF
COOK STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S ELECTION,
ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
NOTES OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER
ACCEPTS
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FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTES, THE OTHER LOAN
DOCUMENTS OR THE OBLIGATIONS.
10.17 WAIVER OF JURY TRIAL. BORROWER, AGENT AND EACH LENDER
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE NOTES OR THE OTHER LOAN
DOCUMENTS. BORROWER, AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY
RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, THE NOTES AND THE OTHER
LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR
RELATED FUTURE DEALINGS. BORROWER, AGENT AND EACH LENDER FURTHER WARRANT AND
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.
10.18 CONSTRUCTION. Borrower, Agent and each Lender each
acknowledge that it has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this Agreement and the other Loan
Documents with its legal counsel and that this Agreement and the other Loan
Documents shall be construed as if jointly drafted by Borrower, Agent and each
Lender.
10.19 COUNTERPARTS; EFFECTIVENESS. This Agreement and any
amendments, waivers, consents, or supplements may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all of
which counterparts together shall constitute but one and the same instrument.
This Agreement shall become effective upon the execution of a counterpart hereof
by each of the parties hereto.
10.20 NO DUTY. All attorneys, accountants, appraisers, and
other professional Persons and consultants retained by Agent or any Lender shall
have the right to act exclusively in the interest of Agent or such Lender and
shall have no duty of disclosure, duty of loyalty, duty of care, or other duty
or obligation of any type or nature whatsoever to Borrower or any of Borrower's
shareholders or any other Person.
10.21 CONFIDENTIALITY. Agent and Lenders shall hold all
nonpublic information obtained pursuant to the requirements hereof and
identified as such by Borrower in accordance with such Person's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound business practices and in any event may make
disclosure reasonably
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required by a bona fide offeree or assignee (or participation), or as required
or requested by any Governmental Authority or representative thereof, or
pursuant to legal process, or to its accountants, lawyers and other advisors,
and shall require any such offeree or assignee (or participant) to agree (and
require any of its offerees, assignees or participants to agree) to comply with
this Section 10.21. In no event shall the Agent or any Lender be obligated or
required to return any materials furnished by Borrower; provided, however, each
Offeree shall be required to agree that if it does not become a assignee (or
participant) it shall return all materials furnished to it by Borrower in
connection herewith.
[Remainder of this page has been intentionally left blank]
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Witness the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first written above.
THE GRADALL COMPANY
By /s/ Barry L. Phillips
-------------------------------------
Title President
FEIN 34-1405233
GRADALL INDUSTRIES, INC.
By /s/ David T. Shelby
-------------------------------------
Title President
FEIN 36-3381606
GRADALL INVESTMENT COMPANY
By /s/ Jack D. Rutherford
-------------------------------------
Title President
FEIN 36-3487381
HELLER FINANCIAL, INC.
By /s/ Richard E. Peller
-------------------------------------
Title Senior Vice President
Revolving Loan Commitment:
$22,000,000
Term Loan Commitment:
$10,000,000
<PAGE> 1
EXHIBIT 10.16
SUPPLY AGREEMENT
BETWEEN
THE GRADALL COMPANY
(AS BUYER)
AND
IOWA INDUSTRIAL HYDRAULICS, INC.
