<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 1996.
REGISTRATION NO. 333-06777
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
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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NUMBER OF PROPOSED PROPOSED
SHARES MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
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Common Stock, par value $.001 per
share........................... 4,025,000 $15.00 $60,375,000 $20,819(3)
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</TABLE>
(1) Includes 525,000 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.
(3) Previously paid.
------------------
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
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 AUGUST 2, 1996
3,500,000 SHARES
GRADALL INDUSTRIES, INC.
COMMON STOCK
OF THE 3,500,000 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE (THE
"COMMON STOCK"), OFFERED HEREBY, 2,500,000 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 $13 PER SHARE AND $15 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 9.
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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 525,000 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> 3
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> 4
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 Consolidated Financial Statements
of the Company and the Notes thereto do not give effect to such stock split.
THE COMPANY
Gradall is a leading manufacturer of wheeled hydraulic excavators and
rough-terrain variable reach 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 telescopic boom technology, versatility,
productivity and reliability. Gradall's telescopic booms, which are manufactured
from high-strength specialty steel, are unique both in their shape and
engineering design, which provide added strength with minimal weight, and, in
the case of excavators, in their ability to rotate a full 360 degrees. 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(++) 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 program designed to expand plant
capacity and reduce production costs by increasing labor efficiency and
equipment productivity and improving quality. The Company invested $4.2 million
in 1995 and $0.7 million through June 30, 1996 for capital improvements pursuant
to this program. The Company currently plans to invest an additional $3.5
million in 1996 and in excess of $4.0 million in 1997 for capital improvements
under this program. Management believes that these strategies have enabled the
Company to increase substantially its profitability in recent years.
3
<PAGE> 5
1995 RECAPITALIZATION
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, MLGA Fund II, L.P.
("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%, and the Existing Stockholders received shares of Series A Preferred Stock
of the Company in the amount of $2 million. 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 and warrants to purchase 449,294 shares of Common Stock. 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. In addition, the Credit
Facility provides a revolving line of credit of $22 million through September
30, 2000. See "Use of Proceeds."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company............ 2,500,000 shares
Common Stock offered by the Selling
Stockholders................................. 1,000,000 shares(1)
-------------------
Total Common Stock offered..................... 3,500,000 shares
===================
Common Stock to be outstanding after the
Offering..................................... 8,489,294 shares(2)
Use of proceeds by the Company................. To repay certain outstanding indebtedness of
the Company incurred in connection with the
1995 Recapitalization and to redeem all of
the outstanding shares of the Series A
Preferred Stock of the Company. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol......... GRDL
</TABLE>
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(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 525,000 shares of Common Stock which may be sold by the
Selling Stockholders pursuant to the Underwriters' over-allotment option.
(2) Does not include 293,371 shares of Common Stock issuable in connection with
outstanding stock options, 10,000 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 9.
4
<PAGE> 6
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>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------- -----------------------
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 $ 62,324 $ 69,636
Cost of sales............................ 42,639 48,780 59,274 71,280 92,637 48,693 53,660
------- ------- ------- ------- --------- --------- ---------
Gross profit............................. 7,307 8,885 12,934 17,540 25,801 13,631 15,976
Operating expenses:
Engineering............................ 1,439 1,477 1,848 2,123 2,504 1,260 1,559
Selling and marketing.................. 3,367 3,345 4,232 4,728 5,365 2,507 3,357
Administrative......................... 3,027 2,986 5,075 4,618 5,138 2,221 2,542
------- ------- ------- ------- --------- --------- ---------
Operating income (loss).................. (526) 1,077 1,779 6,071 12,794 7,643 8,518
Amortization of FAS 106(1)............... -- -- -- (3,626) -- -- --
Interest expense......................... 1,436 1,062 1,055 1,146 1,642 454 2,046
Other, net............................... 578 (376) (549) 234 865 453 674
------- ------- ------- ------- --------- --------- ---------
Income (loss) before provision for
taxes.................................. (2,540) 391 1,273 8,317 10,287 6,736 5,798
Income tax provision (benefit)........... (227) 334 550 3,152 3,680 2,416 2,272
------- ------- ------- ------- --------- --------- ---------
Net income (loss) before change in
accounting............................. (2,313) 57 723 5,165 6,607 4,320 3,526
Change in accounting (gain)/loss(2)...... -- (243) 9,014 -- -- -- --
------- ------- ------- ------- --------- --------- ---------
Net income (loss)(3)..................... $(2,313) $ 300 $(8,291) $ 5,165 $ 6,607 $ 4,320 $ 3,526
======= ======= ======= ======= ======== ======== ========
PRO FORMA DATA
Actual(4):
Net income per common share............ $ 1.10 $ 0.72 $ 0.59
Weighted average common shares
outstanding.......................... 5,989,294 5,989,294 5,989,294
Supplementary(5):
Net income per common share............ $ 0.84 $ 0.51 $ 0.55
Weighted average common shares
outstanding.......................... 8,499,294 8,499,294 8,499,294
OTHER OPERATING DATA:
Employees (at period end)................ 424 459 518 557 581 577 618
Sales per employee....................... $ 112 $ 133 $ 146 $ 165 $ 207 $ 110 $ 116
Capital expenditures..................... $ 346 $ 740 $ 534 $ 1,214 $ 4,189 $ 1,294 $ 676
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1996
1995 ------------------------
------------ AS
ACTUAL ACTUAL ADJUSTED(6)
------------ -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................................... $ 10,735 $ 13,765 $ 16,199
Total assets.............................................................. 52,024 58,122 57,393
Total debt................................................................ 37,922 37,581 8,428
Stockholders' (deficit) equity............................................ (23,119) (19,593) 9,465
</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 based on actual earnings and average shares outstanding in the
periods indicated after giving effect to the 5,540-for-1 stock split and the
conversion of the outstanding Warrants.
(5) Presented as if the 1995 Recapitalization, the exercise of the Warrants and
an option for 10,000 shares, 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 $0.5 million extraordinary loss (net of a tax benefit of $0.3
million) to be incurred on repayment in full of the Senior Subordinated
Notes and a $0.4 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.
(6) 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 June 30, 1996. Reflects a $0.5 million
extraordinary loss (net of a tax benefit of $0.3 million) to be incurred on
repayment in full of the Senior Subordinated Notes and a $0.4 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. See "Use of Proceeds."
5
<PAGE> 7
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 a material 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 has agreements with
its distributors under which the distributors purchase products from the Company
at agreed upon prices for resale within the distributor's territory. In addition
to the Company's products, its distributors typically sell construction
equipment manufactured by third parties, including competitors of the Company.
See "Business -- Marketing & Distribution." 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 a material 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 a material 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
6
<PAGE> 8
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 and other
productivity improvements. In 1995, the Company commenced a multi-year program
designed to expand plant capacity and reduce production costs by increasing
labor efficiency and equipment productivity and improving quality. The Company
invested $4.2 million in 1995 and $0.7 million through June 30, 1996 for capital
improvements pursuant to this program. The Company currently plans to invest an
additional $3.5 million in 1996 and in excess of $4.0 million in 1997 for
capital improvements under this program. 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 411 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 a material
adverse effect on the operations of the Company.
DEFICIT IN STOCKHOLDERS' EQUITY; LEVERAGE
Primarily as a result of the 1995 Recapitalization, at June 30, 1996, the
Company had a deficit in stockholders' equity of $19.6 million. As adjusted for
the Offering and application of the estimated net proceeds to the Company
thereof, at June 30, 1996, the Company would have had stockholders' equity of
$9.5 million. In addition, at June 30, 1996, the Company had total indebtedness
of $37.6 million. As adjusted for the Offering and application of the estimated
net proceeds to the Company thereof, at June 30, 1996, the Company would have
had total indebtedness of $8.4 million, and the Company's debt-to-equity would
have been 0.89 to 1. However, the ratio of operating income to interest expense
for the year ended December 31, 1995 and the six months ended June 30, 1996 were
7.8 to 1 and 4.2 to 1, respectively.
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 have a material adverse effect on 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 a material 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 a material adverse effect on the Company's operating results and
customer relationships. See "Business -- Suppliers."
7
<PAGE> 9
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
determine the extent to which steel price increases can be passed on to the
Company's customers. Historically, the Company has been able to pass on
increases in steel prices to the Company's customers. However, there is usually
a lag of approximately six months to a year before such increases can be passed
on to customers through higher product prices. 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 materially 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 proceeds
available under 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 a material 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.
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 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 47.3% of the
outstanding Common Stock of the Company (approximately 42.7% if the
Underwriters' over-allotment option is exercised in full) will be owned by 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 8,489,294 shares
of Common Stock. Of these shares, the 3,500,000 shares of Common Stock sold in
the Offering (4,025,000 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 (4,464,294 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 (4,464,294
shares if the Underwriters' over-allotment option is exercised in full)
constituting "restricted securities" have entered into lock-up agreements with
the Underwriters pursuant to which they have agreed not to sell or otherwise
dispose
8
<PAGE> 10
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
"Shares Eligible for Future Sale" 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.
ANTITAKEOVER PROVISIONS
The Company's Amended and Restated Certificate of Incorporation will
provide the Board of Directors the authority to issue up to 2,000,000 shares of
preferred stock in one or more series with such distinctive descriptions, rights
and preferences as the Board may provide. The issuance of the preferred stock
could adversely affect the voting power of the holders of Common Stock and,
accordingly, could make more difficult the acquisition of the Company by means
of a tender offer, a proxy contest or otherwise. In addition, the Company is
subject to Section 203 of the Delaware General Corporation Law which limits
transactions between a publicly held company and "interested stockholders"
(generally, those stockholders who own 15% or more of the company's outstanding
stock and their affiliates and associates). This provision of Delaware law may
also have the effect of deterring certain potential acquisitions of the Company.
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 $12.89
per share, assuming an initial public offering price of $14.00 per share. See
"Dilution."
9
<PAGE> 11
THE COMPANY
The Gradall Company, an Ohio corporation and a wholly-owned subsidiary of
the Company, is a leading manufacturer of wheeled hydraulic excavators and
rough-terrain variable reach material handlers as well as related service parts.
The Gradall Company 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, The Gradall Company acquired a
product line of material handlers which it 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 "Series A Preferred Stock") to the Existing Stockholders which represents
100% of the Company's total outstanding Series A 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.
10
<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 $32.1 million,
assuming an initial public offering price of $14.00 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 Series A
Preferred Stock issued in connection with the 1995 Recapitalization 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 Series A 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 $10.1 million will be used to repay a portion of
the amount outstanding under the Revolver ($17.8 million outstanding at June 30,
1996). Proceeds from the issuance of the Senior Subordinated Notes and
borrowings under the Term Loan and the Revolver were used to fund the redemption
of shares of Common Stock from the Existing Stockholders, payments to certain
officers and key employees of the Company, and the repayment of existing
indebtedness of the Company in connection with the 1995 Recapitalization. See
"1995 Recapitalization and Certain Transactions."
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% (8.25% weighted average at June 30, 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% (8.34% weighted average at June 30, 1996).
The Revolver terminates in 2000. At June 30, 1996, the amount available to be
drawn under the Revolver was $4.2 million, which amount will increase to $14.3
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.
11
<PAGE> 13
CAPITALIZATION
The following table sets forth the current debt and capitalization of the
Company as of June 30, 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>
JUNE 30, 1996
---------------------
AS
ACTUAL ADJUSTED
-------- --------
(DOLLARS IN
THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Long-term debt:
Revolver (including current portion)....................... $ 17,777 $ 7,726
Term Loan (including current portion)...................... 10,000 0
Senior Subordinated Notes, net of discount of $945,000
related to the Warrants.................................. 9,102 0
Capital lease obligation (including current portion)....... 702 702
-------- --------
37,581 8,428
-------- --------
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, 8,489,294 issued and outstanding(1).......... 1 8
Series A Preferred Stock: actual, par value $.01 per share,
300 shares authorized, 140 shares issued and outstanding;
as adjusted, par value $.01 per share, 140 shares
authorized, none issued and outstanding.................. 2,000 0
Serial Preferred Stock; as adjusted, par value $.001 per
share, 2,000,000 shares authorized, none issued and
outstanding.............................................. -- 0
Additional paid in capital................................. 11,999 45,042
Additional paid in capital -- warrants..................... 1,000 0
Accumulated deficit........................................ (34,593) (35,585)(2)
-------- --------
Total stockholders' (deficit) equity.................. (19,593) 9,465
-------- --------
Total capitalization.................................. $ 17,988 $ 17,893
======== ========
</TABLE>
- ---------------
(1) Does not include an aggregate of 293,371 shares of Common Stock issuable in
connection with outstanding stock options, 10,000 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. The aggregate proceeds to the Company from the exercise of the
Warrants will be less than $1.00. See "Management," "Principal and Selling
Stockholders," and "Description of Capital Stock."
(2) Reflects a $0.5 million extraordinary loss (net of a tax benefit of $0.3
million) on repayment in full of the Senior Subordinated Notes and a $0.4
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. See "Use of Proceeds."
12
<PAGE> 14
DILUTION
At June 30, 1996, the Company had an aggregate of 5,989,294 shares of
Common Stock outstanding with a deficit in net tangible book value of $(19.6)
million or $(3.27) 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 June 30, 1996, other than to
give effect to the sale of the Common Stock in the Offering, the pro forma net
tangible book value at June 30, 1996 would have been $9.5 million or $1.11 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 $12.89 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............ $14.00
Deficit in net tangible book value per share of Common Stock
before the Offering................................................. $(3.27)
Increase per share attributable to new investors...................... 4.38
Pro forma net tangible book value per share of Common Stock after the
Offering................................................................. 1.11
------
Dilution per share to new investors........................................ $12.89
======
</TABLE>
The following table summarizes, as of June 30, 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 70.6% $13,000,000 27.1% $ 2.17
New investors...................... 2,500,000 29.4 35,000,000 72.9 14.00
--------- ------- ----------- -------
Total......................... 8,489,294 100.0% $48,000,000 100.0%
======== ======= ========== =======
</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 4,464,294 or 52.6% 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 4,025,000
or 47.4% of the total shares of Common Stock to be outstanding after the
Offering. See "Principal and Selling Stockholders."
13
<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 June 30, 1996 and for the respective six month periods ended June 30, 1995
and June 30, 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 June 30, 1996 are not necessarily indicative of results for the full year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------- -----------------------
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 $ 62,324 $ 69,636
Cost of sales............................ 42,639 48,780 59,274 71,280 92,637 48,693 53,660
------- ------- ------- ------- --------- --------- ---------
Gross profit............................. 7,307 8,885 12,934 17,540 25,801 13,631 15,976
Operating expenses:
Engineering............................ 1,439 1,477 1,848 2,123 2,504 1,260 1,559
Selling and marketing.................. 3,367 3,345 4,232 4,728 5,365 2,507 3,357
Administrative......................... 3,027 2,986 5,075 4,618 5,138 2,221 2,542
------- ------- ------- ------- --------- --------- ---------
Operating income (loss).................. (526) 1,077 1,779 6,071 12,794 7,643 8,518
Amortization of FAS 106(1)............... -- -- -- (3,626) -- -- --
Interest expense......................... 1,436 1,062 1,055 1,146 1,642 454 2,046
Other, net............................... 578 (376) (549) 234 865 453 674
------- ------- ------- ------- --------- --------- ---------
Income (loss) before provision for
taxes.................................. (2,540) 391 1,273 8,317 10,287 6,736 5,798
Income tax provision (benefit)........... (227) 334 550 3,152 3,680 2,416 2,272
------- ------- ------- ------- --------- --------- ---------
Net income (loss) before change in
accounting............................. (2,313) 57 723 5,165 6,607 4,320 3,526
Change in accounting (gain)/loss(2)...... -- (243) 9,014 -- -- -- --
------- ------- ------- ------- --------- --------- ---------
Net income (loss)(3)..................... $(2,313) $ 300 $(8,291) $ 5,165 $ 6,607 $ 4,320 $ 3,526
======= ======= ======= ======= ======== ======== ========
PRO FORMA DATA
Actual(4):
Net income per common share............ $ 1.10 $ 0.72 $ 0.59
Weighted average common shares
outstanding.......................... 5,989,294 5,989,294 5,989,294
Supplementary(5):
Net income per common share............ $ 0.84 $ 0.51 $ 0.55
Weighted average common shares
outstanding.......................... 8,499,294 8,499,294 8,499,294
OTHER OPERATING DATA:
Employees (at period end)................ 424 459 518 557 581 577 618
Sales per employee....................... $ 112 $ 133 $ 146 $ 165 $ 207 $ 110 $ 116
Capital expenditures..................... $ 346 $ 740 $ 534 $ 1,214 $ 4,189 $ 1,294 $ 676
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1996
1995 --------------------------
------------ AS
ACTUAL ACTUAL ADJUSTED(6)
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................................................... $ 10,735 $13,765 $16,199
Total assets...................................................................... 52,024 58,122 57,393
Total debt........................................................................ 37,922 37,581 8,428
Stockholders' (deficit) equity.................................................... (23,119) (19,593) 9,465
</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 based on actual earnings and average shares outstanding in the
periods indicated after giving effect to the 5,540-for-1 stock split and the
conversion of the outstanding Warrants.
(5) Presented as if the 1995 Recapitalization, the exercise of the Warrants and
an option for 10,000 shares, 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 $0.5 million extraordinary loss (net of a tax benefit of $0.3
million) to be incurred on repayment in full of the Senior Subordinated
Notes and a $0.4 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.
(6) 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 June 30, 1996. Reflects a $0.5
extraordinary loss (net of a tax benefit of $0.3 million) to be incurred on
repayment in full of the Senior Subordinated Notes and a $0.4 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. See "Use of Proceeds."
14
<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 service
parts business.
Operating profit margins for excavators and for material handlers have been
approximately the same. Operating profit margins for service parts have been
approximately twice the operating profit margins for excavators and material
handlers.
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, the Company commenced a multi-year program designed
to expand plant capacity and reduce production costs by increasing labor
efficiency and equipment productivity and improving quality. The Company
invested $4.2 million in 1995 and $0.7 million through June 30, 1996 for capital
improvements pursuant to this program. The Company currently plans to invest an
additional $3.5 million in 1996 and in excess of $4.0 million in 1997 for
capital improvements under this program. Gradall believes that the recently
completed capital improvements, which have enhanced
15
<PAGE> 17
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
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 June 30, 1996, the Company's backlog of orders aggregated
approximately $30.7 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 June 30, 1996 is due primarily to an increase in orders for
material handlers. Substantially all backlog orders at June 30, 1996 are
expected to be shipped by October 31, 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>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales:
Excavators............................. 55.6% 50.9% 41.5% 41.1% 39.9%
Material handlers...................... 29.6 34.6 45.3 45.0 48.2
Service parts.......................... 14.8 14.5 13.2 14.0 11.8
-------- -------- -------- -------- --------
Total net sales........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................ 82.1 80.3 78.2 78.1 77.1
-------- -------- -------- -------- --------
Gross profit........................... 17.9 19.7 21.8 21.9 22.9
Operating expenses:
Engineering............................ 2.6 2.4 2.1 2.0 2.2
Selling and marketing.................. 5.9 5.3 4.5 4.0 4.8
Administrative......................... 7.0 5.2 4.3 3.6 3.7
-------- -------- -------- -------- --------
Total operating expenses............... 15.4 12.9 11.0 9.6 10.7
-------- -------- -------- -------- --------
Operating income......................... 2.5 6.8 10.8 12.3 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 0.7 2.9
Other, net............................. (0.8) 0.3 0.7 0.7 1.0
-------- -------- -------- -------- --------
Income before provision for taxes........ 1.8 9.4 8.7 10.8 8.3
Income tax provision..................... 0.8 3.5 3.1 3.9 3.3
-------- -------- -------- -------- --------
Net income before change in accounting... 1.0% 5.8% 5.6% 6.9% 5.1%
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) The sum in any column may not equal the indicated total due to rounding.