(AS SELLER)
DATED
JANUARY 1, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Sections Pages
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Title Page 1
Table of Contents 2
Exhibits 3
Supply Agreement 4
1. Agreement Terms and Renewal 4
2. Products/Quantities/Prices 7
3. Shipping and Packaging 12
4. Inventory Control and Procedures 14
5. Warranty 16
6. Quality Control 18
7. Technical Agreement/Test Plan/Application Approval 18
8. Technical Publications 19
9. Special Considerations 20
10. Inability or Delay of Performance 20
11. Litigation 21
12. Notices 22
13. Confidentiality 22
14. Exhibits 23
15. Severability 23
16. Modification 24
17. Waivers 24
18. Binding on Successors; Assignment 24
19. Captions 25
20. Governing Law 25
Signature Page 26
</TABLE>
2
<PAGE> 3
Exhibits
<TABLE>
<CAPTION>
Exhibits Exhibit Numbers
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Estimated Annual Usage/Vendor Quote Sheet I
Hydraulic Cleanliness Specifications II
Index Price Ceiling Formula III
Routing Guide IV
Vendor Release and/or Shipping Schedule V
Limited General Warranty VI
Remove/Replace Hours VII
Quality Agreement VIII
Vendor Information/Contacts IX
Gradall Material Handler Cylinder Test Requirements X
</TABLE>
3
<PAGE> 4
SUPPLY AGREEMENT
----------------
This Agreement is entered into this 1st day of January, 1995 by and between
the Gradall Company an Ohio Corporation (hereinafter referred to as "Buyer" or
"Gradall") and Iowa Industrial Hydraulics Division of Magna Pow'r Inc, an Iowa
Corporation (hereinafter referred to as "Seller" or "IIH") which is wholly
subsidiary of Magna Holding, a Delaware Corp. Buyer and Seller hereby agree as
follows:
1. AGREEMENT TERM AND RENEWAL
1.1 TERM - This Agreement will become effective January 1, 1995 and
shall continue in force for three (3) years following the
effective date hereof through December 31, 1997 for all products
as specified in Section 2.
1.2 TERM EXTENSION (EVERGREEN CLAUSE) - A one (1) year automatic
rollover extension or "Evergreen Clause" will be applied
thereafter which shall allow for "automatic" extension of this
Agreement in the absence of notice for termination or modification
of an extended term. If by the end of the first agreement year or
December 31, 1995, neither party has provided written notice of
termination or written request for revision of terms to apply
during the extended period, this agreement will be automatically
extended by one (1) year through December 31, 1998. This Agreement
shall then continue to be automatically extended by one (1) year
after each Agreement year thereafter until either party provides
written request for termination or request for revision.
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<PAGE> 5
Therefore, on January 1, 1996, the Agreement will be automatically
extended through December 31, 1998, and so on. This automatic
rollover extension in effect provides both parties with at least
two (2) years of visibility prior to expiration of this Agreement
except under special conditions as outlined in Section 1.3 and
1.4.
1.3 NOTICE OF TERMINATION OR REVISION - Prior to the end of an
Agreement year, or December 31, either party may provide written
notice of:
(a) Intent to terminate this Agreement effective as of the end
of the then applicable term, pursuant to Section 1.1 and
1.2, or such other date that both parties may agree to;
provided, however that, this Agreement shall continue
(even beyond the end of the then applicable term on a
week-to-week basis) until such time as the termination of
this Agreement will not result in excess inventory for the
Seller or supply shortage for the Buyer;
(b) Intent to extend this Agreement upon revised terms and
conditions as the parties may agree via a written and
signed addendum to this Agreement.
1.4 TERMINATION EVENTS - This Agreement may be terminated as follows:
(a) Seller and Buyer shall each have the right to terminate
their respective obligations under this Agreement by
written notice to the other party in the event that the
other party has committed a breach of the terms of the
Agreement herein which substantially
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<PAGE> 6
lessens the value of the Agreement and if the breaching
party is either unable or unwilling to cure the breach
within 120 days after the notice of termination is
supplied. Notice of termination shall become final and
effective within 120 days after the notice of intent to
terminate has been provided unless the notice is withdrawn
as a result of correction of the breach within 120 days or
other actions which are satisfactory to the party who
provided this notice.
(b) As mutually agreed upon in writing by both parties.
(c) Immediately by one party upon the occurrence of any of the
following events related to the other party:
(1) Become insolvent or going into liquidation or
receivership.
(2) Becoming a party to dissolution proceedings.
(d) Service of a notice of termination shall be deemed
effective pursuant to the terms of Section 12 of this
Agreement.
(e) The termination of this Agreement, pursuant to the terms
hereof, shall not affect any of the rights or obligations
of either party to the Agreement occurring prior to the
effective date of such termination.
6
<PAGE> 7
2. PRODUCTS/QUANTITIES/PRICES
2.1 PRODUCTS AND QUANTITIES - On or before October 1 of each year of
the Agreement term, Buyer will submit to Seller a "Vendor Quote
Sheet" per Exhibit I (which is attached hereto and made a part
hereof). This provides an estimate of the products and quantities
of the Seller's products that Buyer expects to purchase in the
next succeeding calendar year. Such estimates shall be defined
herein as the "Estimated Annual Usage". The Estimated Annual Usage
report for 1995 shall be submitted to Seller via the Vendor Quote
Sheet on Exhibit I, at the time of execution of this Agreement.
Subsequent estimated annual usage reports shall be submitted to
Seller in substantially the same format.
2.2 SPECIFICATIONS OF PRODUCTS
The foregoing Product, including any revised, modified, or
substitute versions thereof, shall be manufactured in conformance
with the specifications set forth on Gradall drawings and Gradall
approved IIH drawings as listed on the Vendor Quote Sheet, Exhibit
I, under "Part Number" and/or the "Blueprint" column of the
report. All Product must meet Hydraulic Cleanliness Specifications
as displayed on Exhibit II attached. Any specifications for
Products which have not been completed prior to the date of this
Agreement shall, upon their completion to the mutual satisfaction
of both Parties, identified to this Agreement by the Parties, and
shall be deemed to be fully incorporated
7
<PAGE> 8
herein. Gradall shall inform IIH in writing of any changes in any
Vehicle specifications and operational requirements which may
affect the life and performance of any Products as soon as
possible after Gradall first becomes aware of any such change.
2.3. PRODUCT OR PROCESS CHANGES BY IIH
Product or process changes desired by Seller which affect the
form, fit, function, reliability, or interchangeability of service
parts for the Products may not be implemented without the prior
written approval of Buyer. For changes which do not affect the
form, fit, function, reliability, or parts interchangeability, a
written notice explaining the change in detail will be submitted
to Gradall for information purposes only prior to implementation
by Seller. Such notification shall be provided to the appropriate
Gradall Purchasing and Engineering personnel in a manner which
will provide Gradall with adequate opportunity to take into
account the fact of such changes, which is normally at least 90
days. If the IIH initiated change results in a decrease in Product
cost, the selling price for the Product involved shall be
decreased by an amount equal to one-half of the full amount of
such decrease, as agreed.
2.4 PRODUCT CHANGES OR ADDITIONS BY GRADALL
Product or process changes initiated by Buyer shall be provided
with adequate written notice, which is normally at least 90 days,
to allow
8
<PAGE> 9
Seller to procure material and make the appropriate process
changes to accommodate the required change. The prices and
schedules for any new or redesigned Products will be negotiated in
good faith by the Parties based on complete cost justification to
be provided by Seller prior to release hereof by Seller's
Engineering Department and then will be revised or added on the
Vendor Quote Sheet (Exhibit I). If the Gradall initiated change
results in a decrease in Product cost, the selling price for the
Product involved shall be decreased by the full amount of such
decrease, as agreed. If the change is jointly developed and the
change results in a decrease in product costs, the selling price
involved will be decreased by 50% of the amount of such decrease,
as agreed.
2.5 SPECIFICATION ERROR
If Seller is unable to meet the specification, as set forth in
Section 2.2, due to an error on the part of the Seller, and, if
this error results in an increase in the "installed" cost for
Gradall, diligent redesign efforts would be made through a
cooperative effort by both Parties to eliminate this increased
cost. If the redesign effort is unsuccessful in offsetting the
increased installed cost, the cost increase would be reviewed and
prices negotiated in good faith to recognize the impact on
Seller's margins and the effect of the increase in installed
costs. Complete
9
<PAGE> 10
documentation of these installed costs would be made available by
Buyer upon request by Seller.
2.6 PRICES AND PRICE ADJUSTMENTS-
**PRICES**
(a) FOR 1995 - Initial prices which will be in effect for the
products are listed on the Estimated Annual Usage listing
which is Exhibit I. These initial prices are to remain in
effect from January 1, 1995 through December 31, 1995.