16
<PAGE> 18
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Net sales. Net sales for the six months ended June 30, 1996 were $69.6
million, an increase of $7.3 million or 11.7%, compared to $62.3 million for the
six months ended June 30, 1995. The increase in net sales was substantially
attributable to a significant increase in unit volume of material handlers and a
moderate increase in unit volume of excavators. Price increases affecting both
product lines had a modest favorable impact. Net sales of excavators for the six
months ended June 30, 1996 were $27.8 million, an increase of $2.2 million or
8.6%, compared to $25.6 million for the six months ended June 30, 1995. Net
sales of material handlers for the six months ended June 30, 1996 were $33.6
million, an increase of $6.3 million or 23.2%, compared to $27.3 million for the
six months ended June 30, 1995. Net sales of service parts for the six months
ended June 30, 1996 were $8.3 million, a decrease of $0.5 million or 5.2%,
compared to $8.7 million for the six months ended June 30, 1995.
Cost of sales. Cost of sales for the six months ended June 30, 1996 were
$53.7 million, an increase of $5.0 million or 10.2%, compared to $48.7 million
for the six months ended June 30, 1995. This increase was due to an increase in
sales volume. Cost of sales as a percentage of net sales declined to 77.1% for
the six months ended June 30, 1996 from 78.1% for the six months ended June 30,
1995 primarily due to improved production efficiencies and economies of higher
production volume.
Engineering. Engineering expense for the six months ended June 30, 1996
was $1.6 million, an increase of $0.3 million or 23.7%, compared to $1.3 million
for the six months ended June 30, 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 six months
ended June 30, 1996 were $3.4 million, an increase of $0.9 million or 33.9%,
compared to $2.5 million for the six months ended June 30, 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 six months ended June 30,
1996 were $2.5 million, an increase of $0.3 million or 14.5%, compared to $2.2
million for the six months ended June 30, 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 six months ended June 30, 1996
was $2.0 million, an increase of $1.6 million or 350.7%, compared to $0.5
million for the six months ended June 30, 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 six months ended June 30,
1996 was $2.3 million, a decrease of $0.1 million or 6.0%, compared to $2.4
million for the six months ended June 30, 1995 and represented an effective tax
rate of 39.2% and 35.9%, 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 substantially attributable to a significant increase in unit
volume of material handlers and a moderate increase in unit volume of
excavators. Price increases affecting both product lines had a modest favorable
impact. 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 improved production efficiencies and economies of higher
production volume.
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<PAGE> 19
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 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
in net sales was substantially attributable to a significant increase in unit
volume of material handlers and a moderate increase in unit volume of
excavators. Price increases affecting both product lines had a modest favorable
impact. 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 improved 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 the addition of
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.
18
<PAGE> 20
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 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 June 30, 1996, the weighted average interest rate under the Credit Facility
was 8.3%. As of the end of the second quarter, there were $17.8 million of
borrowings under the Revolver and $10 million of the Term Loan outstanding. In
addition, on June 30, 1996, there was $4.2 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 $10.1 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 $8.4 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 $0.5 million, net of a tax
benefit of approximately $0.3 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 $0.4
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 "Amended 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 Amended 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 operating activities of $2,896,000 for the
six months ended June 30, 1996 and $7,570,000 for 1995. Net cash from operating
activities for the six months ended June 30, 1996 primarily resulted from
$3,526,000 of net income, and $1,243,000 of non-cash charges to income less
deferred taxes which were more than offset by $(1,873,000) of net cash used by
changes in operating assets and liabilities, primarily a $3,398,000 increase in
accounts receivable due to strong shipments in the first half. 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 $676,000 for the six months ended June 30, 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.
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<PAGE> 21
Management anticipates that the Company's capital investments in 1996 under this
program will total $4.2 million. Management believes that the remaining $3.5
million will be funded by cash from operations and by borrowings under available
credit facilities. Management expects to invest in excess of $4.0 million in
1997 for capital improvements under the multi-year program which would also be
funded from internally generated cash flow as well as from borrowings under
available credit facilities.
In connection with a certain litigation involving the Company and one of
its distributors, the Company has recently entered into a binding settlement
with respect to such litigation at a cost to the Company of approximately $1.8
million. As of June 30, 1996, the Company had fully accrued such cost in its
historical financial statements.
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.
20
<PAGE> 22
BUSINESS
OVERVIEW
Gradall is a leading manufacturer of wheeled hydraulic excavators and
rough-terrain variable reach 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 telescopic boom technology, versatility,
productivity and reliability. Gradall's telescopic booms, which are manufactured
from high-strength specialty steel, are unique both in their shape and
engineering design, which provide added strength with minimal weight, and, in
the case of excavators, in their ability to rotate a full 360 degrees. 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() 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 program designed to expand plant
capacity and reduce production costs by increasing labor efficiency and
equipment productivity and improving quality. The Company invested $4.2 million
in 1995 and $0.7 million through June 30, 1996 for capital improvements pursuant
to this program. The Company currently plans to invest an additional $3.5
million in 1996 and in excess of $4.0 million in 1997 for capital improvements
under this program. 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
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<PAGE> 23
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 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 17-19%.
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:
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<PAGE> 24
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 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, the Company commenced a multi-year program designed to expand plant
capacity and reduce production costs by increasing labor efficiency and
equipment productivity and improving quality. The Company invested $4.2 million
in 1995 and $0.7 million through June 30, 1996 for capital improvements pursuant
to this program. The Company currently plans to invest an additional $3.5
million in 1996 and in excess of $4.0 million in 1997 for capital improvements
under this program. The recent capital improvements 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
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<PAGE> 25
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.
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
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<PAGE> 26
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.
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.
25
<PAGE> 27
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.
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(++) 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.
26
<PAGE> 28
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 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.
The Company has agreements with its distributors under which the
distributors purchase products from the Company at agreed upon prices for resale
within the distributor's territory. While the agreements are not exclusive, the
Company's practice has been to have only one distributor for either excavators
or material handlers in each territory. The distributor agreements require the
distributors to maintain agreed-upon inventory levels. Either party may
terminate the distributor agreement upon the occurrence of certain events,
including bankruptcy or breach, or in the event either party is dissatisfied
with the other party's performance, upon thirty days notice after a sixty day
dispute resolution procedure. In addition to the Company's products,
distributors typically sell construction equipment manufactured by third
parties, including competitors of the Company.
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.
27
<PAGE> 29
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, the Company commenced a multi-year
program designed to expand plant capacity and reduce production costs by
increasing labor efficiency and equipment productivity and improving quality.
The Company invested $4.2 million in 1995 and $0.7 million through June 30, 1996
for capital improvements pursuant to this program. The Company currently plans
to invest an additional $3.5 million in 1996 and in excess of $4.0 million in
1997 for capital improvements under this program. 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 improvements, which have reduced production costs, expanded
plant capacity and improved quality, and planned capital improvements, 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
28
<PAGE> 30
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
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.
29
<PAGE> 31
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%.
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 June 30, 1996, Gradall employed 618 people -- 411 hourly and 207
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 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.
30
<PAGE> 32
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.
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 proceeds
available under 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.
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<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.................. 58 Director
</TABLE>
- ---------------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
Mr. Phillips has served as President and 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 served as Vice President, Marketing and Sales and has been
a director of the Company since 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 its Vice
President, Engineering and Secretary since 1987. Mr. Keller has served as Vice
President, Engineering and Secretary of the Company since 1995.
Mr. Cahill joined The Gradall Company in 1982 and has served as its Vice
President, Manufacturing since 1990. Mr. Cahill has served as Vice President,
Manufacturing of the Company since 1995.
Mr. Jonker joined The Gradall Company in 1973 and has served as its Vice
President and Chief Financial Officer since July 1994 and its Treasurer since
November 1995. Mr. Jonker has served as Vice President, Finance and
Administration and Treasurer of the Company since November 1995 and as Vice
President, Chief Financial Officer and Treasurer of the Company since April
1996.
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
32
<PAGE> 34
Services, Inc., PAR Technology Corporation, Quaker Fabric Corporation, Stuart
Entertainment, Inc. and ITI Technologies, Inc.
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 a director of the Company since July 1996. Mr. Green is
the founder of, and since its formation 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. In addition, Mr. Green has been granted an option to purchase
10,000 shares of Common Stock of the Company, at an exercise price of $2.71 per
share, which may be exercised at any time and from time to time prior to August
14, 2006.
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.
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<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 President, 139,524 75,000 25,220 12,534(3)
Marketing and Sales
Joseph H. Keller, Jr., Vice President, 88,806 50,000 6,305 5,139(4)
Engineering
James C. Cahill, Vice President, 80,681 55,500 12,610 5,064(4)
Manufacturing
Bruce A. Jonker, Vice President and 78,792 55,500 12,610 5,064(4)
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 $10,000 in life insurance
premiums the Company paid pursuant to a deferred compensation agreement with
Mr. Williams.
(4) Represents the amount the Company contributed on behalf of the Named
Executive Officer to its Supplemental Executive Retirement Plan.
STOCK OPTION PLAN
Effective as of October 13, 1995, the Board of Directors and stockholders
of the Company adopted and approved a Stock Option Plan (the "Option Plan")
under which incentive stock options intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") may be granted. Officers
and key employees of the Company are entitled to participate in the Option Plan.
The Option Plan is administered by the Board of Directors which selects the
optionees and determines: (i) the number of shares of Common Stock subject to
each option; (ii) the vesting schedule of the option; (iii) the exercise price,
which cannot be less than 100% of the estimated fair value of the Common Stock
on the date of grant; and (iv) the duration of the option, which cannot exceed
10 years. The Option Plan does not provide for the grant of stock appreciation
rights. A total of 315,226 shares of Common Stock have been reserved for
issuance under the Option Plan and, as of June 30, 1996, options covering
283,371 shares of Common Stock were outstanding under the Option Plan, none of
which are currently exercisable.
The following table provides information relating to stock options granted
to the Named Executive Officers for the year ended December 31, 1995.
34
<PAGE> 36
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-----------------------------------------------------
% OF TOTAL VALUE AT ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES OR BASE TERM
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------
NAME GRANTED(1) YEAR ($/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
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.
35
<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 at the
normal retirement age of 65:
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <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
36
<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.
37
<PAGE> 39
1995 RECAPITALIZATION AND CERTAIN TRANSACTIONS
In October 1995, the Company consummated a series of transactions which
resulted in the 1995 Recapitalization, pursuant to the terms of a
Recapitalization Agreement (the "Recapitalization Agreement") among the Company,
Fund II and Jack D. Rutherford and David T. Shelby (the "Existing
Stockholders"). The 1995 Recapitalization was undertaken to provide the Existing
Stockholders with liquidity with respect to a substantial portion of their
investment in the Company.
As a part of the 1995 Recapitalization, Fund II and its affiliates acquired
82.5% of the Company's Common Stock for a purchase price of $10.5 million. In
connection with the 1995 Recapitalization, the Company paid to MLGA a financial
advisory fee of $750,000. Messrs. Ahn, Lewis, Morgan and Ughetta, who currently
serve on the Board of Directors of the Company, are general partners of MLGAL,
the general partner of Fund II. Messrs. Ahn, Lewis and Morgan also serve as
general partners of MLGA, the general partner of MLGAL.
The 1995 Recapitalization included the redemption of 412.5 shares of Common
Stock (before giving effect to the 5,540-for-1 stock split) from each of the
Existing Stockholders, which redemption, together with the other transactions
consummated as a part of the 1995 Recapitalization, reduced their percentage
ownership of the Company's Common Stock from 100% to 7.5%. The aggregate
redemption price paid by the Company was $44.5 million, less costs and expenses
of the 1995 Recapitalization, certain payments to officers and key employees,
amounts required to retire the existing indebtedness of The Gradall Company, as
further adjusted as required by the Recapitalization Agreement for working
capital, income taxes, property additions and cash balances as of the effective
date of the 1995 Recapitalization, resulting in net proceeds to the Existing
Stockholders of approximately $39.6 million. The Recapitalization Agreement also
provided for the distribution to the Existing Stockholders, pursuant to a plan
of partial liquidation, of certain investments of the Company in businesses
unrelated to The Gradall Company, including two former wholly owned subsidiaries
of the Company, Magna Power and International Consulting Management. Prior to
the 1995 Recapitalization, Messrs. Rutherford and Shelby were the sole
stockholders and directors of the Company. Mr. Rutherford served as Chairman of
the Board and Treasurer and Mr. Shelby served as a director and President and
Secretary of the Company. From October 1995 through April 1996, Mr. Rutherford
served as Co-Chairman of the Company and since April 1996 has continued to serve
as a director of the Company. Both Messrs. Rutherford and Shelby will be Selling
Stockholders, if the underwriters over-allotment option is exercised.
In addition, the Recapitalization Agreement provided for the issuance to
the Existing Stockholders of 140 shares of Series A Preferred Stock, as a stock
dividend. The Series A Preferred Stock has a liquidation preference of $2
million and constitutes 100% of the outstanding Preferred Stock. In connection
with the Offering, the Company has elected to exercise its option to redeem all
outstanding shares of the Series A Preferred Stock, in accordance with the terms
thereof, at its stated redemption price of $2 million. A portion of the proceeds
of this Offering will be used to pay this redemption price in cash. See "Use of
Proceeds."
As a condition to the consummation of the 1995 Recapitalization, the
Company issued 554,000 shares of Common Stock, representing 10% of the total
outstanding Common Stock of the Company upon completion of the 1995
Recapitalization, and made cash payments in the aggregate amount of
approximately $5.9 million and tax gross up payments of approximately $1.3
million to certain officers and key employees of the Company. These cash
payments and tax gross up payments reduced the redemption price paid to the
Existing Stockholders by the Company. As a condition to the consummation of the
1995 Recapitalization and their receipt of the Common Stock and cash the Company
distributed to its officers and key employees, Messrs. Phillips and Williams
surrendered their rights to receive equity interests in The Gradall Company,
which were substantially equivalent to the shares of Common Stock they received
as part of the 1995 Recapitalization. Included in this distribution of Common
Stock and cash to officers and key employees of the Company were distributions
to executive officers as follows: Barry L. Phillips received 277,000 shares of
Common Stock, a cash payment of $1.8 million and a tax gross up payment of
$746,000; David S. Williams received 138,500 shares of Common Stock, a cash
payment of $900,000 and a tax gross up payment of $373,000; Bruce A. Jonker and
James C. Cahill each received 27,700 shares of Common Stock and tax gross up
payments of
38
<PAGE> 40
$33,750; and Joseph H. Keller, Jr. received 13,850 shares of Common Stock and a
tax gross up payment of $16,875.
In connection with the 1995 Recapitalization, the Company entered into a
securities purchase agreement pursuant to which the Company issued $10 million
of 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 and obtained a revolving line
of credit of $22 million under the Revolver. Proceeds from the Senior
Subordinated Notes, the Term Loan and the Revolver, together with amounts
received from Fund II for acquisition of Common Stock, as described above, were
used to fund payments made in connection with the 1995 Recapitalization.
In January 1995, the Company entered into a Supply Agreement with Iowa
Industrial Hydraulics, Inc. ("Iowa"), a wholly owned subsidiary of Magna Power.
Prior to the 1995 Recapitalization, Magna Power was a wholly owned subsidiary of
the Company and, pursuant to the terms of the 1995 Recapitalization, is now
owned by the Existing Stockholders. 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 adjustments determined pursuant to a formula based upon
changes in the United States Bureau of Labor Statistics Producer Price Index
Code for Fluid Power Equipment. In addition, prices may be adjusted on an annual
basis as determined by good faith negotiation, in the event that actual volumes
of products purchased differ from estimated volumes by more than 25%. The
Company is not required to purchase any minimum quantity of products under this
Agreement. 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.
39
<PAGE> 41
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 72.6% 550,706 3,802,151 44.7%
Barry L. Phillips............. 277,000 4.6 0 277,000 3.3
Jack D. Rutherford(4)......... 207,750 3.5 0 207,750 2.4
David S. Williams............. 138,500 2.3 0 138,500 1.6
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)(5)............. 4,408,678 73.5 550,706 3,857,972 45.4
John A. Morgan(3)(5).......... 4,408,678 73.5 550,706 3,857,972 45.4
Perry J. Lewis(3)(5).......... 4,408,678 73.5 550,706 3,857,972 45.4
William C. Ughetta,
Jr.(3)(5)................... 4,371,026 72.9 550,706 3,820,320 44.9
Ira Starr(3)(5)............... 4,364,932 72.8 550,706 3,814,226 44.9
Ernest Green.................. 10,000 0.2 0 10,000 0.1
David T. Shelby(4)............ 207,750 3.5 0 207,750 2.4
Mellon Ventures, L.P.(6)...... 220,154 3.7 220,154 0 0.0
The Marlborough Capital
Investment Fund, L.P.(6).... 229,140 3.8 229,140 0 0.0
All Fund II affiliates as a
group....................... 4,570,500 76.2 550,706 4,019,794 47.3
All Directors, Director
Nominees and Executive
Officers as a group (11
persons).................... 5,240,989 87.4 550,706 4,690,283 55.2
Total shares outstanding...... 5,999,294 100.0% 8,499,294 100.0%
</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. Certain of
the Selling Stockholders have granted to the Underwriters an option to
purchase up to 525,000 additional shares of Common Stock. If this option is
exercised in full, the number of shares and percent of the Common Stock to
be held by such Selling Stockholders will be as follows:
<TABLE>
<CAPTION>
SHARES TO BE
BENEFICIALLY OWNED
NUMBER OF AFTER OFFERING
SHARES --------------------
SELLING STOCKHOLDER OFFERED NUMBER PERCENT
------------------------------ --------- --------- -------
<S> <C> <C> <C> <C> <C>
MLGA Fund II, L.P..................................... 386,514 3,415,637 40.2%
Jack D. Rutherford.................................... 69,243 138,507 1.6
David T. Shelby....................................... 69,243 138,507 1.6
</TABLE>
40
<PAGE> 42
(3) The business address for Fund II and Messrs. Ahn, Lewis, Morgan, Starr and
Ughetta is Two Greenwich Plaza, Greenwich, CT 06830.
(4) Prior to the 1995 Recapitalization, Messrs. Rutherford and Shelby were the
sole stockholders of the Company and served as Chairman of the Board and
Treasurer, and President and Secretary of the Company, respectively. Mr.
Rutherford served as Co-Chairman of the Board through April 1996 and
continues to serve as a Director of the Company.
(5) Includes 4,352,857 shares held by Fund II. MLGAL, the general partner of
Fund II, has the power to vote or dispose of the shares held by Fund II.
Therefore, as general partners of MLGAL, 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.
(6) In connection with the 1995 Recapitalization, the Company issued $10 million
of Senior Subordinated Notes and the Warrants to Mellon Ventures, L.P. and
The Marlborough Capital Investment Fund, L.P. The shares of Common Stock
beneficially owned by such holders represent shares of Common Stock to be
issued upon the exercise of the Warrants immediately prior to the
consummation of the Offering. The Senior Subordinated Notes will be paid in
full upon the consummation of the Offering.
41
<PAGE> 43
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, 2,000,000 shares of Serial Preferred Stock, par value $.001 per share and
140 shares of Series A Preferred Stock, of which 8,489,294 shares of Common
Stock will be issued and outstanding and no shares of Serial Preferred Stock or
Series A Preferred Stock will be issued and outstanding. As of June 30, 1996,
293,371 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 Series A 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."
SERIAL 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
42
<PAGE> 44
expenses incurred in connection with any such proceeding in advance of its final
disposition, to the fullest 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 or associated 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.