Firm pricing periods thereafter will be January 1 through
December 31 of
each subsequent Agreement year.
(b) FOR 1996 AND SUBSEQUENT YEARS - The prices for Seller's
product for 1996 and subsequent years during the term of
this Agreement will be adjusted as provided in this
section.
**PRICE ADJUSTMENT**
(c) ADJUSTMENTS DUE TO CHANGES IN LABOR AND/OR MATERIAL COSTS
- Changes in pricing due to labor or material cost changes
for Seller will be based on the United States Bureau of
Labor Statistics Producer Price Index Code #1143
subheading "Fluid Power Equipment" (referred to herein as
the "Index Price Ceiling"). Exhibit III (which is attached
hereto and made a part hereof) provides an example of the
pricing formula used to determine the Index Price Ceiling.
10
<PAGE> 11
(d) ADJUSTMENTS DUE TO CHANGES IN THE QUANTITIES REPORTED IN
PREVIOUS YEARS ANNUAL USAGE - If the annual usage for a
product for any year beyond 1995 increases or decreases by
25% (twenty-five percent) or more from the estimated
annual report for the previous year, the parties agree to
negotiate, in good faith, an appropriate price.
(e) QUANTITY AND PRICE EXHIBIT - Each year, Seller will prepare
and Buyer will sign an updated Vendor Quote Sheet, Exhibit
I, which will state the quantities and prices agreed upon by
the parties for the next year. Products listed with an
Estimated Annual Usage of "0" are non-forecasted items but
may be used. Seller will quote assuming a lot of "1". If
Buyer should require larger lot sizes for these items, the
item may be requoted upon Buyer's request based on the
larger size requested. Each Vendor Quote Sheet, Exhibit I,
will be prepared by Seller 60 days prior to the expiration
of the current year's prices which is November 1 of each
year. Seller will also be responsible for maintaining any
amendment to the Vendor Quote Sheet to reflect adjustments
due to quantity changes or new or redesigned products.
2.7 PAYMENT TERMS AND CONDITIONS - Payment terms shall be net 30 days
from buyers receipt of invoice.
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<PAGE> 12
3. SHIPPING AND PACKAGING
3.1 FREIGHT CHARGES - All shipments are F.O.B. Seller's shipping
point; freight collect.
3.2 SHIPPING INSTRUCTIONS - All shipments are to be made in compliance
with the attached Buyer routing instructions, which is Exhibit IV
(which is attached hereto and made a part hereof). Deviations from
these instructions which result in increased freight cost will be
backcharged to Seller unless they are approved by Buyer's
transportation department prior to shipment.
3.3 PREMIUM TRANSPORTATION COSTS - Premium transportation costs above
and beyond normal transportation costs, which are caused by
Seller's failure to meet acknowledged delivery dates when adequate
lead time and firm periods are provided (as stated in Section 4),
will be the responsibility of the Seller. Method of shipment will
be expedited as determined by Buyer/Seller negotiations. In the
event that Buyer pulls forward the delivery date(s) for Seller's
products, inside the firm period, the Seller will advise Buyer
that Seller COMMITS to such revised delivery dates. The delivery
dates that Seller COMMITS to are the dates to be used to determine
responsibility for premium transportation costs. However, if
Seller cannot COMMIT to a revised delivery schedule, but Seller
wishes to make a good faith effort to try to meet the revised
delivery schedule, the Seller will advise the Buyer that a GOOD
FAITH
12
<PAGE> 13
EFFORT will be made to meet the revised dates. However, a GOOD
FAITH EFFORT by the Seller shall not constitute an acknowledgement
and therefore the Seller shall not be responsible for premium
transportation costs that may be caused by missing rescheduled
delivery dates requested by the Buyer inside the firm period.
3.4 PACKAGING - All items are to be suitably prepared for shipment and
must be packed and shipped in accordance with governing
classification and tariffs applicable thereto. All items shall be
packaged in a manner sufficient to ensure arrival in an undamaged
condition. Seller shall be responsible for costs or damages
incurred by Buyer, directly or indirectly, from improper
packaging. Buyer shall file freight claim with carrier on material
damaged in transit for improper handling.
3.5 RETURNABLE CONTAINERS/PALLETS - Pallet material used will be
billed as packaging costs as defined in quote. When returnable
quality pallets are used and returned by Buyer, the Seller will
issue credit if the following criteria is met:
(a) Each container/pallet must be clearly and distinctly
marked "Returnable". If returnable pallets are used,
Buyer shall be responsible for return freight.
(b) The return policy must be clearly outlined in relation to:
1. Description of container/pallet.
2. Invoice and credit amounts.
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<PAGE> 14
3. Acceptable conditions for return.
4. Minimum returns.
5. Return shipping address and return goods
authorized number (if required).
6. Packing requirements for return.
7. Freight terms.
3.6 CYLINDER IDENTIFICATION - Each cylinder is to be properly
identified by a Gradall part number, manufacturer's name and part
number and manufacturer's code for date of manufacture. Cylinders
must have part numbers and codes stamped on the cylinder body,
where identified by the specific Gradall print.
4. INVENTORY CONTROL AND PROCEDURES
4.1 LEAD TIME - Lead time for new orders shall not exceed twelve (12)
calendar weeks from date of order. This lead time will be subject
to vendor material availability but will not be changed without
written approval and agreement of Buyer.
4.2 RESCHEDULING AND FIRM PERIOD - Buyer reserves the right to request
and Seller will make a good faith effort to comply to rescheduled
requirements without penalty, for releases scheduled beyond eight
(8) calendar weeks of the requested delivery date. No reschedule
may go more than twelve (12) calendar weeks beyond the original
delivery on any order. In the event that rescheduling is required
beyond twelve
14
<PAGE> 15
(12) calendar weeks, both parties agree to enter into good faith
negotiations to agree on a delivery or payment schedule for the
inventory on hand.
4.3 PARTIAL SHIPMENTS - Partial shipments will not be accepted without
prior approval of Buyer's authorized Purchasing personnel.
4.4 OVER-SHIPMENTS - Over-shipments will not be accepted without prior
approval of Buyer's authorized Purchasing personnel.
4.5 CANCELLATIONS - In the event cancellations are required, Buyer
shall be financially responsible as follows:
(a) 100% of completed units due for delivery within eight (8)
calendar weeks of the date order was cancelled, plus
completed units that the parties have agreed to, in
writing, as being necessary for Just-In-Time requirements.
These requirements are displayed as firm "S" releases on
the Vendor Release and/or Shipping Schedule report
(Exhibit V).
(b) 100% of raw material costs actually incurred for units due
for delivery between eight (8) and twelve (12) calendar
weeks from the date order was cancelled. These
requirements are displayed as the raw material "R" period
on the Vendor Release and/or Shipping Schedule report
(Exhibit V).
(c) Beyond twelve (12) calendar weeks, but not to exceed
twenty (20) calendar weeks, Buyer's only responsibility is
an equitable
15
<PAGE> 16
settlement for the total cost of non-cancelable raw
materials, from Seller's suppliers, for Buyer's products
that are unique to Buyer's application and cannot be used
on any other customer's application. These requirements
are displayed as the forecasted "F" period on the Vendor
Release and/or Shipping Schedule Report (Exhibit V).
5. WARRANTY
5.1 SELLER'S WARRANTY - Exhibit VI which is attached hereto and made a part
hereof, sets forth Seller's current warranty. Such warranty, together with
any future changes, amendments, or modifications, is hereafter defined in
this agreement as "Seller's Warranty". Seller's Warranty shall be the only
warranty for the products sold under this agreement, together with the
following provisions:
(a) FIELD SERVICE. Seller shall, without costs to Buyer, furnish
reasonable advice and assistance to resolve field service problems
with its products.
(b) WARRANTY TERMS. Seller warrants its products sold under this
agreement for twenty-four (24) months from the date Seller ships
its products to Buyer or for 1500 machine hours of operation by
the end-user of Gradall equipment, whichever occurs first.