43
<PAGE> 45
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
8,489,294 shares of Common Stock. Of these shares, the 3,500,000 shares of
Common Stock sold in the Offering (4,025,000 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
(4,464,294 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 (4,464,294 shares if the
Underwriters' over-allotment option is exercised in full) constituting
"restricted securities" have entered into a lock-up agreements with the
Underwriters pursuant to which they have agreed, subject to certain exceptions,
not to sell, contract to sell, grant any option to sell, transfer or otherwise
dispose of, directly or indirectly, any shares of Common Stock or securities
convertible into or exchangeable for Common Stock or warrants or other rights to
purchase Common Stock or permit the registration under the Securities Act of any
shares of Common 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 agreements.
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 84,893 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.
44
<PAGE> 46
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 525,000 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.
45
<PAGE> 47
This Offering is being conducted in accordance with the provisions of Rule
2720 of the Conduct Rules of the National Association of Securities Dealers,
Inc. ("Rule 2720"). Accordingly, the initial public offering price can be no
higher than that recommended by a "qualified independent underwriter" meeting
certain standards. In accordance with this requirement, Dillon, Read & Co. Inc.
is serving in such role and has recommended a price in compliance with the
requirements of Rule 2720. Dillon, Read & Co. Inc. in its role of qualified
independent underwriter has performed due diligence investigations and reviewed
and participated in the preparation of this Prospectus and the Registration
Statement of which this Prospectus forms a part.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1995 and 1994 and for the three years in the period ended December 31, 1995
included in this Prospectus and the related financial statement schedule
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.
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.
46
<PAGE> 48
GRADALL INDUSTRIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants on the Consolidated Balance Sheets as of December
31, 1995 and 1994 and the Consolidated Statements of Income, Changes in
Stockholders' Equity and Cash Flows for the three years in the period ended December
31, 1995............................................................................ F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996
(unaudited)......................................................................... F-3
Consolidated Statements of Income for the years ended December 31, 1993, 1994 and 1995
and the six months ended June 30, 1995 and 1996 (unaudited)......................... F-5
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1993, 1994 and 1995 and the six months ended June 30, 1996
(unaudited)......................................................................... F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and the six months ended June 30, 1995 and 1996 (unaudited).................... F-7
Notes to the Consolidated Financial Statements........................................ F-9
</TABLE>
The consolidated financial statements do 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 made under this Prospectus.
F-1
<PAGE> 49
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Gradall Industries, Inc.
We have audited the accompanying consolidated balance sheets of Gradall
Industries, Inc. (formerly ICM Industries, Inc.) and Subsidiaries as of December
31, 1995 and 1994 and the related consolidated statements of income,
stockholders' equity and cash flows and the financial statement schedule (listed
in Item 16(b) of this Form S-1) for the three years in the period ended December
31, 1995. These financial statements and the financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Gradall Industries, Inc. and Subsidiaries as of December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for the three
years in the period ended December 31, 1995 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. The
accompanying financial statements exclude the accounts of these Subsidiaries.
Coopers & Lybrand L.L.P.
Cleveland, Ohio
July 25, 1996
F-2
<PAGE> 50
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- ------- JUNE 30,
-----------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash................................................. $ 160 $ 1,537 $ 3,345
Accounts receivable - trade, net of allowance for
doubtful accounts of $33, $62 and $62.............. 11,659 12,151 15,549
Inventories.......................................... 14,892 18,510 19,220
Prepaid expenses and deferred charges................ 272 429 469
Deferred income taxes................................ 803 1,371 1,371
------- ------- -----------
Total current assets............................ 27,786 33,998 39,954
Deferred income taxes..................................... 4,550 5,143 5,290
Property, plant and equipment, net........................ 7,106 10,619 10,577
Other assets:
Deferred financing costs, net of accumulated
amortization....................................... 36 1,573 1,412
Other................................................ 755 691 889
------- ------- -----------
Total other assets.............................. 791 2,264 2,301
------- ------- -----------
Total assets.................................... $40,233 $52,024 $58,122
======= ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 51
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- ------- JUNE 30,
-----------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Capital lease obligation, current portion............ $ 87 $ 172 $ 170
Long-term debt, current portion...................... 7,701 1,350 1,800
Accounts payable -- trade............................ 10,329 14,672 12,406
Accrued other expenses:
Salaries........................................ 1,350 514 658
Legal........................................... 315 1,256 1,815
Vacation........................................ 996 1,050 1,389
Warranty........................................ 1,066 1,272 1,285
Income taxes.................................... 434 (2,156) 1,709
Other........................................... 3,145 5,133 4,957
------- ------- -----------
Total current liabilities....................... 25,423 23,263 26,189
------- ------- -----------
Long term obligations:
Capital lease obligation, net of current portion..... 330 619 532
Long-term debt, net of current portion............... 3,116 35,781 35,079
Accrued post-retirement benefit cost................. 13,045 13,824 14,259
Other long term liabilities.......................... 1,453 1,656 1,656
------- ------- -----------
Total long term obligations..................... 17,944 51,880 51,526
------- ------- -----------
Total liabilities............................... 43,367 75,143 77,715
------- ------- -----------
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) (34,593)
------- ------- -----------
Total stockholders' (deficit)................... (3,134) (23,119) (19,593)
------- ------- -----------
Total liabilities and stockholders' equity...... $40,233 $52,024 $58,122
======= ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 52
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ ------------------
1993 1994 1995 1995 1996
------- ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales................................... $72,208 $88,820 $118,438 $62,324 $69,636
Cost of sales............................... 59,274 71,280 92,637 48,693 53,660
------- ------- -------- ------- -------
Gross profit........................... 12,934 17,540 25,801 13,631 15,976
Operating expenses:
Engineering............................ 1,848 2,123 2,504 1,260 1,559
Selling and marketing.................. 4,232 4,728 5,365 2,507 3,357
Administrative......................... 5,075 4,618 5,138 2,221 2,542
------- ------- -------- ------- -------
Total operating expenses.......... 11,155 11,469 13,007 5,988 7,458
------- ------- -------- ------- -------
Operating income.................. 1,779 6,071 12,794 7,643 8,518
Other expense (income):
Amortization of FAS 106 gain........... (3,626)
Interest expense....................... 1,055 1,146 1,642 454 2,046
Other.................................. (549) 234 865 453 674
------- ------- -------- ------- -------
Net other expense (income)........ 506 (2,246) 2,507 907 2,720
------- ------- -------- ------- -------
Income before provision for
taxes........................... 1,273 8,317 10,287 6,736 5,798
Income tax provision........................ 550 3,152 3,680 2,416 2,272
------- ------- -------- ------- -------
Net income before change in
accounting...................... 723 5,165 6,607 4,320 3,526
Change in accounting for post-retirement
benefits, net of taxes of $6,009.......... 9,014
------- ------- -------- ------- -------
Net income (loss)................. $(8,291) $ 5,165 $ 6,607 $ 4,320 $ 3,526
======= ======= ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 53
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.......................... 3,526 3,526
--
--------- ---------- ---------- ----------- -----------
Balance June 30, 1996 (unaudited)........ $1 $ 2,000 $ 11,999 $1,000 $ (34,593) $ (19,593)
====== ======= ======= ======= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 54
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------------- -------------------
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 $ 4,320 $ 3,526
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Post-retirement benefit transition
obligation................................. 16,130 (3,085) 779 390 435
Depreciation and amortization................ 1,111 945 1,206 549 955
Pension and other compensation accruals...... 27
Deferred income taxes........................ (6,137) 992 (1,161) (133) (147)
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) (3,497) (3,398)
(Increase) in inventory...................... (2,126) (2,906) (3,618) (812) (710)
(Increase) decrease in prepaid expenses...... (175) 48 (157) (110) (40)
Decrease (increase) in other assets.......... (105) 10 13 (64) (203)
Increase (decrease) in accounts payable and
accrued expenses........................... (350) 5,804 4,106 1,925 2,478
Increase (decrease) in accrued other
long-term liabilities...................... 946 (579) 203
-------- ------- ------- ------- -------
Net cash provided by (used in) operating
activities................................. (350) 5,084 7,570 2,568 2,896
-------- ------- ------- ------- -------
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) (1,294) (676)
Investment in joint venture....................... (100)
-------- ------- ------- ------- -------
Net cash used in investing activities........ (476) (1,293) (4,159) (1,294) (676)
-------- ------- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 55
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------------- -------------------
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/payments under lines of credits.... 1,415 (3,461) (993) (323)
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) (42) (89)
Other debt repayments............................. (86) (3,026) (825)
-------- ------- ------- ------- -------
Net cash provided by (used in) financing
activities................................. 1,305 (4,125) (2,034) (1,035) (412)
-------- ------- ------- ------- -------
Net increase (decrease) in cash.............. 479 (334) 1,377 239 1,808
-------- ------- ------- ------- -------
Cash, beginning of period......................... 15 494 160 160 1,537
-------- ------- ------- ------- -------
Cash, end of period............................... $ 494 $ 160 $ 1,537 $ 399 $ 3,345
======== ======= ======= ======= =======
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-8
<PAGE> 56
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. Gradall Investment Company is an inactive subsidiary of the 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>
F-9
<PAGE> 57
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
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.
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
F-10
<PAGE> 58
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
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:
<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 June 30, 1996 and for the six months ended June 30, 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 six months ended June 30,
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-11
<PAGE> 59
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
3. INVENTORIES:
Inventories were comprised of:
<TABLE>
<CAPTION>
JUNE
DECEMBER 31, 30,
------------------ -------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Raw materials.............................. $ 1,120 $ 936 $ 998
Work in process............................ 15,761 16,585 16,490
Finished goods............................. 3,216 6,150 7,632
------- ------- -------
20,097 23,671 25,120
LIFO reserve............................... (5,205) (5,161) (5,900)
------- ------- -------
Total inventory............................ $14,892 $18,510 $19,220
======= ======= =======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
The major classes of property, plant and equipment are summarized as
follows:
<TABLE>
<CAPTION>
JUNE
DECEMBER 31, 30,
------------------ -------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Land....................................... $ 513 $ 513 $ 513
Machinery and equipment.................... 11,057 14,001 13,799
Buildings and improvements................. 4,914 5,291 5,291
Furniture and fixtures..................... 1,196 1,340 1,360
Construction in progress................... 445 670 1,424
------- ------- -------
18,125 21,815 22,387
Less: accumulated depreciation............. (11,019) (11,196) (11,810)
------- ------- -------
Net property, plant and equipment..... $ 7,106 $10,619 $10,577
======= ======= =======
</TABLE>
5. LONG-TERM DEBT:
Long-term debt included:
<TABLE>
<CAPTION>
JUNE
DECEMBER 31, 30,
------------------ -------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Term loan.................................. $ 2,449 $10,000 $10,000
Revolving credit........................... 6,958 18,100 17,777
12.5% Senior subordinated notes, net of
discount of $968,719 related to
warrants................................. -- 9,031 9,102
Notes payable.............................. 1,410 -- --
------- ------- -------
10,817 37,131 36,879
Less current portion....................... 7,701 1,350 1,800
------- ------- -------
$ 3,116 $35,781 $35,079
======= ======= =======
</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-12
<PAGE> 60
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-13
<PAGE> 61
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-14
<PAGE> 62
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-15
<PAGE> 63
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 consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------------- -----------------
1993 1994 1995 1995 1996
---- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Federal..................... $363 $1,842 $3,888 $2,226 $1,964
State....................... 89 384 849 323 455
Deferred.................... 98 926 (1,057) (133) (147)
---- ------ ------ ------ ------
$550 $3,152 $3,680 $2,416 $2,272
==== ====== ====== ====== ======
</TABLE>
F-16
<PAGE> 64
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>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------------- -----------------
1993 1994 1995 1995 1996
---- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Federal statutory rate...... 34.0% 34.0% 34.0% 34.0% 34.0%
Effect of state and local
taxes..................... 4.6 3.0 4.8 4.8 5.2
Change in tax liability..... 4.6 -- (3.0) (2.9)
Other....................... -- 0.9 -- --
---- ------ ------ ------ ------
43.2% 37.9% 35.8% 35.9% 39.2%
==== ====== ====== ====== ======
</TABLE>
The components of the net deferred tax benefits (liabilities) were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------- --------
1994 1995 1996
------ ------ --------
<S> <C> <C> <C>
Current:
Inventories.............................. $ (796) $ (813) $(813)
Accrued expenses......................... 1,599 2,184 2,184
------ ------ --------
$ 803 $1,371 $1,371
====== ====== =======
Long-term:
Basis of property and equipment.......... (1,271) (1,352) (1,352)
Post-retirement benefits liability....... 5,355 5,646 5,793
Other.................................... 466 849 849
------ ------ --------
$4,550 $5,143 $5,290
====== ====== =======
</TABLE>
The sources of timing differences and related deferred tax effects were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Accrued expenses............ $(149) $(444) $ (577) $(133) $(147)
Post-retirement benefits
liability................. 447 1,049 (308)
Depreciation................ 59 29 84
Inventory................... 24 (27) 20
Other....................... (283) 319 (276)
----- ----- ------- ----- -----
$ 98 $ 926 $(1,057) $(133) $(147)
===== ===== ======= ===== =====
</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
F-17
<PAGE> 65
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
may require the Company to redeem preferred shares proportionately to any
reduction in shares held by MLGA Fund II, L.P.
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:
In connection with a certain litigation involving the Company and one of
its distributors, the Company has recently entered into a binding settlement
with respect to such litigation at a cost to the Company of approximately $1.8
million. As of June 30, 1996, the Company had fully accrued such cost in its
historical financial statements.
F-18
<PAGE> 66
- -------------------------------------------------------------
- -------------------------------------------------------------
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................................ 10
Use of Proceeds............................ 11
Dividend Policy............................ 11
Capitalization............................. 12
Dilution................................... 13
Selected Consolidated Financial Data....... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 15
Business................................... 21
Management................................. 32
1995 Recapitalization and Certain
Transactions............................. 38
Principal and Selling Stockholders......... 40
Description of Capital Stock............... 42
Shares Eligible for Future Sale............ 44
Underwriting............................... 45
Experts.................................... 46
Legal Matters.............................. 46
Additional Information..................... 46
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.
---------------------------
3,500,000 SHARES
COMMON STOCK
PROSPECTUS
, 1996
---------------------------
DILLON, READ & CO. INC.
MCDONALD & COMPANY
SECURITIES, INC.
- -------------------------------------------------------------
- -------------------------------------------------------------
<PAGE> 67
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.......................................... 125,000
Accounting fees and expenses............................................. 100,000
Legal fees and expenses.................................................. 100,000
Transfer Agent fees and expenses......................................... 15,000
Blue Sky fees and expenses and legal fees................................ 20,000
Miscellaneous............................................................ 74,537
--------
Total.......................................................... $500,000
========
</TABLE>
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.
(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)
II-1
<PAGE> 68
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, 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).
II-2
<PAGE> 69
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.
(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.
(8) On April 18, 1996, the registrant issued options to purchase an
aggregate of 27.3 shares of Common Stock to a group of 22 executive
officers and key employees of the registrant and its subsidiary pursuant to
the terms of its 1995 Stock Option Plan.
II-3
<PAGE> 70
- ---------------
* 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> 71
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Gradall
Industries, Inc. has duly caused this Amendment No. 1 to the 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 2nd day of
August, 1996.
GRADALL INDUSTRIES, INC.
By: /s/ BARRY L. PHILLIPS
------------------------------------
Name: Barry L. Phillips
Title: President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE 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 August 2, 1996
- ------------------------------------- Officer) and Director
/s/ * Vice President, Chief Financial August 2, 1996
- ------------------------------------- Officer and Treasurer (Principal
Financial Officer and Principal
Accounting Officer)
/s/ * Director August 2, 1996
- -------------------------------------
/s/ * Director August 2, 1996
- -------------------------------------
/s/ * Director August 2, 1996
- -------------------------------------
/s/ * Director August 2, 1996
- -------------------------------------
/s/ * Director August 2, 1996
- -------------------------------------
/s/ * Director August 2, 1996
- -------------------------------------
*By: /s/ BARRY L. PHILLIPS
--------------------------------
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE> 72
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------- ----------
<C> <S> <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 Form of 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)+
11.01 Statement re computation of per share earnings*
21.01 Subsidiaries of the Registrant+
23.01 Consent of Coopers & Lybrand L.L.P.*
23.03 Consent of Black, McCuskey, Souers & Arbaugh (included in their opinion
filed as Exhibit 5.01)*
24.01 Powers of Attorney of certain officers and directors of the Registrant+
27.01 Financial Data Schedule+
</TABLE>
- ---------------
+ Filed previously.
* Filed herewith.
E-1
<PAGE> 73
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> 1
EXHIBIT 1.01
FORM OF
UNDERWRITING AGREEMENT
August __, 1996
Dillon, Read & Co. Inc.
McDonald & Company Securities, Inc.
as Managing Underwriters
c/o Dillon, Read & Co. Inc.
535 Madison Avenue
New York, NY 10022
Ladies and Gentlemen:
Gradall Industries Inc., a Delaware corporation (the "Company"),
proposes to issue and sell, and certain of the persons named in Schedule B
propose to sell to the underwriters named in Schedule A (the "Underwriters") an
aggregate of 3,500,000 shares (the "Firm Shares") of Common Stock, par value
$.001 per share (the "Common Stock"), of the Company, of which 2,500,000 shares
are to be issued and sold by the Company and an aggregate of 1,000,000 shares
are to be sold by such persons in the respective amounts set forth opposite
their names in Schedule B. In addition, solely for the purpose of covering
overallotments, certain of the persons named in Schedule B propose to issue and
sell, at the Underwriters' option, up to 525,000 additional shares of the Common
Stock (the "Additional Shares") in the respective amounts set forth opposite
their names in Schedule B. The Additional Shares and the Firm Shares are
collectively referred to as the "Shares". The Shares are described in the
Prospectus which is referred to below. The persons named in Schedule B are
collectively referred to as the "Selling Stockholders". The Selling Stockholders
proposing to sell Firm Shares are collectively referred to as the "Firm Share
Selling Stockholders", and the Selling Stockholders proposing to sell additional
Shares are collectively referred to as the "Additional Share Selling
Stockholders".
The Company has filed, in accordance with the provisions of the
Securities Act of 1933, as amended, and the published rules and regulations
thereunder (collectively, the "Act"), with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1, including a
prospectus, relating to the Shares. The Company has furnished to you, for use by
the Underwriters and by dealers, copies of one or more preliminary prospectuses
(collectively, the "Preliminary Prospectus") relating to the Shares. Except
where the context otherwise requires, the registration statement in the form in
which it becomes effective, including all documents filed as a part thereof, and
including any registration statement filed pursuant to Rule 462(b) under the
<PAGE> 2
Act increasing the size of the offering registered under the Act and any
information contained in a prospectus subsequently filed with the Commission
pursuant to Rule 424(b) under the Act and deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the Act, is
herein called the "Registration Statement", and the prospectus in the form most
recently filed by the Company with the Commission pursuant to Rule 424(b) under
the Act or, if no such filing is required, in the form of final prospectus
included in the Registration Statement at the time it became effective, is
herein called the "Prospectus".
The Company, the Selling Stockholders and the Underwriters agree
as follows:
1. Sale and Purchase. On the basis of the representations and
warranties and the other terms and conditions herein set forth, the Company and
each Firm Share Selling Stockholder, severally and not jointly, agrees to sell
to the respective Underwriters and each of the Underwriters, severally and not
jointly, agrees to purchase from the Company and each such Firm Share Selling
Stockholder the respective number of Firm Shares (subject to such reasonable
adjustment as you may determine to avoid fractional shares) which bears the same
proportion to the number of Firm Shares to be sold by the Company or by that
Firm Share Selling Stockholder, as the case may be, as the number of Firm Shares
set forth opposite the name of such Underwriter on Schedule A bears to the total
number of Firm Shares to be sold by the Company and the Firm Share Selling
Stockholders, in each case at a purchase price of $[ ] per Share. You may
release the Firm Shares for public sale promptly after this Agreement becomes
effective. You may from time to time increase or decrease the public offering
price after the initial public offering to such extent as you may determine.
In addition, on the basis of the representations and warranties
and the other terms and conditions herein set forth, the Additional Share
Selling Stockholders hereby grant to the several Underwriters an option to
purchase, and the Underwriters shall have the right to purchase, severally and
not jointly, from the Additional Share Selling Stockholders all or a portion of
the Additional Shares as may be necessary to cover overallotments made in
connection with the offering of the Firm Shares, at the same purchase price per
share to be paid by the several Underwriters to the Company and the Firm Share
Selling Stockholders for the Firm Shares. This option may be exercised in whole
or in part from time to time on or before the thirtieth day following the date
hereof, by written notice to the Company. Any such notice shall set forth the
aggregate number of Additional Shares as to which the option is being exercised,
and the date and time when the Additional Shares are to be delivered (any such
date and time being
2
<PAGE> 3
herein referred to as an "additional time of purchase"); provided, however, that
no additional time of purchase shall occur earlier than the time of purchase (as
defined below) nor earlier than the second business day* after the date on which
the option shall have been exercised nor later than the eighth business day
after the date on which the option shall have been exercised. The number of
Additional Shares to be sold by each Additional Share Selling Stockholder at an
additional time of purchase shall be the number which bears the same proportion
to the aggregate number of Additional Shares being purchased at such additional
time of purchase as the number of Additional Shares set forth opposite the name
of such Additional Share Selling Stockholder on Schedule B bears to the total
number of Additional Shares (subject, in each case, to such reasonable
adjustment as you may determine to eliminate fractional shares). The number of
Additional Shares to be sold to each Underwriter at an additional time of
purchase shall be the number which bears the same proportion to the aggregate
number of Additional Shares being purchased at such additional time of purchase
as the number of Firm Shares set forth opposite the name of such Underwriter on
Schedule A bears to the total number of Firm Shares (subject, in each case, to
such adjustment as you may determine to eliminate fractional shares).
2. Payment and Delivery. Payment of the purchase price for the
Firm Shares shall be made to the Company and to each Firm Share Selling
Stockholder by wire-transfer in immediately available funds to accounts
designated by the Company and such Firm Share Selling Stockholder in Schedule B,
against delivery of the certificates for the Firm Shares to you for the
respective accounts of the Underwriters at the office of Dillon, Read & Co. Inc.
in New York City. Such payment and delivery shall be made at 9:30 A.M., New York
City time, on August __, 1996 (unless another time shall be agreed to by you,
the Company and the Selling Stockholders or unless postponed in accordance with
the provisions of Section 10). The time at which such payment and delivery are
actually made is called the "time of purchase". Certificates for the Firm Shares
shall be delivered to you in definitive form in such names and in such
denominations as you shall specify to the Company and the Selling Stockholders
on the second business day preceding the time of purchase. For the purpose of
expediting the checking of the certificates for the Firm Shares by you, the
Company and the Firm Share Selling Stockholders agree to make such certificates
available to you for such purpose at least one full business day preceding the
time of purchase.
- --------
* As used herein, "business day" shall mean a day on which the New
York Stock Exchange is open for trading.
3
<PAGE> 4
Payment of the purchase price for the Additional Shares shall be
made at the additional time of purchase in the same manner and at the same
office as the payment for the Firm Shares. Certificates for the Additional
Shares shall be delivered to you in definitive form in such names and in such
denominations as you shall specify on the second business day preceding the
additional time of purchase. For the purpose of expediting the checking of the
certificates for the Additional Shares by you, the Company and the Additional
Share Selling Stockholders agree to make such certificates available to you for
such purpose at least one full business day preceding the additional time of
purchase.
3. Representations and Warranties of the Company and MLGA Fund II,
L.P. The Company and MLGA Fund II, L.P. ("Fund II") jointly and severally,
represent and warrant to each of the Underwriters and the other Selling
Stockholders that:
(a) Each Preliminary Prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Act, complied when so filed in all
material respects with the Act; when the Registration Statement becomes
or became effective and at all times subsequent thereto up to the time
of purchase and the additional time of purchase, the Registration
Statement and the Prospectus, and any supplements or amendments
thereto, complied and will comply in all material respects with the
provisions of the Act; and the Registration Statement at all such times
did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Prospectus at all such times did not and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that the Company and Fund II make no representation
or warranty with respect to any statement contained in the Registration
Statement or the Prospectus in reliance upon and in conformity with
information concerning the Underwriters and furnished in writing by or
on behalf of any Underwriter through you to the Company expressly for
use in the Registration Statement or the Prospectus and set forth in
the section of the Registration Statement and the Prospectus entitled
"Underwriting".
(b) As of the date of this Agreement, the Company has an
authorized capitalization as set forth under the column entitled
"[June] 30, 1996 Actual" in the section
4
<PAGE> 5
of the Registration Statement and the Prospectus entitled
"Capitalization" and, after application of the net proceeds of the sale
of the Shares by the Company contemplated hereby, the capitalization of
the Company will be as set forth under the column entitled "[June] 30,
1996 As Adjusted" in the section of the Registration Statement and the
Prospectus entitled "Capitalization"; all of the issued and outstanding
shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable and at and after
the time of purchase will be free of statutory and contractual
preemptive rights.
(c) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware
with full power and authority to (i) own its properties and conduct its
business as described in the Registration Statement and the Prospectus
and (ii) execute and deliver this Agreement and to issue, sell and
deliver the Shares to be issued and sold by the Company as herein
contemplated.
(d) All of the issued and outstanding shares of capital stock of
each of the subsidiaries of the Company (the "Subsidiaries") are owned
directly by the Company; all of such shares have been duly authorized
and validly issued and are fully paid and nonassessable and, except as
described in the Prospectus, are owned free and clear of any pledge,
lien, encumbrance, security interest or other claim; there are no
outstanding rights, subscriptions, warrants, calls, preemptive rights,
options or other agreements of any kind with respect to the capital
stock of any of the Subsidiaries.
(e) Each of the Subsidiaries has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
its respective jurisdiction of incorporation, with full corporate power
and authority to own its respective properties and to conduct its
respective businesses.
(f) Each of the Company and each of the Subsidiaries is duly
qualified or licensed by and is in good standing in each jurisdiction
in which it owns or leases property or conducts its business and in
each other jurisdiction in which the failure, individually or in the
aggregate, to be so qualified or licensed could have a material adverse
effect on the properties, assets, operations, business, business
prospects or condition (financial or other) of the Company and the
Subsidiaries taken as a whole; each of the Company and each of the
Subsidiaries is in compliance in all material respects
5
<PAGE> 6
with the laws, orders, rules, regulations and directives issued or
administered by each such jurisdiction.
(g) Neither the Company nor any of the Subsidiaries is in breach
of, or in default under (nor has any event occurred which with notice,
lapse of time or both would constitute a breach of, or default under),
(i) its charter or bylaws or (ii) in the performance or observance of
any obligation, agreement, covenant or condition contained in any
license, indenture, lease, mortgage, deed of trust, bank loan or credit
agreement, supply or other agreement or instrument to which the Company
or any of the Subsidiaries is a party or by which any of them may be
bound or affected that would have a material adverse effect on the
properties, assets, operations, business, business prospects or
condition (financial or other) of the Company and the Subsidiaries
taken as a whole. The execution, delivery and performance of this
Agreement, the issuance of the Shares and the consummation of the
transactions contemplated hereby will not conflict with, or result in
any breach of or constitute a default under (nor constitute any event
which with notice, lapse of time or both would constitute a breach of,
or default under), the charter or bylaws of the Company or any of the
Subsidiaries or under any provision of any license, indenture, lease,
mortgage, deed of trust, bank loan or credit agreement, material supply
agreement or other agreement or instrument to which the Company or any
of the Subsidiaries is a party or by which any of them or their
properties may be bound or affected, or under any federal, state, local
or foreign law, regulation or rule or any decree, judgment or order
applicable to the Company or any of the Subsidiaries.
(h) The Firm Shares to be issued and sold by the Company hereunder
have been duly authorized and, when issued and delivered to and paid
for by the Underwriters as contemplated hereby, will be duly and
validly issued and fully paid and nonassessable, free and clear of any
pledge, lien, encumbrance, security interest, preemptive right or other
claim.
(i) This Agreement has been duly authorized, executed and
delivered by the Company.
(j) The capital stock of the Company, including the Shares,
conforms in all material respects to the description thereof contained
in the Registration Statement and the Prospectus; and the certificates
for the Shares are in due and proper form and the holders of the Shares
after making payment therefor will not be
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<PAGE> 7
subject to personal liability by reason of being such holders.
(k) No approval, authorization, consent or order of or filing with
any federal, state, local or foreign governmental or regulatory
commission, board, body, authority or agency is required in connection
with the issuance and sale of the Shares as contemplated hereby, other
than registration of the Shares under the Act, clearance of the
offering of the Shares with the National Association of Securities
Dealers, Inc. (the "NASD") and any necessary qualification under the
securities or blue sky laws of the various jurisdictions in which the
Shares are being offered by the Underwriters.
(l) Each person who has the right, contractual or otherwise, to
cause the Company to register pursuant to the Act any securities of the
Company in consequence of the issue and sale of the Shares to the
Underwriters hereunder either included such securities in the
Registration Statement or duly waived such right and each person who
has the right, contractual or otherwise, to cause the Company to issue
to it any securities of the Company in consequence of the issue and
sale of the Shares to the Underwriters hereunder has duly waived such
right.
(m) Coopers & Lybrand L.L.P., whose reports on the consolidated
financial statements of the Company and the Subsidiaries are included
in the Registration Statement and the Prospectus, are independent
public accountants with respect to the Company as required by the Act
and the applicable published rules and regulations thereunder.
(n) All legal or governmental proceedings, contracts or documents
of a character required to be described in the Registration Statement
or the Prospectus or to be filed as an exhibit to the Registration
Statement have been so described or filed as required.
(o) Except as described in the Prospectus, there is no action,
suit or proceeding pending or to the best of the Company's knowledge,
threatened against the Company or any of the Subsidiaries or any of
their properties, at law or in equity, or before or by any federal,
state, local or foreign governmental or regulatory commission, board,
body, authority or agency that could result in a judgment, decree or
order having a material adverse effect on the properties, assets,
operations, business, business prospects or condition (financial or
other) of the Company and the Subsidiaries taken as a whole.
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<PAGE> 8
(p) The audited and unaudited financial statements included in the
Registration Statement and the Prospectus present fairly the
consolidated financial condition of the Company and the Subsidiaries as
of the dates indicated and the consolidated results of operations and
cash flows of the Company and the Subsidiaries for the periods
specified; such financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent
basis during the periods involved, except as set forth in the notes to
such financial statements and except to the extent that certain
footnote disclosures regarding the unaudited financial statements have
been omitted in accordance with the applicable rules of the Commission.
(q) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as
may be otherwise stated in the Registration Statement or the
Prospectus, there has not been: (A) any material adverse change in the
properties, assets, operations, business, business prospects or
condition (financial or other), present or prospective, of the Company
and the Subsidiaries taken as a whole; (B) any transaction contemplated
or entered into by the Company or any of the Subsidiaries that would
require an amendment to the Registration Statement or a supplement to
the Prospectus or have a material adverse effect on the properties,
assets, operations, business, business prospects or condition
(financial or other) of the Company and the Subsidiaries taken as a
whole; or (C) any obligation, contingent or otherwise, directly or
indirectly incurred by the Company or any of the Subsidiaries that is
material to the Company and the Subsidiaries taken as a whole, other
than contracts, purchase orders or commitments for capital equipment
and inventory and borrowings under the existing credit facility in the
ordinary course of business and consistent with past practice.
(r) The Company has obtained the agreement of the stockholders
listed on Schedule C not to sell, contract to sell, grant any option to
sell, transfer or otherwise dispose of, directly or indirectly, any
shares of Common Stock, or securities convertible into or exchangeable
for Common Stock or warrants or other rights to purchase Common Stock,
for a period of 180 days from the date of the Prospectus without the
prior written consent of Dillon, Read & Co. Inc.
(s) Neither the Company nor any of the Subsidiaries has violated
any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances
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<PAGE> 9
or wastes, pollutants or contaminants ("Environmental Laws"), nor any
federal or state law relating to discrimination in the hiring,
promotion or pay of employees nor any applicable federal or state wages
and hours laws, nor any provisions of the Employee Retirement Income
Security Act or the rules and regulations promulgated thereunder, which
in each case would result in any material adverse effect on the
properties, assets, operations, business, business prospects or
condition (financial or other) of the Company and the Subsidiaries
taken as a whole.
(t) The Company and each of the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits"), including without limitation under any
applicable Environmental Laws, as are necessary to own, lease and
operate its respective properties and to conduct its business, except
for those the absence of which would not have a material adverse effect
on the properties, assets, operations, business, business prospects or
condition (financial or other) of the Company and the Subsidiaries
taken as a whole; the Company and each of the Subsidiaries has
fulfilled and performed all of its material obligations with respect to
such permits and is in material compliance with the terms of such
permits, and no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination thereof or results
in any other material impairment of the rights of the holder of any
such permit; and, except as described in the Prospectus, such permits
contain no restrictions that are materially burdensome to the Company
or any of the Subsidiaries.
(u) To the best of the Company's knowledge, there are no costs and
liabilities associated with or arising in connection with Environmental
Laws (including without limitation any capital or operating expenditure
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to
third parties), singly or in the aggregate, which would have a material
adverse effect on the properties, assets, operations, business,
business prospects or condition (financial or other) of the Company and
the Subsidiaries taken as a whole.
(v) Neither the Company, any of the Subsidiaries, nor, to the best
of the Company's knowledge, any employee of the Company or any of the
Subsidiaries, has made any payment of funds of the Company or any of
the Subsidiaries prohibited by law, and no funds of the
9
<PAGE> 10
Company or any of the Subsidiaries have been set aside to be used for
any payment prohibited by law.
(w) The Company and the Subsidiaries have filed all federal or
state income or franchise tax returns required to be filed and have
paid all taxes shown thereon as due, and there is no tax deficiency
which has been or, to the best of the Company's knowledge, might be
asserted against the Company or any of the Subsidiaries that would have
a material adverse effect on the consolidated financial position or
results of operations of the Company and the Subsidiaries; all material
tax liabilities are adequately provided for on the books of the Company
and the Subsidiaries.
(x) The Company has not incurred any liability for any finder's
fees or similar payments in connection with the transactions herein
contemplated.
(y) The Company and the Subsidiaries have good title to all
properties and assets owned by them, in each case free and clear of all
liens, security interests, pledges, charges, encumbrances, mortgages
and defects (except such as are described or referred to in the
Prospectus and the financial statements and the notes thereto contained
therein or such as do not interfere with the use made and proposed to
be made of such property by the Company and the Subsidiaries).
(z) Neither the Company nor any of the Subsidiaries is an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended, or is subject to regulation under such Act.
4. Representations and Warranties of the Selling Stockholders.
Each Selling Stockholder, severally and not jointly, represents and warrants to
each Underwriter that:
(a) Such Selling Stockholder is, and at the time of delivery of
the Shares to be sold by such Selling Stockholder will be, the lawful
owner of the number of Shares or securities convertible into or
warrants exercisable for the number of Shares to be sold by such
Selling Stockholder pursuant to this Agreement and, at the time of
delivery thereof, will have valid and marketable title to such Shares,
and upon delivery of and payment for such Shares the Underwriters will
acquire valid and marketable title to such Shares free and clear of any
claim, lien, encumbrance, security interest, community property right,
restriction on transfer or other defect in title, assuming each of the
Underwriters has purchased the Shares purchased by it in good faith and
without notice of any adverse claim.
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<PAGE> 11
(b) Such Selling Stockholder has and at the time of delivery of
such Shares will have full legal right, power and capacity, and any
approval required to be obtained by such Selling Stockholder by law
(other than approvals required by the Act, applicable blue sky laws or
from the NASD) to sell, assign, transfer and deliver such Shares in the
manner provided in this Agreement.
(c) This Agreement has been duly authorized, executed and
delivered by such Selling Stockholder. The Custody Agreement and the
Power of Attorney among the Company, William C. Ughetta, Jr., as
custodian and the Selling Stockholders (the "Custody Agreement and
Power of Attorney") has been duly executed and delivered by such
Selling Stockholder and constitutes the legal, valid and binding
agreement of such Selling Stockholder, enforceable against such Selling
Stockholder in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and
general principles of equity.
(d) Such Selling Stockholder has duly and irrevocably authorized
the Attorney-in-Fact (as defined in the Custody Agreement and Power of
Attorney), on behalf of such Selling Stockholder, to execute and
deliver this Agreement and any other document necessary or desirable in
connection with the transactions contemplated hereby and to deliver the
Shares to be sold by such Selling Stockholder and receive payment
therefor pursuant hereto.
(e) All information furnished in writing by or on behalf of such
Selling Stockholder to you or the Company specifically for use in the
Registration Statement and the Prospectus, and any supplement or
amendment thereto, is and will be when the Registration Statement
became effective and at all times subsequent thereto up to the time of
purchase and the additional time of purchase, true and correct and
complete and at all such times did not and will not contain any untrue
statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(f) The consummation of the transactions contemplated hereby and
by the Custody Agreement and Power of Attorney to be consummated by
such Selling Stockholder and the fulfillment of the terms hereof and
thereof by such Selling Stockholder will not constitute a breach or
violation of or default under any trust,
11
<PAGE> 12
indenture, agreement or other instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder is bound.