(c) REPLACEMENT. If Seller's product experiences valid warranty
claims of a repetitive nature due to material flaws or manufacture
processes, then
16
<PAGE> 17
the Seller shall, for the defect, replace such product at no
charge to Buyer.
(c1) If the material is found defective prior to assembly or
test at Gradall, the Seller is responsible for cost to
replace or repair the defect.
(c2) If the material is found defective during assembly or test
at Gradall, the Seller is responsible for the cost to
repair or replace the defective product. Seller further
agrees to reimburse Buyer for the cost to remove and
replace cylinders in Buyer's Plant at $35.00 per hour
using the hours negotiate and listed on Exhibit VII,
entitled "Remove/Replace Hours", (which is attached hereto
and made a part hereof).
(c3) If the part is found defective during Buyer Warranty
period, the Seller is responsible for the cost to repair
or replace defective product. In circumstances that merit
special consideration, the Seller may be asked to
negotiate on an individual basis any reasonable charges up
to a maximum of two (2) times the cylinder price.
(d) SCOPE OF WARRANTY. Seller's obligation to reimburse Buyer for
warranty expenses shall not extend to any costs or expenses for
which Buyer has denied Warranty coverage to Buyer's customer.
17
<PAGE> 18
6. QUALITY CONTROL
6.1 QUALITY AGREEMENT - Gradall and IIH are to establish a mutually
agreeable Quality Agreement (see Exhibit VIII).
6.2 RETURNED GOODS - If any item substantially fails Buyer's quality
control inspection or is deemed by Buyer to be unacceptable for
its intended use, in accordance with normally established industry
standards, then Buyer reserves the right to notify Seller of these
conditions and negotiate return goods at Seller's expense. Return
authorization numbers will be requested by Buyer and assigned by
Seller, as required. The Vendor Information/Contacts (set forth in
Exhibit IX) is made a part of this Agreement.
7. TECHNICAL AGREEMENT/TEST PLAN/APPLICATION APPROVAL
Gradall and IIH have developed a mutually agreeable test plan for
the Products. This plan includes specifically what tests both
parties will perform and the respective criteria for acceptance of
results. These tests combined with prototype testing at Gradall
best simulate Gradall's application requirements which serves as
the basis for Application Approval which is displayed as Exhibit
X. Once these tests are complete and the results are approved by
Buyer, the Seller's responsibilities will be limited to cost
associated with material and workmanship. Seller's Engineering lab
tests will meet the specification parameters as established by
Buyer and only limited by Seller's
18
<PAGE> 19
capabilities. In turn, Buyer agrees to reimburse Seller for lab
tests, requested by Buyer, at a rate of $25.00 per hour plus
actual cost of required tooling. It is also understood that
Gradall's customers must operate the Vehicle in accordance with
normal rough terrain operational criteria.
8. TECHNICAL PUBLICATIONS
8.1 INFORMATION CONCERNING COMPONENTS - Seller shall provide Buyer's
Technical Publications Department with accurate and current
information for items (a) through (d) listed in this Section 8.1
relative to the Seller's components. Such information will be
utilized in Buyer's Parts, Service Operations and Maintenance
publications and training aids. Seller shall provide the following
materials:
(a) Parts Illustrations and/or blueprints, excluding
proprietary information.
(b) Replaceable parts list with IIH part numbers and
manufacturers part numbers for purchased components.
(c) Repair kit detail (including supplier information on
purchased/outsourced components).
(d) Service and adjustment instructions.
8.2 REVISIONS - Any revision(s) made by the Seller concerning the
above technical information must be communicated to Buyer's
Technical Publications
19
<PAGE> 20
Department prior to that change being incorporated into product(s) shipped
to Buyer in accordance with Section 2.3.
9. SPECIAL CONSIDERATIONS
9.1 YEARLY FORECAST - At the request of Seller, Buyer will supply
periodically a yearly forecast of all products that are sold by
Seller to Buyer.