5. Certain Covenants of the Company. The Company hereby agrees:
(a) to furnish such information as may be required and otherwise
to cooperate in qualifying the Shares for offering and sale under the
securities or blue sky laws of such states as you may designate and to
maintain such qualifications in effect as long as required for the
distribution of the Shares, provided that the Company shall not be
required to qualify as a foreign corporation or to consent to the
service of process under the laws of any such state (except service of
process with respect to the offering and sale of the Shares); promptly
to advise you of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale
in any jurisdiction or the initiation or threatening of any proceeding
for such purpose; and to use its best efforts to obtain the withdrawal
of any order of suspension at the earliest practicable moment;
(b) to make available to you in New York City, as soon as
practicable after the Registration Statement becomes effective, and
thereafter from time to time to furnish to the Underwriters, as many
copies of the Prospectus (or of the Prospectus as amended or
supplemented if the Company shall have made any amendment or supplement
thereto after the effective date of the Registration Statement) as the
Underwriters may request for the purposes contemplated by the Act;
(c) to advise you promptly and if requested by you to confirm such
advice in writing, (i) when the Registration Statement has become
effective and when any post-effective amendment thereto becomes
effective and (ii) when the Prospectus is filed with the Commission
pursuant to Rule 424(b) under the Act, if required under the Act (which
the Company agrees to file in a timely manner under such Rule);
(d) to advise you promptly, confirming such advice in writing, of
any request by the Commission for amendments or supplements to the
Registration Statement or the Prospectus or for additional information
with respect thereto, or of notice of institution of proceedings for or
the entry of a stop order suspending the effectiveness of the
Registration Statement and, if the Commission should enter a stop order
suspending the effectiveness of the Registration Statement, to use its
best efforts to obtain the lifting or removal of such
12
<PAGE> 13
order as soon as possible; to advise you promptly of any proposal to
amend or supplement the Registration Statement or the Prospectus and to
file no such amendment or supplement to which you shall object in
writing;
(e) to furnish to you and, upon request to each of the other
Underwriters, for a period of five years from the date of this
Agreement (i) copies of all reports or other communications that the
Company shall send to its stockholders or from time to time shall
publish or publicly disseminate and (ii) copies of all annual,
quarterly and current reports filed with the Commission on Forms 10-K,
10-Q and 8-K, or such other similar form as may be designated by the
Commission, and any other document filed by the Company pursuant to
Section 12, 13, 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
(f) to advise the Underwriters promptly of the happening of any
event known to the Company within the time during which a prospectus
relating to the Shares is required to be delivered under the Act that,
in the reasonable judgment of the Company, would require the making of
any change in the Prospectus then being used, so that the Prospectus,
as then supplemented, would not include an untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
are made, not misleading and, during such time, promptly to prepare and
furnish, at the Company's expense, to the Underwriters such amendments
or supplements to such Prospectus as may be necessary to reflect any
such change in such quantities as requested by the Underwriters, and to
furnish to you a copy of such proposed amendment or supplement before
filing any such amendment or supplement with the Commission;
(g) to make generally available to its security holders, and to
deliver to you, an earnings statement of the Company (which need not be
audited and which will satisfy the provisions of Section 11(a) of the
Act including, at the option of the Company, Rule 158) covering a
period of 12 months beginning after the effective date of the
Registration Statement but ending not later than 15 months after the
date of the Registration Statement, as soon as is reasonably
practicable after the termination of such 12-month period;
(h) to furnish to you three signed copies of the Registration
Statement, as initially filed with the Commission, and of all
amendments thereto (including all exhibits thereto) and sufficient
conformed copies of the
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<PAGE> 14
foregoing (other than exhibits) for distribution of a copy to each of
the other Underwriters;
(i) to furnish to you as early as practicable prior to the time of
purchase and the additional time of purchase, as the case may be, but
not later than two business days prior thereto, a copy of the latest
available unaudited interim consolidated financial statements, if any,
of the Company and the Subsidiaries that have been read by the
Company's independent certified public accountants as stated in their
letter to be furnished pursuant to Section 8(b);
(j) to apply the net proceeds from the sale of the Shares sold by
the Company in the manner set forth under the caption "Use of Proceeds"
in the Registration Statement and the Prospectus;
(k) to use its best efforts to cause the Shares to be included in
the Nasdaq National Market;
(l) whether or not the transactions contemplated in this Agreement
are consummated or this Agreement otherwise becomes effective or is
terminated, to pay all expenses, fees and taxes (other than (x) any
transfer taxes and (y) fees and disbursements of your counsel except as
set forth under Section 7 and clauses (iii) and (iv) below) in
connection with (i) the preparation and filing of the Registration
Statement, each Preliminary Prospectus, the Prospectus and any
amendment or supplement thereto, and the printing and furnishing of
copies of each thereof to you and to dealers (including costs of
mailing and shipment), (ii) the issuance, sale and delivery of the
Shares, (iii) the word processing or printing of this Agreement and any
dealer agreements, and the reproduction or printing and furnishing of
copies of each thereof to you and to dealers (including costs of
mailing and shipment), (iv) the qualification of the Shares for
offering and sale under state laws as aforesaid (including legal fees
and filing fees and other disbursements of your counsel) and the
printing and furnishing of copies of any blue sky surveys to you and to
dealers, (v) any listing of the Shares on any securities exchange or
qualification of the Shares for inclusion in the Nasdaq National Market
and any registration thereof under the Exchange Act, (vi) any filing
for review of the public offering of the Shares by the NASD and (viii)
the performance of the Company's and the Selling Stockholders' other
obligations hereunder;
(m) not to sell, contract to sell, grant any option to sell,
transfer or otherwise dispose of, directly or indirectly, any shares of
Common Stock or securities
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<PAGE> 15
convertible into or exchangeable for Common Stock or warrants or other
rights to purchase Common Stock or permit the registration under the
Act of any shares of Common Stock, except for the registration of the
Shares and the sales to you pursuant to this Agreement for a period
commencing on the date hereof and continuing for 180 days after the
date of the Prospectus, without the prior written consent of Dillon,
Read & Co. Inc., other than the issuance of Common Stock upon the
exercise of stock options outstanding on the date hereof and the grant
of stock options under existing stock option plans; and
(n) to refrain from investing the proceeds from the sale of the
Shares in a manner to cause the Company or any of the Subsidiaries to
become an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
6. Certain Covenants of the Selling Stockholders. Each Selling
Stockholder agrees, severally and not jointly, with each Underwriter that such
Selling Stockholder will not sell, contract to sell, grant any option to sell,
transfer or otherwise dispose of, directly or indirectly, any shares of Common
Stock or securities convertible into or exchangeable for Common Stock or
warrants or other rights to purchase Common Stock, except for the sales to you
pursuant to this Agreement, for a period commencing on the date hereof and
continuing for 180 days after the date of the Prospectus, without the prior
written consent of Dillon, Read & Co. Inc.
7. Reimbursement of Underwriters' Expenses. If the Firm Shares or
the Additional Shares are not delivered for any reason, other than the failure
of one or more of the Underwriters to purchase the Firm Shares or the Additional
Shares as provided herein (unless such failure is permitted under the provisions
of Section 8 or Section 9(b) of this Agreement), the Company will reimburse the
Underwriters for all of their out-of-pocket expenses, including the reasonable
fees and disbursements of their counsel.
8. Conditions of Underwriters' and Selling Stockholders'
Obligations. The several obligations of the Underwriters and of the Selling
Stockholders hereunder are subject to the accuracy of the representations and
warranties on the part of the Company and other Selling Stockholders on the date
hereof and at the time of purchase (and the several obligations of the
Underwriters at any additional time of purchase are subject to the accuracy of
the representations and warranties on the part of the Company and the Selling
Stockholders on the date hereof and at the time of purchase and at such
additional time of purchase, as the case may be), the performance by each of the
Company and the Selling
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<PAGE> 16
Stockholders of its and their obligations hereunder and to the following
conditions:
(a) The Company shall furnish to you at the time of purchase and
at such additional time of purchase, as the case may be, an opinion of
Black, McCuskey, Souers & Arbaugh, counsel for the Company, addressed
to the Underwriters and the Selling Stockholders, and dated the time of
purchase or such additional time of purchase, as the case may be, with
reproduced copies for each of the other Underwriters and in form
satisfactory to Davis Polk & Wardwell, counsel for the Underwriters,
stating that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with full corporate power and authority (A) to
own its properties and conduct its business as described in the
Registration Statement and the Prospectus and (B) to execute and
deliver this Agreement and to issue, sell and deliver the Shares
as herein contemplated;
(ii) each of the Subsidiaries has been duly incorporated and
is validly existing as a corporation in good standing under the
laws of the state in which such Subsidiary is incorporated, with
full corporate power and authority to own its properties and to
conduct its business as described in the Registration Statement
and the Prospectus;
(iii) each of the Company and each of the Subsidiaries is
duly qualified or licensed to do business by and is in good
standing as a foreign corporation in each jurisdiction in which it
conducts business or owns property so as to require such
qualification or license and in which the failure, individually or
in the aggregate, to be so licensed or qualified could have a
material adverse effect on the properties, assets, operations,
business, business prospects or condition (financial or other) of
the Company and the Subsidiaries taken as a whole;
(iv) all of the issued and outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable and, except as set
forth in the Prospectus, are owned, directly or indirectly, by the
Company free and clear of any pledge, lien, encumbrance, security
interest, preemptive right or other claim, and there are no
rights, warrants, options or other agreements to acquire or
16
<PAGE> 17
instruments convertible into or exchangeable for any shares of
capital stock or other equity interest of any Subsidiary, except
as set forth in the Prospectus;
(v) this Agreement has been duly authorized, executed and
delivered by the Company;
(vi) (A) the Shares to be issued and sold by the Company
hereunder, when delivered to and paid for by the Underwriters,
will be duly authorized, validly issued, fully paid and
nonassessable, and will be free of any pledge, lien, encumbrance,
claim or preemptive right; and (B) the certificates for the Shares
are in due and proper form and the holders of the Shares will not
be subject to personal liability by reason of being such holders;
(vii) (A) the authorized capital stock of the Company is as
set forth under the heading "Description of Capital Stock" in the
Registration Statement and the Prospectus and (B) the outstanding
shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid, nonassessable and free of
statutory and contractual preemptive rights;
(viii) the capital stock of the Company, including the
Shares, conforms in all material respects to the description
thereof contained in the Registration Statement and the
Prospectus;
(ix) the Registration Statement and the Prospectus (except as
to the financial statements and schedules contained therein as to
which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Act;
(x) the Registration Statement has become effective under the
Act and, to the best of such counsel's knowledge, no stop order
proceedings with respect thereto are pending or threatened under
the Act;
(xi) no approval, authorization, consent or order of or
filing with any federal, state, local or foreign governmental or
regulatory commission, board, body, authority or agency is
required in connection with the issuance or sale of the Shares as
contemplated hereby other than (A) registration of the Shares
under the Act, (B) such consents, approvals, authorizations,
registrations or
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<PAGE> 18
qualifications as may be required under the state securities or
blue sky laws of the various jurisdictions in which the Shares are
being offered by the Underwriters and (C) such approval of the
underwriting arrangements as may be required under the bylaws of
the NASD;
(xii) the execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby do not and will not conflict
with, or result in any breach of, or constitute a default under
(nor constitute any event which with notice, lapse of time or both
would constitute a breach of or default under), the charter or
bylaws of the Company or any of the Subsidiaries, or, to the best
of such counsel's knowledge, under any provision of any license,
indenture, lease, mortgage, deed of trust, bank loan or credit
agreement or other agreement or instrument to which the Company or
any of the Subsidiaries is a party or by which the Company or any
of the Subsidiaries or their properties are bound or affected, or,
to the best of such counsel's knowledge, under any federal, state,
local or foreign law, regulation or rule or any decree, judgment
or order applicable to the Company or any of the Subsidiaries;
(xiii) to the best of such counsel's knowledge, neither the
Company nor any of the Subsidiaries is in breach of or in default
under (nor has any event occurred which with notice, lapse of time
or both would constitute a breach of or default under) any
license, indenture, lease, mortgage, deed of trust, bank loan or
credit agreement or any other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which the
Company or any of the Subsidiaries or their properties are bound
or affected or under any law, regulation or rule or any decree,
judgment or order applicable to the Company or any of the
Subsidiaries, except for such matters as could not, individually
or in the aggregate, have a material adverse effect on the
properties, assets, operations, business, business prospects or
condition (financial or other) of the Company and the Subsidiaries
taken as a whole;
(xiv) the Company and each of the Subsidiaries has such
permits, licenses, franchises and authorizations of governmental
or regulatory authorities ("permits"), including without
limitation under any applicable Environmental Laws,
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<PAGE> 19
as are necessary to own, lease and operate its respective
properties and to conduct its business in the manner described in
the Prospectus; to the best of such counsel's knowledge, after due
inquiry, the Company and each of the Subsidiaries has fulfilled
and performed all of its material obligations with respect to such
permits and is in material compliance with the terms of such
permits, and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the
holder of any such permit, subject in each case to such
qualification as may be set forth in the Prospectus; and, except
as described in the Prospectus, such permits contain no
restrictions that are materially burdensome to the Company or any
of the Subsidiaries;
(xv) to the best of such counsel's knowledge, all contracts
or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement have been so described or
filed;
(xvi) except as described in the Registration Statement and
the Prospectus, there are no actions, suits or proceedings of
which such counsel has knowledge pending or threatened against the
Company or any of the Subsidiaries, or any of their respective
properties, at law or in equity, or before or by any federal,
state, local or foreign governmental or regulatory commission,
board, body, authority or agency that individually or in the
aggregate could result in a judgment, decree or order having a
material adverse effect on the properties, assets, operations,
business, business prospects or condition (financial or other) of
the Company and the Subsidiaries taken as a whole;
(xvii) to the best of such counsel's knowledge, each person
who has the right, contractual or otherwise, to cause the Company
to register pursuant to the Act any securities of the Company in
consequence of the issue and sale of the Shares to the
Underwriters hereunder either included such securities in the
Registration Statement or duly waived such right and each person
who has the right, contractual or otherwise, to cause the Company
to issue to it any securities of the Company in consequence of the
issue and sale of the Shares to the Underwriters hereunder has
duly waived such right;
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<PAGE> 20
(xviii) the statements in the Registration Statement and the
Prospectus under the captions "Business -- Legal Proceedings",
"Management", "Description of Capital Stock" and "Shares Eligible
For Future Sale", insofar as they are descriptions of laws,
regulations and rules, of legal and governmental proceedings or of
contracts, agreements, leases and other legal documents, or refer
to statements of law or legal conclusions, have been reviewed by
such counsel and are accurate in all material respects;
(xix) neither the Company nor any of the Subsidiaries is an
"investment company" or a person "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940,
as amended;
(xx) the sales of securities by the Company described in Item
15 of the Registration Statement were exempt from the registration
requirements of the Act;
(xxi) nothing has come to the attention of such counsel that
causes them to believe that the Registration Statement or any
amendment thereto at the time such Registration Statement or
amendment became effective contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus or any supplement thereto at
the date of such Prospectus or such supplement, and at all times
up to and including the time of purchase contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading (it being understood that such counsel need express
no opinion with respect to the financial statements and schedules
included in the Registration Statement or Prospectus).
(b) Each Selling Stockholder shall furnish to you at the time of
purchase and at such additional time of purchase, as the case may be,
an opinion of legal counsel for such Selling Stockholder, addressed to
the Underwriters and dated the time of purchase or such additional time
of purchase, as the case may be, with reproduced copies for each of the
other Underwriters and in form reasonably satisfactory to Davis Polk &
Wardwell, counsel for the Underwriters, stating that:
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<PAGE> 21
(i) this Agreement and the Custody Agreement and Power of
Attorney have been duly executed and delivered by such Selling
Stockholder; the Custody Agreement and Power of Attorney is legal,
valid and binding agreement of such Selling Stockholder
enforceable against such Selling Stockholder in accordance with
its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and general principles of
equity;
(ii) such Selling Stockholder has full legal right and power,
and has obtained any authorization or approval required by law
(other than those imposed by the Act and the securities or blue
sky laws of certain jurisdictions), to sell, assign, transfer and
deliver the Shares to be sold by such Selling Stockholder in the
manner provided in this Agreement;
(iii) delivery of certificates for the Shares to be sold by
such Selling Stockholder pursuant hereto will pass title thereto
to the Underwriters severally, free and clear of any claim, lien,
encumbrance, security interest, community property right,
restriction on transfer or other defect in title assuming that the
several Underwriters are good faith purchasers and without notice
of any adverse claim;
(iv) to the best of such counsel's knowledge, the
consummation of the transactions contemplated hereby and by the
Custody Agreement and Power of Attorney and the fulfillment of the
terms hereof and thereof will not constitute a breach or violation
of or default under any trust, indenture, agreement or other
instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder is bound;
(v) the Attorney-in-Fact has been duly authorized by such
Selling Stockholder to execute and deliver on behalf of such
Selling Stockholder this Agreement and any other document
necessary or desirable in connection with the transactions
contemplated hereby and to deliver the Shares to be sold by such
Selling Stockholder and receive payment therefor pursuant hereto;
and
(vi) no approval, authorization, consent or order of or
filing with any federal, state, local or foreign governmental or
regulatory commission,
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<PAGE> 22
board, body, authority or agency is required in connection with
the sale of the Shares to be sold by such Selling Stockholder as
contemplated hereby other than registration of the Shares under
the Act (except such counsel need express no opinion as to any
necessary qualification under the state securities or blue sky
laws of the various jurisdictions in which the Shares are being
offered by the Underwriters).
(c) You shall have received from Coopers & Lybrand L.L.P. letters
dated, respectively, the date of this Agreement and the time of
purchase and additional time of purchase, as the case may be, and
addressed to the Underwriters (with reproduced copies for each of the
Underwriters) [and the Selling Stockholders] in form and substance
satisfactory to the Managing Underwriters.
(d) You shall have received at the time of purchase and at the
additional time of purchase, as the case may be, opinions from Davis
Polk & Wardwell in form and substance satisfactory to you.
(e) No amendment or supplement to the Registration Statement or
the Prospectus shall be filed prior to the time the Registration
Statement becomes effective to which you shall have objected in
writing.
(f) The Registration Statement shall become effective at or before
5:00 P.M., New York City time, on the date of this Agreement and, if
Rule 430A under the Act is used, the Prospectus shall have been filed
with the Commission pursuant to Rule 424(b) under the Act at or before
5:00 P.M., New York City time, on the second full business day after
the date of this Agreement; provided, however, that the Company, the
Selling Stockholders and you and any group of Underwriters, including
you, who have agreed hereunder to purchase in the aggregate at least
50% of the Firm Shares from time to time may agree in writing or by
telephone, confirmed in writing, on a later date.
(g) Prior to the time of purchase or the additional time of
purchase, as the case may be: (i) no stop order with respect to the
effectiveness of the Registration Statement shall have been issued
under the Act or proceedings initiated under Section 8(d) or 8(e) of
the Act; (ii) the Registration Statement and all amendments thereto, or
modifications thereof, if any, shall not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and
(iii) the Prospectus and all amendments or
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<PAGE> 23
supplements thereto, or modifications thereof, if any, shall not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(h) Between the time of execution of this Agreement and the time
of purchase or the additional time of purchase, as the case may be,
there has not been: (i) any material and adverse change, present or
prospective, in the properties, assets, operations, business, business
prospects or condition (financial or other) of the Company and the
Subsidiaries taken as a whole, other than as described in the
Registration Statement and the Prospectus; (ii) any transaction that is
material to the Company and the Subsidiaries taken as a whole
contemplated or entered into by the Company or any of the Subsidiaries,
other than as described in the Registration Statement and the
Prospectus; or (iii) any obligation, contingent or otherwise, directly
or indirectly, incurred by the Company or any of the Subsidiaries that
is material to the Company and the Subsidiaries taken as a whole, other
than as described in the Registration Statement and the Prospectus, the
effect of which in any such case described in clause (i), (ii) or (iii)
in your judgment would make it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares on the terms and
in the manner contemplated in the Prospectus.
(i) The Company, at the time of purchase or additional time of
purchase, as the case may be, will deliver to you a certificate of two
of its executive officers to the effect that the representations and
warranties of the Company as set forth in this Agreement are true and
correct as of each such date and the conditions set forth in Section
8(f) and Section 8(g) have been met.
(j) You shall have received a signed letter, dated the date of
this Agreement, from each of the stockholders listed in Schedule C to
the effect that such persons shall not sell, contract to sell, grant
any option to sell, transfer or otherwise dispose of, directly or
indirectly, any shares of Common Stock or securities convertible into
or exchangeable for Common Stock or warrants or other rights to
purchase Common Stock for a period of 180 days from the date of the
Prospectus without the prior written consent of Dillon, Read & Co. Inc.
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<PAGE> 24
(k) The Company shall have furnished to you such other documents
and certificates as to the accuracy and completeness of any statement
in the Registration Statement or the Prospectus as of the time of
purchase and the additional time of purchase, as the case may be, as
you reasonably may request.
(l) The Company and the Selling Stockholders shall have performed
such of their respective obligations under this Agreement as are to be
performed by the terms hereof at or before the time of purchase and at
or before the additional time of purchase, as the case may be.
(m) The Shares shall have been approved for quotation through the
Nasdaq National Market.
(n) The Attorney-in-Fact, at the time of purchase or additional
time of purchase, as the case may be, shall have delivered to you a
certificate to the effect that the Attorney-in-Fact is not aware that
any of the representations and warranties of the Selling Stockholders
as set forth in this Agreement are not true and correct as of such
date.
9. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective (i) if Rule 430A under
the Act is not used, when you shall have received notification of the
effectiveness of the Registration Statement, or (ii) if Rule 430A under
the Act is used, when the parties hereto have executed and delivered
this Agreement.
(b) The obligations of the several Underwriters hereunder shall be
subject to termination in the absolute discretion of you or any group
of Underwriters (which may include you) which has agreed to purchase in
the aggregate at least 50% of the Firm Shares if, at any time prior to
the time of purchase or, with respect to the purchase of any Additional
Shares, the additional time of purchase, as the case may be, trading in
securities on the Nasdaq National Market shall have been suspended or
minimum prices shall have been established on the Nasdaq National
Market or if a banking moratorium shall have been declared either by
the United States or New York State authorities, or if the United
States shall have declared war in accordance with its constitutional
processes or there shall have occurred any material outbreak or
escalation of hostilities or other national or international calamity
or crisis of such magnitude in its effect on, or any material adverse
change in, any financial market which, in each case, in your judgment
or in the judgment of such group of Underwriters, makes it
24
<PAGE> 25
impracticable to market the Shares. If you or any group of Underwriters
elect to terminate this Agreement as provided in this Section 9(b), the
Company, each Selling Stockholder and each other Underwriter shall be
notified promptly by letter or telegram.
(c) If any Underwriter shall default in its obligation to take up
and pay for the Firm Shares to be purchased by it hereunder and if the
number of Firm Shares which all Underwriters so defaulting shall have
agreed but failed to take up and pay for does not exceed 10% of the
total number of Firm Shares, the non-defaulting Underwriters shall take
up and pay for (in addition to the aggregate principal amount of Firm
Shares they are obligated to purchase pursuant to Section 1) the number
of Firm Shares agreed to be purchased by all such defaulting
Underwriters as hereinafter provided. Such Shares shall be taken up and
paid for by such non-defaulting Underwriter or Underwriters in such
amount or amounts as you may designate with the consent of each
Underwriter so designated or, in the event no such designation is made,
such Shares shall be taken up and paid for by all non-defaulting
Underwriters pro rata in proportion to the aggregate number of Firm
Shares set opposite the names of such non-defaulting Underwriters in
Schedule A.
(d) If any Underwriter shall default in its obligation to take up
and pay for the Firm Shares to be purchased by it hereunder and if the
number of Firm Shares which all Underwriters so defaulting shall have
agreed but failed to take up and pay for exceeds 10% of the total
number of Firm Shares, and arrangements satisfactory to you and the
Company are not made within 48 hours after such default, this Agreement
will terminate without liability on the part of any non-defaulting
Underwriter.
(e) Without relieving any defaulting Underwriter from its
obligations hereunder, the Company agrees with the non-defaulting
Underwriters that it will not sell any Firm Shares hereunder unless all
of the Firm Shares are purchased by the Underwriters (or by substituted
underwriters selected by you with the approval of the Company or
selected by the Company with your approval pursuant to Section 9(d)).
If a new Underwriter or Underwriters are substituted for a defaulting
Underwriter or Underwriters in accordance with Section 9(d), the
Company or you shall have the right to postpone the time of purchase
for a period not exceeding five business days in order that any
necessary change in the Registration Statement and the Prospectus and
other documents may be effected. The term Underwriter as used in this
Agreement
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<PAGE> 26
shall refer to and include any Underwriter substituted under this
Section 9 with like effect as if such substituted Underwriter had
originally been named in Schedule A.
(f) If the purchase of the Firm Shares by the Underwriters, as
contemplated by this Agreement, is not consummated for any reason
permitted under this Agreement or if such purchase is not consummated
because the Company shall be unable to comply with any of the terms of
this Agreement, the Company shall not be under any obligation or
liability under this Agreement (except to the extent provided in
Sections 5(l), 7 and 10), the Selling Stockholders shall not be under
any obligation or liability under this Agreement (except to the extent
provided in Section 10) and the Underwriters shall be under no
obligation or liability to the Company under this Agreement (except to
the extent provided in Section 10).
10. Indemnity by the Company, the Selling Stockholders and the
Underwriters.
(a) The Company and Fund II, jointly and severally, agree to
indemnify, defend and hold harmless each Underwriter and each Selling
Stockholder (other than Fund II), each person that controls any
Underwriter or any such Selling Stockholder within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, and each
Underwriter's agent, employees, officers and directors and the agents,
employees, officers and directors of any such controlling person and
each of such Selling Stockholder's agents, employees, officers and
directors and the agents, employee,s officers and directors of any such
controlling person (collectively, the "Underwriter/Selling Stockholder
Indemnified Parties") from and against any and all losses, claims,
damages, judgments, liabilities and expenses (including the reasonable
fees and expenses of counsel and other expenses in connection with
investigating, defending or settling any such action or claim) which,
jointly or severally, any Underwriter/Selling Stockholder Indemnified
Party may incur as they are incurred (and regardless of whether such
Underwriter/Selling Stockholder Indemnified Party is a party to the
litigation, if any) arising out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in the
registration statement relating to the Shares or the Prospectus or any
Preliminary Prospectus, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
except
26
<PAGE> 27
insofar as such losses, claims, damages, judgments, liabilities or
expenses arise out of, or are based upon, any such untrue statement or
omission or alleged untrue statement or omission based upon and in
conformity with information with respect to any Underwriter or any such
Selling Stockholder (other than Fund II) furnished in writing by any
Underwriter or any such Selling Stockholder (other than Fund II)
through you to the Company expressly for use therein with reference to
such Underwriter or such Selling Stockholder (other than Fund II);
provided, however, that as to any Preliminary Prospectus, the foregoing
indemnity shall not inure to the benefit of any Underwriter/Selling
Stockholder Indemnified Party with respect to any loss, claim, damage,
judgment, liability or expense arising from the sale of Shares to any
person by such Underwriter/Selling Stockholder Indemnified Party if
such Underwriter or Selling Stockholder (other than Fund II) failed to
send or give a copy of the Prospectus to such person within the time
required by the Act and the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact in such Preliminary Prospectus was corrected in the
Prospectus. This indemnity agreement will be in addition to any
liability the Company or Fund II otherwise may have.
(b) Each Selling Stockholder severally and not jointly agrees to
indemnify, defend and hold harmless the Underwriter/Selling Stockholder
Indemnified Parties to the same extent as the foregoing indemnity from
the Company and Fund II to the Underwriter/Selling Stockholder
Indemnified Parties, but only with respect to information concerning
such Selling Stockholder furnished in writing by or on behalf of such
Selling Stockholder expressly for use with respect to such Selling
Stockholder in the Registration Statement, any Preliminary Prospectus
or the Prospectus. No Selling Stockholder shall be liable under this
Section 11 in an amount exceeding the net proceeds to such Selling
Stockholder from the sale of Shares sold by such Selling Stockholder
hereunder. This indemnity agreement will be in addition to any
liability each Selling Stockholder otherwise may have.
(c) If any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted
against any Underwriter/Selling Stockholder Indemnified Party, with
respect to which indemnity may be sought against the Company or a
Selling Stockholder pursuant to this Section 10, such
Underwriter/Selling Stockholder Indemnified Party shall promptly notify
the Company and each Selling Stockholder in writing, and the Company
and
27
<PAGE> 28
Fund II (in the case of an indemnification obligation under clause (a)
hereof) or the applicable Selling Stockholder (in the case of an
indemnification obligation under clause (b) hereof) shall assume the
defense thereof, including the employment of counsel reasonably
satisfactory to the Underwriter/Selling Stockholder Indemnified Party
and payment of all fees and expenses; provided that the omission so to
notify the Company and the Selling Stockholders shall not relieve them
from any liability that they may have to any Underwriter/Selling
Stockholder Indemnified Party, except to the extent that they have been
prejudiced in any material respect by such failure. An
Underwriter/Selling Stockholder Indemnified Party shall have the right
to employ separate counsel in any such action or proceeding and to
assume the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Underwriter/Selling Stockholder
Indemnified Party unless (i) the employment of such counsel has been
authorized in writing by the indemnifying party, (ii) the indemnifying
party has failed promptly to assume the defense and employ counsel
reasonably satisfactory to the Underwriter/Selling Stockholder
Indemnified Party after notice of such action or proceeding has been
given to the indemnifying party or (iii) the named parties to any such
action or proceeding (including any impleaded parties) include both the
Underwriter/Selling Stockholder Indemnified Party and the indemnifying
party and such Underwriter/Selling Stockholder Indemnified Party shall
have reasonably concluded (upon advice of counsel) that there may be
one or more legal defenses available to it that are different from or
additional to those available to the indemnifying party such that a
conflict of interest exists or would exist in the absence of separate
counsel representing the indemnifying party and the Underwriter/Selling
Stockholder Indemnified Party (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf
of such Underwriter/Selling Stockholder Indemnified Party), in any of
which events such reasonable fees and expenses shall be borne by the
indemnifying party and reimbursed as they are incurred. It is
understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the fees and
expenses of more than two separate firms of attorneys (in addition to
any local counsel) at any time for all such Underwriter/Selling
Stockholder Indemnified Parties, one of which firms shall be designated
in writing by Dillon, Read & Co. Inc. and one of which firms shall be
designated by The Marlborough Capital Investment Fund, L.P. and Mellon
Ventures, L.P.,
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<PAGE> 29
and that all such fees and expenses shall be reimbursed as they are
incurred. No indemnifying party shall be liable for any settlement of
any such action effected without the written consent of such
indemnifying party (which consent shall not be unreasonably withheld or
delayed), but if settled with the written consent of such indemnifying
party, or if there is a final judgment with respect thereto, such
indemnifying party agrees to indemnify and hold harmless each
Underwriter/Selling Stockholder Indemnified Party from and against any
loss or liability by reason of such settlement or judgment.
(d) Each Underwriter severally agrees to indemnify and hold
harmless the Company, its directors, its officers who sign the
Registration Statement, any person that controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act,
each Selling Stockholder and each person that controls such Selling
Stockholder within the meaning of Section 15 of the Act or Section 20
of the Exchange Act (collectively, the "Company/Selling Stockholder
Indemnified Parties") to the same extent as the foregoing indemnity
from the Company and Fund II to the Underwriter/Selling Stockholder
Indemnified Parties, but only with respect to information concerning
such Underwriter furnished in writing by or on behalf of such
Underwriter through you to the Company expressly for use with respect
to such Underwriter in the Registration Statement, any Preliminary
Prospectus or the Prospectus. In case any action shall be brought
against any Company/Selling Stockholder Indemnified Party based on the
Registration Statement, any Preliminary Prospectus or the Prospectus
and in respect of which indemnity may be sought against any Underwriter
pursuant to this Section 10(c), such Underwriter shall have the rights
and duties given to the Company and the Selling Stockholders by Section
10(b) (except that if the Company and the Selling Stockholders shall
have assumed the defense thereof such Underwriter shall not be required
to do so, but may employ separate counsel therein and participate in
the defense thereof, provided that the fees and expenses of such
separate counsel shall be at the expense of such Underwriter), and the
Company/Selling Stockholder Indemnified Parties shall have the rights
and duties given to the Underwriter/Selling Stockholder Indemnified
Parties by Section 10(b).
(e) If the indemnification provided for in this Section 10 is
unavailable to or insufficient to hold harmless any Underwriter/Selling
Stockholder Indemnified Party or any Company/Selling Stockholder
Indemnified Party, then the party required to indemnify such
indemnified party under this Section 10, in lieu of
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<PAGE> 30
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, judgments, liabilities and expenses (i) in such
proportion as is appropriate to reflect the relative benefits received
by the Company, such Selling Stockholder and the Underwriters from the
offering of the Shares, or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company, such
Selling Stockholder and the Underwriters in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, such
Selling Stockholder and the Underwriters shall be deemed to be in the
same proportion as the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses)
received by the Company and each of the Selling Stockholders,
respectively, bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault of the Company and
each of the Selling Stockholders and the Underwriters shall be
determined by reference to, among other things, whether the untrue
statement or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company, by such Selling Stockholder or by
the Underwriters, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the
losses, claims, damages, judgments, liabilities and expenses referred
to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any claim or action.
The Company, the Selling Stockholders and the Underwriters agree
that it would not be just and equitable if contribution pursuant to
this Section 10(d) were determined by pro rata allocation or by any
other method of allocation (even if the Underwriters were treated as
one entity for such purpose) that does not take account of the
equitable considerations referred to in this Section 10(d).
Notwithstanding the provisions of this Section 10(d), no
Underwriter/Selling Stockholder Indemnified Party shall be required to
contribute any amount in excess of the amount by which the total price
at which the Shares underwritten or sold by such
30
<PAGE> 31
Underwriter/Selling Stockholder Indemnified Party and distributed to
the public were offered to the public exceeds the amount of any damages
which such Underwriter/Selling Stockholder Indemnified Party otherwise
has been required to pay by reason of such untrue statement or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 10 are several in
proportion to their respective underwriting commitments and are not
joint. The Selling Stockholders' obligations to contribute pursuant to
this Section 10 are several in proportion to their respective
obligations to sell Shares and are not joint.
The statements under the caption "Underwriting" in the Prospectus
(to the extent such statements relate to an Underwriter) constitute the
only information furnished to the Company in writing by such
Underwriter expressly for use in the Registration Statement, any
Preliminary Prospectus or the Prospectus.
(f) The indemnity and contribution agreements contained in this
Section 10 and the representations, warranties and covenants of the
Company and the Selling Stockholders contained in this Agreement shall
remain in full force and effect, regardless of any investigation made
by or on behalf of any Underwriter/Selling Stockholder Indemnified
Party or by or on behalf of any Company/Selling Stockholder Indemnified
Party or any Selling Stockholder, and shall survive any termination of
this Agreement or the issuance and delivery of the Shares. Subject to
the provisions of Section 10(b) and Section 10(c), the Company, each
Selling Stockholder and each Underwriter agree promptly to notify the
other of the commencement of any litigation or proceeding against it in
connection with the issuance and sale of the Shares or in connection
with the Registration Statement or the Prospectus.
11. Notices. Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by telegram and, if to
the Underwriters, shall be sufficient in all respects if delivered or sent to
Dillon, Read & Co. Inc., 535 Madison Avenue, New York, New York 10022,
Attention: Syndicate Department; if to the Company, shall be sufficient in all
respects if delivered or sent to the Company at the offices of the Company at
406 Mill Avenue SW, New Philadelphia, Ohio 44663, Attention: Chief Financial
Officer; and if to the Selling Stockholders, shall be sufficient in all
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<PAGE> 32
respects, if delivered or sent to the Company at the above address.
12. Construction. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW. THE SECTION HEADINGS IN THIS AGREEMENT HAVE
BEEN INSERTED AS A MATTER OF CONVENIENCE OF REFERENCE AND ARE NOT A PART OF THIS
AGREEMENT.
13. Parties at Interest. The Agreement herein set forth has been
and is made solely for the benefit of the Underwriters, the Company, the Selling
Stockholders, the Underwriter/Selling Stockholder Indemnified Parties and the
Company/Selling Stockholder Indemnified Parties, and their respective
successors, assigns, executors and administrators. No other person, partnership,
association or corporation (including a purchaser, as such purchaser, from any
of the Underwriters) shall acquire or have any right under or by virtue of this
Agreement.
14. Counterparts. This Agreement may be signed by the parties in
counterparts which together shall constitute one and the same agreement among
the parties.
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<PAGE> 33
If the foregoing correctly sets forth the understanding among the
Company, the Selling Stockholders and the Underwriters, please so indicate in
the space provided below for such purpose, whereupon this letter and your
acceptance shall constitute a binding agreement among the Company, the Selling
Stockholders and the Underwriters, severally.
Very truly yours,
GRADALL INDUSTRIES, INC.
By: __________________________
Name:
Title:
THE SELLING STOCKHOLDERS NAMED IN
SCHEDULE B ATTACHED HERETO
By: __________________________
Attorney-in-fact
Accepted and agreed to as of the date
first above written, on behalf of
themselves, McDonald & Company
Securities, Inc. and the other several
Underwriters named in Schedule A
DILLON, READ & CO. INC., as
Managing Underwriter
By: __________________________
Name:
Title:
33
<PAGE> 34
SCHEDULE A
Number of
Underwriter Firm Shares
Dillon, Read & Co. Inc.
McDonald & Company Securities, Inc.
[Others]
--------
Total ========
<PAGE> 35
SCHEDULE B
<TABLE>
<CAPTION>
Name and wire-transfer Number of Firm Number of Additional
instructions Shares to be Sold Shares to be Sold
- --------------------------- --------------------- --------------------
<S> <C> <C>
MLGA Fund II, L.P. 550,706 386,514
Mellon Ventures, L.P. 220,154
The Marlborough Capital 229,140
Investment Fund, L.P.
Jack D. Rutherford 69,243
David T. Shelby 69,243
</TABLE>
<PAGE> 36
SCHEDULE C
STOCKHOLDERS WHO HAVE EXECUTED LOCK-UP AGREEMENTS
Barry L. Phillips
David S. Williams
James C. Cahill
Bruce A. Jonker
Joseph H. Keller
Ky Kuehling
Michael Haberman
Matthew Stear
John Arnold
Phillip Keller
The Nippon Credit Bank, Ltd.
Sangwoo Ahn
John A. Morgan
Perry J. Lewis
William C. Ughetta, Jr.
Ira Starr
<PAGE> 1
EXHIBIT 3.01
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
GRADALL INDUSTRIES, INC.
Gradall Industries, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify:
FIRST: That the Certificate of Incorporation has been amended and
restated as set forth in Exhibit A (the "Restated Certificate of
Incorporation").
SECOND: That the Restated Certificate of Incorporation has been duly
adopted by the stockholders in the manner and by the vote prescribed by Section
242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Barry L. Phillips, its President, this ___ day of
August, 1996.
GRADALL INDUSTRIES, INC.
By: _____________________________________
Barry L. Phillips, President
<PAGE> 2
EXHIBIT A
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
GRADALL INDUSTRIES, INC.
The original Certificate of Incorporation was filed on May 3, 1985.
This Amended and Restated Certificate of Incorporation was duly adopted in
accordance with Sections 242 and 245 of the General Corporation Law of the State
of Delaware.
FIRST: The name of the Corporation is Gradall Industries, Inc.
SECOND: The address of the Corporation's registered office in the State
of Delaware is United States Corporation Company, 1013 Centre Road, in the City
of Wilmington, County of New Castle. The name of its registered agent at such
address is the United States Corporation Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue Twenty Million One Hundred Forty
(20,000,140), divided into classes as follows:
One Hundred Forty (140) shares shall be shares of Series A
Preferred Stock, $.01 par value (the "Series A Preferred Stock");
Two Million (2,000,000) shares shall be shares of Preferred
Stock, $.001 par value (the "Preferred Stock"); and
Eighteen Million (18,000,000) shares shall be shares of Common
Stock, $.001 par value (the "Common Stock").
Upon the filing of this Amended and Restated Certificate of
Incorporation, each outstanding share of Common Stock, without par value, or
fraction thereof, shall be split and converted into shares of Common Stock,
$.001 par value, on the basis of 5,540 shares for each outstanding share,
provided, that no fractional shares shall be issued as a result of or remain
outstanding after such stock split and any fractional shares resulting therefrom
shall be rounded down to the nearest whole number of shares.
The following is a statement of the powers, preferences, rights and the
qualifications, limitations or restrictions of the Series A Preferred Stock, the
Preferred Stock and the Common Stock.
<PAGE> 3
SECTION I
SERIES A PREFERRED STOCK
The Series A Preferred Stock shall have the powers, designations,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations and restrictions as are set forth in the
Certificate of Designations, Preferences and Rights of Series A Preferred Stock
as filed with the Secretary of State of Delaware on October 4, 1995 as corrected
by a Certificate of Correction filed with the Secretary of State of Delaware on
October 11, 1995.
SECTION II
SERIAL PREFERRED STOCK
Section 1. The Serial Preferred Stock may be issued from time to time
in one or more series. All shares of Serial Preferred Stock of each series shall
be identical with all other shares of such series, except as to the date from
which dividends may be cumulative. The Board of Directors hereby is authorized
to cause such shares to be issued in one or more series and with respect to each
such series by resolution or resolutions adopted prior to the issuance thereof
to fix or determine:
(A) The designation of the series, which may be by distinguishing
number, letter or title.
(B) The number of shares of the series, which number the Board of
Directors may (except where otherwise provided in the creation of the series)
increase or decrease (but not below the number of shares thereof then
outstanding).
(C) The consideration for which such shares of the series shall be
issued.
(D) The dividend rate or rates on the shares of the series, whether
dividends shall be cumulative and, if so, the dates from which dividends shall
be cumulative, and the dates at which dividends, if declared, shall be payable.
(E) The redemption rights and price or prices, if any, for shares of
the series (which may vary at different redemption dates).
(F) The terms and amount of any sinking fund provided for the purchase
or redemption of shares of the series.
(G) The liquidation price payable on shares of the series in the event
of any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation.
(H) Whether the shares of the series shall be convertible into Common
Shares or other securities of the Corporation, and, if so, the conversion price
or rate (which may vary depending on the time at which such conversion is made),
any adjustments thereof, and all other terms and conditions upon which such
conversion may be made.
<PAGE> 4
(I) Restrictions on the issuance of shares of the same series or of any
other class or series.
(J) The voting powers, if any, of such series.
(K) Any other preferences and relative, participating, optional or
other special rights and qualifications, limitations or restrictions.
SECTION III
COMMON SHARES
Each share of Common Stock shall have one vote upon all matters to be
voted on by the holders of Common Stock. Each share of Common Stock shall be
entitled to participate equally in all dividends payable with respect to the
Common Stock and to share ratably, subject to the rights and preferences of the
Series A Preferred Stock and any series of Serial Preferred Stock, in all assets
of the Corporation in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, or upon any
distribution of the assets of the Corporation.
FIFTH: To the fullest extent permitted by the General Corporation Law
of the State of Delaware, as the same exists or may hereafter be amended, a
director of the Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of the foregoing provisions of this Article
FIFTH by the Stockholders of the Corporation shall be prospective only and shall
not adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification for or with respect to any
acts or omissions of a director occurring prior to such repeal or modification.
SIXTH: The Board of Directors is authorized to make, alter or repeal
the Bylaws of the Corporation.
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.
EIGHTH: Elections of directors need not be by written ballot unless and
to the extent that the Bylaws so provide.
NINTH: This Amended and Restated Certificate of Incorporation
supersedes and replaces the presently existing Certificate of Incorporation of
the Corporation.
<PAGE> 5
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES A PREFERRED STOCK
of
GRADALL INDUSTRIES, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
I, the undersigned, Jack D. Rutherford, Chairman of the Board
and Treasurer of Gradall Industries, Inc., a Delaware corporation (hereinafter
called the "CORPORATION"), pursuant to the provisions of Sections 103 and 151 of
the General Corporation Law of the State of Delaware, do hereby make this
Certificate of Designations and do hereby state and certify that pursuant to the
authority expressly vested in the Board of Directors of the Corporation by the
Certificate of Incorporation, the Board of Directors duly adopted the following
resolutions:
RESOLVED, that, pursuant to Article Fourth of the Certificate
of Incorporation (which authorizes 300 shares of preferred stock, $.01 par value
("PREFERRED STOCK"), the Board of Directors hereby fixes the powers,
designations, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations and restrictions, of a
series of Preferred Stock.
RESOLVED, that each share of such series of Preferred Stock
shall rank equally in all respects and shall be subject to the following
provisions:
(1) Number and Designation. 140 shares of the Preferred Stock
of the Corporation shall be designated as Series A Preferred Stock (the "SERIES
A PREFERRED STOCK").
(2) Rank. The Series A Preferred Stock shall, with respect to
rights on liquidation, dissolution and winding up, and except as set forth in
this Section (2), dividend rights, rank prior to all classes or series of
capital stock of the Corporation, including the Corporation's common stock, no
par value ("COMMON STOCK"). All capital stock of the Corporation to which the
Series A Preferred Stock ranks prior (whether with respect to dividends or upon
liquidation, dissolution, winding up or otherwise), including the Common Stock,
are collectively referred to herein as the "JUNIOR SECURITIES." All capital
stock of the Corporation with which the Series A Preferred Stock ranks on a
parity (whether with respect to dividends or upon liquidation, dissolution or
winding up) are collectively referred to herein as the "PARITY SECURITIES". All
capital stock of the Corporation which rank senior to the Series A Preferred
Stock (whether with respect to dividends or upon liquidation, dissolution or
winding up) are collectively referred to herein as the "SENIOR SECURITIES". The
respective definitions of Junior Securities, Parity Securities and Senior
Securities shall also include any rights or options exercisable for or
convertible into any of the Junior Securities, Parity Securities and Senior
Securities, as the case may be. The Series A Preferred Stock shall be subject to
the creation of Junior Securities and Parity Securities.
<PAGE> 6
(3) Dividends. (a) The holders of shares of Series A Preferred
Stock shall not be entitled to receive dividends.
(b) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends (other than dividends paid in shares of, or options,
warrants or rights to subscribe for or purchase shares of, Junior Securities)
shall be declared or paid or set apart for payment or other distribution
declared or made upon Junior Securities, nor shall any Junior Securities be
redeemed, purchased or otherwise acquired (all such dividends, distributions,
redemptions or purchases being hereinafter referred to as a "JUNIOR SECURITIES
DISTRIBUTIONS") for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any such stock
by the Corporation, directly or indirectly (except by conversion into or
exchange for Junior Securities), unless in each case (i) the funds in an amount
equal to such Junior Securities Distribution are made available for the
redemption of shares of Series A Preferred Stock and such shares are repurchased
by the Corporation in accordance with Section (5) hereof. Notwithstanding the
foregoing, nothing herein shall be construed to prohibit (i) the accrual of
dividends on Junior Securities and (ii) the repurchase of Junior Securities
permitted pursuant to the Securities Purchase Agreements between the
Corporation, The Gradall Company, The Marlborough Capital Investment Fund, L.P.
and Mellon Ventures, Inc. (as amended, the "SECURITIES PURCHASE AGREEMENTS").
(4) Liquidation Preference. (a) In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, before any payment or distribution of the assets of the Corporation
(whether capital or surplus) shall be made to or set apart for the holders of
Junior Securities (except as provided in the Securities Purchase Agreements),
the holders of the shares of Series A Preferred Stock shall be entitled to
receive $14,286 per share of Series A Preferred Stock; but such holders shall
not be entitled to any further payment. If, upon any liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation, or proceeds
thereof, distributable among the holders of the shares of Series A Preferred
Stock shall be insufficient to pay in full the preferential amount aforesaid and
liquidating payments on any Parity Securities, then such assets, or the proceeds
thereof, shall be distributed among the holders of shares of Series A Preferred
Stock and any such other Parity Securities ratably in accordance with the
respective amounts that would be payable on such shares of Series A Preferred
Stock and any such other stock if all amounts payable thereon were paid in full.
(b) Subject to the rights of the holders of any Parity
Securities, after payment shall have been made in full to the holders of the
Series A Preferred Stock, as provided in this paragraph (4), any other series or
class or classes of Junior Securities shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the holders of the Series A Preferred
Stock shall not be entitled to share therein.
(5) Redemption. (a) To the extent the Corporation shall have
funds legally available for such payment, the Corporation may redeem at its
option shares of Series A
<PAGE> 7
Preferred Stock, at any time in whole or from time to time in part, at a
redemption price of $14,286 per share in cash.
(b) To the extent the Corporation shall have funds legally
available for such payment, the Corporation shall from time to time, as
applicable, redeem the number of shares of the Series A Preferred Stock, at a
redemption price of $14,286 per share in cash, which the Corporation may be
contractually obligated to redeem.
(c) Shares of Series A Preferred Stock which have been issued
and reacquired in any manner, including shares purchased or redeemed, shall
(upon compliance with any applicable provisions of the laws of the State of
Delaware) have the status of authorized and unissued shares of the class of
Preferred Stock undesignated as to series and may be redesignated and reissued
as part of any series of the Preferred Stock.
(d) If the Corporation is unable or shall fail to discharge
its obligation to redeem all outstanding shares of Series A Preferred Stock
pursuant to paragraphs (5)(b) (the "MANDATORY REDEMPTION OBLIGATION"), the
Mandatory Redemption Obligation shall be discharged as soon as the Corporation
is able to discharge such Mandatory Redemption Obligation. If and so long as any
Mandatory Redemption Obligation with respect to the Series A Preferred Stock
shall not be fully discharged, the Corporation shall not (i) directly or
indirectly, redeem, purchase, or otherwise acquire any Parity Security or
discharge any mandatory or optional redemption, sinking fund or other similar
obligation in respect of any Parity Securities (except in connection with a
redemption, sinking fund or other similar obligation to be satisfied pro rata
with the Series A Preferred Stock) or (ii) declare or make any dividends or
distributions upon any Junior Securities (except as provided in the Securities
Purchase Agreements), or, directly or indirectly, discharge any mandatory or
optional redemption, sinking fund or other similar obligation in respect of the
Junior Securities (except as provided in the Securities Purchase Agreements).
(6) Procedure for Redemption. (a) In the event that fewer than
all the outstanding shares of Series A Preferred Stock are to be redeemed, the
number of shares to be redeemed shall be determined by the Board of Directors
and the shares to be redeemed shall be selected pro rata (with any fractional
shares being rounded to the nearest whole share) as may be determined by the
Board of Directors.
(b) In the event the Corporation shall redeem shares of Series
A Preferred Stock, notice of such redemption shall be given by first class mail,
postage prepaid, mailed not less than 30 days nor more than 60 days prior to the
redemption date, to each holder of record of the shares to be redeemed at such
holder's address as the same appears on the stock register of the Corporation;
provided that neither the failure to give such notice nor any defect therein
shall affect the validity of the giving of notice for the redemption of any
share of Series A Preferred Stock to be redeemed except as to the holder to whom
the Corporation has failed to give said notice or except as to the holder whose
notice was defective. Each such notice shall state: (i) the redemption date;
(ii) the number of shares of Series A Preferred Stock to be redeemed and, if
fewer than all the shares held by such holder are to be redeemed, the number of
shares to be redeemed from such holder; (iii) the redemption price; and (iv) the
place or
<PAGE> 8
places where certificates for such shares are to be surrendered for payment of
the redemption price.
(c) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in providing
money for the payment of the redemption price of the shares called for
redemption), all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation the redemption
price) shall cease. Upon surrender in accordance with said notice of the
certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors of the Corporation shall so require and the
notice shall so state), such share shall be redeemed by the Corporation at the
redemption price aforesaid. In case fewer than all the shares represented by any
such certificate are redeemed, a new certificate shall be issued representing
the unredeemed shares without cost to the holder thereof.
(7) Voting Rights. (a) Each holder of record of a share or
shares of Series A Preferred Stock shall be entitled to one vote for each
outstanding share of Series A Preferred Stock held by such holder and as
hereinafter provided in this paragraph (7) or as otherwise provided by law.
Except as set forth in paragraph 7(b), the holders of record of shares of Series
A Preferred Stock shall vote together with the holders of record of shares of
Common Stock as a single class.
(b) If the Corporation shall have failed to discharge its
Mandatory Redemption Obligation, the number of directors then constituting the
Board of Directors shall be increased by two and the holders of shares of Series
A Preferred Stock, voting as a single class, shall be entitled to elect the two
additional directors to serve on the Board of Directors at any annual meeting of
stockholders or special meeting held in place thereof, or at a special meeting
of the holders of the Series A Preferred Stock called as hereinafter provided.
Whenever the Corporation shall have fulfilled its Mandatory Redemption
Obligation then the right of the holders of the Series A Preferred Stock to
elect such additional two directors shall cease (but subject always to the same
provisions for the vesting of such voting rights in the case of any similar
future failure to fulfill any Mandatory Redemption Obligation), and the terms of
office of all persons elected as directors by the holders of the Series A
Preferred Stock shall forthwith terminate and the number of the Board of
Directors shall be reduced accordingly. At any time after such voting power
shall have been so vested in the holders of shares of Series A Preferred Stock,
the secretary of the Corporation may, and upon the written request of any holder
of Series A Preferred Stock (addressed to the secretary at the principal office
of the Corporation) shall, call a special meeting of the holders of the Series A
Preferred Stock for the election of the two directors to be elected by them as
herein provided, such call to be made by notice similar to that provided in the
Bylaws of the Corporation for a special meeting of the stockholders or as
required by law. If any such special meeting required to be called as above
provided shall not be called by the secretary within 20 days after receipt of
any such request, then any holder of shares of Series A Preferred Stock may call
such meeting, upon the notice above provided, and for that purpose shall have
access to the stock books of the Corporation. The directors elected at any such
special meeting shall hold office until the next annual meeting of the
stockholders or special meeting held in lieu thereof if such office shall not
have previously
<PAGE> 9
terminated as above provided. If any vacancy shall occur among the directors
elected by the holders of the Series A Preferred Stock, a successor shall be
elected by the Board of Directors, upon the nomination of the then-remaining
director elected by the holders of the Series A Preferred Stock or the successor
of such remaining director, to serve until the next annual meeting of the
stockholders or special meeting held in place thereof if such office shall not
have previously terminated as provided above.
(c) Without the written consent of a majority of the
outstanding shares of Series A Preferred Stock or the vote of holders of a
majority of the outstanding shares of Series A Preferred Stock at a meeting of
the holders of Series A Preferred Stock called for such purpose, the Corporation
will not amend, alter or repeal any provision of the Certificate of
Incorporation (by merger or otherwise) so as to materially adversely affect the
preferences, rights or powers of the Series A Preferred Stock; provided that any
such amendment that changes the liquidation preference of the Series A Preferred
Stock shall require the affirmative vote at a meeting of holders of Series A
Preferred Stock called for such purpose or written consent of the holder of each
share of Series A Preferred Stock.
(d) Without the written consent of a majority of the
outstanding shares of Series A Preferred Stock or the vote of holders of a
majority of the outstanding shares of Series A Preferred Stock at a meeting of
such holders called for such purpose, the Corporation will not (i) issue any
additional Series A Preferred Stock or (ii) create, authorize or issue any
Parity Securities or Senior Securities, provided that clause (ii) shall not
limit the right of the Corporation to issue Preferred Stock ranking pari passu
with the Series A Preferred Stock in connection with any merger in which the
Corporation is the surviving entity.
(e) In exercising the voting rights set forth in this
paragraph (7), each share of Series A Preferred Stock shall have one vote per
share. Except as otherwise required by applicable law or as set forth herein,
the shares of Series A Preferred Stock shall not have any relative,
participating, optional or other special voting rights and powers and the
consent of the holders thereof, as a separate class, shall not be required for
the taking of any corporate action.
(8) Reports. So long as any of the Series A Preferred Stock is
outstanding, the Corporation will furnish the holders thereof with the quarterly
and annual financial reports that the Corporation is required to file with the
Securities and Exchange Commission pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 or, in the event the Corporation is not
required to file such reports, reports containing the same information as would
be required in such reports and with copies of any quarterly financial
statements and annual audited financial statements of the Corporation or its
subsidiaries that the Corporation is required to furnish to its senior lenders.
(9) General Provisions. (a) The term "PERSON" as used herein
means any corporation, limited liability company, partnership, trust,
organization, association, other entity or individual.
<PAGE> 10
(b) The term "OUTSTANDING", when used with reference to shares
of stock, shall mean issued shares, excluding shares held by the Corporation or
a subsidiary.
(c) The headings of the paragraphs, subparagraphs, clauses and
subclauses of this Certificate of Designations are for convenience of reference
only and shall not define, limit or affect any of the provisions hereof.
(d) Each holder of Series A Preferred Stock, by acceptance
thereof, acknowledges and agrees that redemption and repurchase of such
securities by the Corporation are subject to restrictions on the Corporation
contained in certain credit, financing (including the Securities Purchase
Agreements) and shareholders agreements. Notwithstanding anything to the
contrary herein, the Corporation shall have no obligation to redeem or
repurchase any shares of Series A Preferred Stock in violation of such credit,
financing and shareholders agreements.
<PAGE> 11
IN WITNESS WHEREOF, Gradall Industries, Inc. has caused this
Certificate of Designations to be signed and attested by the undersigned this
11th day of October, 1995.
GRADALL INDUSTRIES, INC.
By /s/ David T. Shelby
--------------------------
Name: David T. Shelby
Title: President
ATTEST:
/s/ Brad A. Levin
- -----------------
Name: Brad A. Levin
Title: Asst. Secretary
<PAGE> 1
EXHIBIT 4.01
GRADALL INDUSTRIES, INC.
CUSIP 38411P 10 7
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.001 PAR VALUE OF
GRADALL INDUSTRIES, INC.
transferable on the books of the corporation by the holder of this certificate
in person or by duly authorized attorney upon surrender of this certificate
properly endorsed. This certificate is not valid unless countersigned and
registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the corporation and the facsimile
signatures of its duly authorized officers.
Dated
Secretary
GRADALL INDUSTRIES, INC.
President
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
PAR VALUE $.001
<PAGE> 2
Countersigned and Registered
ChaseMellon Shareholder Services, LLC
Transfer Agent and Registrar
By
Authorized Signature
<PAGE> 3
GRADALL INDUSTRIES, INC.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ______ Custodian _______
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
in common Act__________________________
(State)
</TABLE>
Abbreviations in addition to those in the above list may also be used.
For value received, ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
Please print or typewrite name and address of assignee
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _______________________________________________________________ Attorney
to transfer the said shares on the books of the within-named Corporation with
full power of substitution in the premises.
Dated: ___________________________________
_____________________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
certificate, in every particular
without alteration or enlargement, or
any change whatever.
- --------------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT 5.01
OPINION OF BLACK, MCCUSKEY, SOUERS & ARBAUGH
August 2, 1996
Gradall Industries, Inc.
406 Mill Avenue S.W.
New Philadelphia, Ohio 44663
Ladies and Gentlemen:
Reference is made to your Registration Statement on Form S-1
(File No. 333-06777) filed with the Securities and Exchange Commission with
respect to the proposed sale of up to 3,593,750 shares (the "Shares") of Common
Stock, par value $.001, of Gradall Industries, Inc. (the "Company") of which
2,125,000 shares are to be sold by the Company and the balance are to be sold by
certain shareholders of the Company (the "Selling Stockholders").
We understand that a 5,540-for-1 stock split of the Company's
presently outstanding shares of Common Stock is to be effected prior to the
consummation of the offering contemplated by the Registration Statement and is a
condition thereof.
We have examined the records relating to the incorporation of
the Company, including its Certificate of Incorporation and all amendments
thereto, the records of proceedings taken by its directors and shareholders to
date, including proceedings of its directors and shareholders adopting the
Amended and Restated Certificate of Incorporation increasing the authorized
capital stock and providing for the stock split (the "Amended Certificate") to
be filed with the Secretary of State of Delaware, and the applicable provisions
of the laws of the State of Delaware under which the Company was incorporated.