9.2 LONG RANGE FORECAST - Buyer will share long-range forecasting
information upon request by Seller for all of Buyer's products and
any forecasts related to industry products that are normally
available in the daily conduct of Buyer's business to aid Seller
in planning and to achieve the best utilization of assets.
9.3 TOOLING COST - Upon notification by Seller, Buyer agrees to absorb
reasonable costs of tooling for new or redesigned cylinders during
the term of this Agreement.
9.4 JOINT TECHNICAL COMMITTEE - Seller proposes, and is willing to
commit resources, to the creation of a joint technical committee
with Buyer and to share in the net cost reduction effort of
current (existing) designs. This committee would also seek to
implement the most cost-effective new designs.
10. INABILITY OR DELAY OF PERFORMANCE
10.1 If any party is prevented from or delayed in performing any of its
obligations hereunder because of any law or legally binding order,
20
<PAGE> 21
regulation, direction, or act of any government or any department
or agency thereof having jurisdiction over such party, or because
of war, act of God, or any cause beyond the reasonable control of
such party, including, but not limited to, strikes, lockouts or
other labor disputes, then such party shall be excused from
performing such obligations for the term of such disability and
the other party shall be excused from performing its obligations
hereunder to a like extent.
11. LITIGATION
11.1 CLAIMS AGAINST SELLER - In the event that any claim, proceeding or
suit concerning the products supplied under this Agreement is
brought against the Seller, Buyer shall cooperate with the Seller
in the defense and investigation of any such claim and shall make
available to Seller such information and assistance as may be
reasonably necessary or appropriate thereto.
11.2 CLAIMS AGAINST BUYER - In the event that any claim, proceeding or
suit concerning products supplied under this Agreement is brought
against Buyer, Seller shall cooperate with Buyer in defense and
investigation of any such claim and shall make available to Buyer
such information and assistance as may be reasonably necessary or
appropriate thereto.
11.3 LIABILITY INSURANCE LIMITS - Seller agrees to furnish to Buyer a
statement outlining the provisions of Seller's self insured
product liability insurance.
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<PAGE> 22
12. NOTICES
12.1 Any notices specifically required herein or required by law shall
be deemed duly given and received five business days after mailing
if deposited in the United States mail, first-class, postage
prepaid and mailed to the respective parties at the following
addresses:
As to Seller:
Iowa Industrial Hydraulics, Inc.
Attn: President
Industrial Park Road
Pocahontas, IA 50574
With a copy to:
Magna-Power, Inc.
Attn: President
3412 N. River Road
Franklin Park, IL 60131
As to Buyer:
The Gradall Company
Attn: President
406 Mill Avenue SW
New Philadelphia, Ohio 44663
13. CONFIDENTIALITY
13.1 The parties agree during and after the term of this Agreement to
safeguard the confidentiality of any information obtained in the
performance of this Agreement regarding the products, accessories,
designs, and developments of the other party. It is agreed that
each party remains the owner of its information and documents, and
that
22
<PAGE> 23
such information and documents can be used by the other party only
for the purposes of performing under the terms of this Agreement.
The disclosure of any such information or documents to any third
party requires prior written approval of the owner of such
information, and requires the prior agreement of such third party
to safeguard the confidentiality of such information.
14. EXHIBITS
14.1 All Exhibits to this Agreement form an integral part of this
Agreement and constitute valid and binding obligations of the
respective parties. In the event of a conflict between any Section
of this Agreement and any Exhibits which are attached thereto, the
provisions of the Agreement shall govern.
15. SEVERABILITY
15.1 It is understood and agreed by the parties hereto that if any
part, term, or provisions of this Agreement is held by the courts
to be illegal or in conflict with the laws of the State of Ohio,
the validity of the remaining portions or provisions shall not be
affected, and the rights and obligations of the parties shall be
construed and enforced as if the contract did not contain the
particular part, term, or provision held to be invalid.
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<PAGE> 24
16. MODIFICATION
16.1 No letter, or other form of communication, passing between the
parties hereto, covering any matter during the term of this
Agreement, shall be deemed a part of this Agreement, nor shall it
have the effect of amending or modifying this Agreement, unless
said communication distinctly states that said communication is to
constitute a part of this Agreement and is to be attached as an
addendum to this Agreement and is signed by the parties hereto.
17. WAIVER
17.1 The failure of either party at any time to require performance by
the other party to any provision hereof shall in no way affect the
full right to require such performance at any time thereafter. Nor
shall the waiver by either party of a breach of any provision
hereof constitute a waiver of any succeeding breach of the same or
any other such provision herein.
18. BINDING ON SUCCESSORS; ASSIGNMENT
18.1 The provisions of this Agreement shall be binding on and shall
endure to the benefit of the successors and assigns of the parties
hereto; PROVIDED, HOWEVER, THAT neither party may assign this
Agreement, voluntarily or by operation of law, in whole or in
part, without the written consent of the other party.
24
<PAGE> 25
19. CAPTIONS
19.1 Captions contained in this Agreement are inserted only as a matter
of convenience and in no way define, limit or extend the scope or
intent of this Agreement or any provision hereof.
20. GOVERNING LAW
20.1 This Agreement shall be considered as executed in, and shall be
construed and interpreted in accordance with the laws of the State
of Ohio.
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<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their corporate names by the respective representatives duly authorized
thereof, as of the day and year first above written.
The Gradall Company (Buyer) Iowa Industrial Hydraulics (Seller)
By: /s/ Barry Phillips By: /s/ Don Kluver
----------------------- -----------------------
Printed Printed
Name: Barry Phillips Name: Don Kluver
------------------------- -------------------------
Title: President Title: President
------------------------ ------------------------
By: /s/ Bruce A. Jonker By: /s/ Robert Hoover
------------------------- --------------------------
Printed Printed
Name: Bruce A. Jonker Name: Robert Hoover
---------------------------- --------------------------
Title: V.P. Finance & Administration Title: V.P. Major Account
-------------------------------- -------------------------
By: /s/ Lonnie E. Wolfe
-------------------------------------
Printed
Name: Lonnie E. Wolfe
----------------------------------
Title: Supv. Material Sourcing
---------------------------------
26
<PAGE> 1
EXHIBIT 21.01
SUBSIDIARIES OF THE REGISTRANT
The Gradall Company, an Ohio corporation
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this registration statement on Form S-1
of our report dated March 11, 1996, on our audit of the consolidated financial
statements of Gradall Industries, Inc. (formely ICM Industries, Inc.). We also
consent to the reference to our firm under the caption "Experts".
Coopers & Lybrand L.L.P.
Cleveland, Ohio
June 25, 1996
<PAGE> 1
EXHIBIT 23.04
CONSENT OF DIRECTOR NOMINEE
I hereby accept my nomination to serve on the Board of Directors of
Gradall Industries, Inc., and if so elected will serve as a director of Gradall
Industries, Inc. I consent to the reference to me as a nominated director under
the caption "Management" in the Registration Statement on Form S-1 and the
related Prospectus of Gradall Industries, Inc. for the registration of shares of
its common stock.
Dated: June 19, 1996 /s/ Ernest Green
-----------------------------------
ERNEST GREEN
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH UNAUDITED
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,206
<SECURITIES> 0
<RECEIVABLES> 17,911
<ALLOWANCES> 62
<INVENTORY> 17,688
<CURRENT-ASSETS> 39,486
<PP&E> 10,466
<DEPRECIATION> 11,196
<TOTAL-ASSETS> 57,567
<CURRENT-LIABILITIES> 24,988
<BONDS> 38,165
<COMMON> (23,285)
0
2,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 57,567
<SALES> 34,137
<TOTAL-REVENUES> 34,137
<CGS> 26,467
<TOTAL-COSTS> 3,515
<OTHER-EXPENSES> 141
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,018
<INCOME-PRETAX> 2,996
<INCOME-TAX> 1,162
<INCOME-CONTINUING> 1,834
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<EXTRAORDINARY> 0
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<NET-INCOME> 1,834
<EPS-PRIMARY> .23
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