Based upon the foregoing and upon the examination of such
other matters as we have deemed necessary in order to express the opinions
hereinafter set forth, we are of the opinion that upon the filing of the Amended
Certificate with the Secretary of State of Delaware:
<PAGE> 2
1. The Shares to be issued and sold by the Company pursuant to
the Registration Statement will have been duly authorized and, when issued and
sold upon the terms described in said Registration Statement, will have been
validly issued and will be fully paid and nonassessable.
2. The Shares to be sold by the Selling Stockholders pursuant
to the Registration Statement will have been duly authorized, validly issued and
fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to said
Registration Statement and to the reference to us in the prospectus included
therein under the caption "Legal Matters." In giving such consent, we do not
admit that we are within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder.
Very truly yours,
Black, McCuskey, Souers & Arbaugh
<PAGE> 1
EXHIBIT 10.03
FORM OF
AMENDED AND RESTATED
SHAREHOLDERS AGREEMENT
DATED AS OF
JUNE ___, 1996
AMONG
GRADALL INDUSTRIES, INC.,
MLGA FUND II, L.P., AND ITS AFFILIATES,
JACK D. RUTHERFORD,
DAVID T. SHELBY,
THE MANAGERS
AND
THE INSTITUTIONAL INVESTORS
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
1.1 Definitions..............................................................1
ARTICLE 2
IPO TRANSACTIONS
2.1 Selling Stockholders.....................................................3
2.2 Redemption of Preferred Shares...........................................4
2.3 Effective Date...........................................................4
2.4 Waiver...................................................................4
ARTICLE 3
RESTRICTIONS ON TRANSFER
3.1 General..................................................................4
3.2 Legend on Certificates...................................................4
3.3 Permitted Transferees....................................................5
ARTICLE 4
REGISTRATION RIGHTS
4.1 Demand Registration......................................................5
4.2 Incidental Registration..................................................7
4.3 Holdback Agreements......................................................8
4.4 Registration Procedures..................................................8
4.5 Indemnification by the Company..........................................10
4.6 Indemnification by Holders..............................................11
4.7 Conduct of Indemnification Proceedings..................................11
4.8 Contribution............................................................11
4.9 Participation in Public Offering........................................13
ARTICLE 5
CONFIDENTIALITY
5.1 Confidentiality.........................................................13
-i-
<PAGE> 3
ARTICLE 6
MISCELLANEOUS
6.1 Entire Agreement........................................................14
6.2 Binding Effect; Benefit.................................................14
6.3 Assignability...........................................................14
6.4 Information.............................................................14
6.5 Notices.................................................................14
6.6 Headings................................................................16
6.7 Counterparts............................................................16
6.8 Applicable Law..........................................................16
6.9 Specific Enforcement....................................................16
6.10 Consent to Jurisdiction................................................16
-ii-
<PAGE> 4
FORM OF AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
This Amended and Restated Shareholders Agreement dated as of August
___, 1996, but effective on the "Effective Date" as defined in Section 2.3
hereof, among Gradall Industries, Inc., a Delaware corporation (the "Company"),
MLGA Fund II, L.P., a Delaware limited partnership ("MLGA") and its affiliates
whose names are set forth on the signature pages hereof (collectively the "MLGA
Entities"), Jack D. Rutherford and David T. Shelby (collectively, the "Minority
Shareholders"), and the managers of The Gradall Company whose names are set
forth on the signature pages hereof (individually, a "Manager" and collectively
the "Managers").
WITNESSETH:
WHEREAS, the MLGA Entities, the Minority Shareholders and the Managers
(the "Shareholders") are parties to a Shareholders Agreement dated as of October
13, 1995 (the "Shareholders Agreement") together with The Marlborough Capital
Investment Fund, L.P. and Mellon Ventures, Inc. (collectively the "Institutional
Investors");
WHEREAS, the Company is planning an initial underwritten public
offering of its Common Stock and in connection therewith the Company and the
Shareholders desire to amend and restate the Shareholders Agreement on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the
following meanings:
"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 no stockholder of the Company shall be deemed an
Affiliate of any other stockholder solely by reason of any investment in the
Company. For the purpose of this definition, the term "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"Board" means the board of directors of the Company.
"Bylaws" means the bylaws of the Company, as amended from time to time.
"Common Stock" means the common stock, par value $.001 per share, of
the Company.
"Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of the Company, as amended from time to time.
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"Effective Date" means the date determined in accordance with the
provisions of Section 2.3 hereof.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
"Gradall" means The Gradall Company, an Ohio corporation.
"Initial Public Offering" or "IPO" means the first Public Offering of
the Company with respect to approximately 3,500,000 Shares, underwritten by the
Underwriters, as described in a Registration Statement on Form S-1 filed with
the SEC on June 25, 1996.
"Institutional Investors" has the meaning set forth in the recitals
hereto.
"Minority Shareholders" has the meaning set forth in the recitals
hereto and "Minority Shareholder" means any of the Minority Shareholders.
"MLGA Entities" means MLGA, any partner of MLGA, any Affiliate of MLGA
and any Affiliate of any partner of MLGA and "MLGA Entity" means any one of such
Persons.
"Permitted Transferee" means:
(a) in the case of any Minority Shareholder or Manager (i) a Person to
whom Shares are transferred from such Shareholder by will or the laws of descent
and distribution, (ii) the issue or spouse of such Shareholder, (iii) a trust
that is for the exclusive benefit of such Shareholder or such Shareholder's
Permitted Transferees under (i) and (ii) above; and
(b) in the case of MLGA or any MLGA Entity, any MLGA Entity.
"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 Shares" means at any time all shares of Series A Preferred
Stock, par value $.01 per share of the Company, held by the Minority
Shareholders or any of their Permitted Transferees at such time.
"Public Offering" means an underwritten public offering of Registrable
Stock of the Company pursuant to an effective registration statement under the
Securities Act.
"Recapitalization Agreement" means the Recapitalization Agreement dated
as of September 15, 1995 among the Company, MLGA and the Minority Shareholders.
"Registrable Stock" means any shares of Common Stock until (i) a
registration statement covering such shares of Common Stock has been declared
effective by the SEC and such shares have been disposed of pursuant to such
effective registration statement, (ii) such shares are freely transferable by
the holder thereof pursuant to Rule 144 (or any similar provisions then in
force) under the Securities Act are met or (iii) such shares are otherwise
transferred, the Company has
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delivered a new certificate or other evidence of ownership for such shares not
bearing the legend required pursuant to this Agreement and such shares may be
resold without subsequent registration under the Securities Act.
"Registration Expenses" means with respect to any Registrable Stock,
(i) all SEC registration and filing fees, (ii) fees and expenses of compliance
with state securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Shares), (iii) printing expenses, (iv) reasonable fees of counsel for the
Company and customary fees and expenses for independent certified public
accountants retained by the Company (including the expenses of any comfort
letters or costs associated with the delivery by independent certified public
accountants of a comfort letter or comfort letters requested pursuant to Section
4.4(g) hereof), (v) the reasonable fees and expenses of one counsel (who shall
be reasonably acceptable to the Company) for all Shareholders participating in
the offering selected by the holders of a majority of Shares to be sold for the
account of all Shareholders participating in the offering, (vii) fees payable to
the National Association of Securities Dealers, Inc. and (viii) fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities; but shall not include any underwriting fees, discounts or
commissions attributable to the sale of Registrable Stock, or any out-of-pocket
expenses of the Shareholders (or the agents who manage their accounts) or any
fees and expenses of underwriter's counsel.
"Rule 144" means Rule 144 (or any successor provisions) under the
Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder" means each Person (other than the Company) who shall be a
party to or bound by this Agreement, whether in connection with the execution
and delivery hereof as of the date hereof, pursuant to Section 6.3 or otherwise,
so long as such Person shall beneficially own any Shares.
"Shares" means at any time all shares of Common Stock held by the
Shareholders or any of their Permitted Transferees at such time.
"Transfer" has the meaning set forth in Section 3.1.
"Underwriters" means Dillon, Read & Co., Inc. and McDonald & Company
Securities, Inc.
ARTICLE 2
IPO TRANSACTIONS
2.1 Selling Stockholders. Each party identified on Exhibit A hereto (a)
shall sell that number of Shares as is set forth after such parties' name on
Exhibit A to the Underwriters on the basis provided in an underwriting agreement
to be entered into by and between the Company and the Underwriters in connection
with the IPO and (b) shall complete and execute all
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questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required in connection with the IPO.
2.2 Redemption of Preferred Shares. Upon the closing of the IPO, the
Company shall purchase all outstanding Preferred Shares at a per share purchase
price of $14,285.71 payable in cash. On or before the Effective Date, the
Minority Shareholders shall deliver to the Company the certificates representing
the Preferred Shares, together with executed stock powers transferring all
interest in the Preferred Shares to the Company, free and clear of all liens,
claims and encumbrances.
2.3 Effective Date. This Agreement shall become effective upon the
SEC's declaration of the effectiveness of the Registration Statement on Form S-1
filed with the SEC in connection with the IPO, (the "Effective Date"), provided
that the IPO is consummated in accordance with the terms and conditions of the
underwriting agreement by and between the Company and the Underwriters. If the
Registration Statement does not become effective or if the IPO is not
consummated by September 31, 1996, this Agreement shall be void and of no force
or effect, and the Shareholders Agreement shall remain in full force and effect,
without modification.
2.4 Waiver. Each of the Shareholders hereby waive any and all notices
required to be given by the Company under the terms of the Shareholders
Agreement in connection with the filing of the Registration Statement on Form
S-1 with the SEC and the IPO and, except as provided in Section 2.1 hereof,
waive any rights it may have to have Registrable Stock held by it included in
such Registration Statement.
SECTION 3
RESTRICTIONS ON TRANSFER
3.1 General. None of the Shareholders or their Permitted Transferees
will directly or indirectly, offer, sell, assign, transfer, grant a
participation in, pledge or otherwise dispose of ("transfer") any Shares, except
(i) in compliance with the Securities Act or (ii) pursuant to the exemption from
registration provided under Rule 144 under the Securities Act.
3.2 Legend on Certificates. (a) In addition to any other legend that
may be required, each certificate for Shares that is issued to any Shareholder
shall bear a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS AND MAY NOT BE OFFERED
OR SOLD EXCEPT IN COMPLIANCE THEREWITH."
(b) If any Shares shall cease to be Registrable Stock, the Company
shall, upon the written request of the holder thereof, issue to such holder a
new certificate evidencing such Shares without the legend required by Section
3.2(a) endorsed thereon.
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3.3 Permitted Transferees. Notwithstanding anything in this Agreement
to the contrary, each of the Shareholders may at any time transfer any or all of
its Securities to one or more of its Permitted Transferees without the consent
of the Board or any other Shareholder or group of Shareholders so long as (a)
such Permitted Transferee shall have agreed in writing to be bound by the terms
of this Agreement and (b) the transfer to such Permitted Transferee is not in
violation of applicable federal or state or foreign securities laws.
ARTICLE 4
REGISTRATION RIGHTS
4.1 Demand Registration. (a) The MLGA Entities holding a majority of
the total shares of Registrable Stock held by the MLGA Entities shall be
entitled to request the Company to register under the Securities Act, at any
time and from time to time, all or a portion of the Registrable Stock held by
any MLGA Entity substantially on the terms and conditions provided below, except
that Section 4.1(a)(x) and Section 4.1(a)(y) shall not apply. After the first
anniversary of the Effective Date, upon the written request of the Minority
Shareholders or their Permitted Transferees holding a majority of the total
shares of Registrable Stock held by the Minority Shareholders and their
Permitted Transferees (the parties making the request hereinafter referred to as
the "Selling Shareholders"), requesting that the Company effect the registration
under the Securities Act of all or a portion of such Registrable Stock, and
specifying the intended method of disposition thereof, the Company will promptly
give written notice of such requested registration to all other Shareholders at
least 30 days prior to the intended effectiveness of such registration
statement, and thereupon will use its best efforts to effect, as expeditiously
as possible, the registration under the Securities Act of:
(i) the Registrable Stock which the Company has been so
requested to register by the Selling Shareholders; and
(ii) all other Registrable Stock which the Company has been
requested to register by any other Shareholder or their Permitted
Transferees (together with the Selling Shareholders, the "Holders") by
written request received by the Company within fifteen (15) days after
the giving of such written notice by the Company (which request shall
specify the intended method of disposition of such Registrable Stock),
all to the extent necessary to permit the disposition (in accordance with the
intended method thereof as aforesaid) of the Registrable Stock so to be
registered; provided that
(x) the Company shall not be obligated to file a registration
statement relating to a registration request made by any Selling
Shareholders under this Section 4.1(a) within a period of six months
after the effective date of any other registration statement of Common
Stock other than any registration statement relating to Common Stock
issuable upon exercise of employee stock options or in connection with
any employee benefit or similar plan of the Company or in connection
with an acquisition by the Company of a business or assets,
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(y) subject to Section 4.1(f) hereof, the Company shall not be
obligated to effect more than one registration pursuant to a request by
the Minority Shareholders and their Permitted Transferees under this
Section 4.1.
Promptly after the expiration of the fifteen (15) day period referred to in
Section 4.1(a)(ii) hereof, the Company will notify all the Holders to be
included in the registration of the other Holders and the number of shares of
Registrable Stock requested to be included therein. The Selling Shareholders
requesting a registration under this Section 4.1(a) may, at any time prior to
the effective date of the registration statement relating to such registration,
revoke such request, without liability (except as set forth in Section 4.1(b)
hereof) to any of the other Holders or the Company, by providing a written
notice to the Company revoking such request, but, if such revocation occurs
after the registration statement is filed with the SEC, the Company shall be
deemed to have effected one registration pursuant to the request of such Selling
Shareholder for the purpose of satisfying its obligation under clause (y) above.
Notwithstanding anything contained in this Agreement to the contrary, nothing
herein shall be construed as requiring the Company to register any of its
securities other than shares of Registrable Stock.
(b) Except as otherwise provided, the Company will pay all Registration
Expenses in connection with any registration which is requested pursuant to this
Section 4.1. The Company shall not be liable for Registration Expenses in
connection with a registration that shall not have become effective due to a
revocation by the Selling Shareholders requesting such registration under this
Section 4.1. In such event, the obligation to pay the Registration Expenses in
connection with such revoked registration shall be due and payable by the
Selling Shareholders.
(c) Except as otherwise indicated herein, a registration requested
pursuant to this Section 4.1 shall not be deemed to have been effected unless
the registration statement relating thereto (i) has become effective under the
Securities Act and (ii) has remained effective for a period of at least 90 days
in the aggregate (or such shorter period in which all Registrable Stock of the
Holders included in such registration have actually been sold thereunder);
provided that if after any registration statement requested pursuant to this
Section 4.1 becomes effective (i) such registration statement is interfered with
by any stop order, injunction or other order or requirement of the SEC or other
governmental agency or court primarily due to the actions or omissions to act of
the Company and (ii) less than 75% of the Registrable Stock included in such
registration has been sold thereunder, such registration statement shall be at
the sole expense of the Company and shall not be considered a registration
requested pursuant to Section 4.1 hereof.
(d) If any requested registration pursuant to this Section 4.1 is in
the form of a Public Offering, the Board shall have the right, subject to the
approval of MLGA, which approval shall not be unreasonably withheld, to select
their manager or co-managers that will administer the offering. The Company may
require the offering pursuant to such Demand Registration to be in the form of a
firm commitment underwritten offering. In that event, all Registrable Stock to
be registered shall be registered for sale only in such underwritten offering.
(e) If a requested registration pursuant to this Section 4.1 involves a
Public Offering and the managing underwriter shall advise the Company that, in
its view, (i) the number of shares of Common Stock requested to be included in
such registration (including any Common
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Stock which the Company requests to be included), exceeds the largest number of
shares of Common Stock and/or the largest number of Shares owned by
Shareholders, as the case may be, which can be sold without having an adverse
effect on such offering, including the price at which such shares can be sold
(the "Maximum Offering Size"), the Company will include in such registration, in
the priority listed below, up to the Maximum Offering Size:
(i) first, all shares of Registrable Stock requested to be
included in such registration by any Holder or otherwise proposed to be
included in such registration (allocated, if necessary for the offering
not to exceed the Maximum Offering Size, among such Holders in the
proportion (expressed as a percentage) that such Holder's ownership of
Shares bears to all outstanding Shares owned by all Holders who desire
to participate in such registration; and
(ii) second, all shares of Common Stock proposed to be
registered by the Company.
(f) If Registrable Stock representing at least 50% of the number of
shares of Common Stock requested to be registered by the Selling Shareholders is
not included in any registration requested pursuant to Section 4.1(a), then the
Selling Shareholders shall be granted one additional registration under Section
4.1(a).
4.2 Incidental Registration. If the Company proposes to register any
shares of its Common Stock under the Securities Act for its own account (other
than a registration (A) on Form S-8 or S-4 or any successor or similar forms,
(B) relating to Common Stock issuable upon exercise of employee stock options or
in connection with any employee benefit or similar plan of the Company, (C) in
connection with a direct or indirect acquisition by the Company of a business or
assets or (D) pursuant to a registration under Section 4.1 hereof) in a manner
which would permit registration of Registrable Stock for sale to the public
under the Securities Act, it will each such time, subject to the provisions of
Section 4.2(b) hereof, give prompt written notice to the Shareholders of its
intention to do so and of such Shareholders' rights under this Section 4.2, at
least 20 days prior to the anticipated filing date of the registration statement
relating to such registration. Any such notice shall offer each Shareholder the
opportunity to include in such registration statement such number of shares of
Registrable Stock as each such Shareholder may request (an "Incidental
Registration"). Upon the written request of any such Shareholder made within ten
(10) days after the receipt of notice from the Company (which request shall
specify the number of shares of Registrable Stock intended to be disposed of by
such Shareholder), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Stock Act which the
Company has been so requested to register by the Shareholders; provided that (i)
if such registration involves a Public Offering, all Shareholders requesting to
be included in the Company's registration must sell their Registrable Stock to
the underwriters selected by the Company on the same terms and conditions as
apply to the Company (or other party requesting the registration) and (ii) if,
at any time after giving written notice of its intention to register any stock
pursuant to this Section 4.2(a) and prior to the effective date of the
registration statement filed in connection with such registration, it shall be
determined for any reason not to register such stock, the Company shall give
written notice to all Shareholders and, thereupon, shall be relieved of its
obligation to register any Registrable Stock in connection with such
registration. No registration effected under this Section 4.2 shall
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<PAGE> 11
relieve the Company of its obligations to effect a registration upon request to
the extent required by Section 4.1 hereof. The Company will pay all Registration
Expenses in connection with each registration of Registrable Stock requested
pursuant to this Section 4.2.
(b) If a registration pursuant to this Section 4.2 involves a Public
Offering and the managing underwriter advises the Company that, in its view, the
number of shares of Common Stock intended to be included in such registration
exceeds the Maximum Offering Size, the Company will include in such
registration, in the following priority, up to the Maximum Offering Size:
(i) first, all shares of Common Stock proposed to be
registered by the Company; and
(ii) second, all shares of Registrable Stock requested to be
included in such registration by any Shareholder (allocated, if
necessary for the offering not to exceed the Maximum Offering Size,
among such Shareholders in the proportion (expressed as a percentage)
that such Shareholder's ownership of Shares bears to all outstanding
Shares owned by such Shareholders at such time).
4.3 Holdback Agreements. If any registration of Registrable Stock shall
be in connection with a Public Offering, each Shareholder agrees not to effect
any public sale or distribution, including any sale pursuant to Rule 144, or any
successor provision, under the Securities Act, of any Registrable Stock, and not
to effect any such public sale or distribution of any other Common Stock of the
Company or of any stock convertible into or exchangeable or exercisable for any
Common Stock of the Company (in each case, other than as part of such Public
Offering) during the fourteen (14) days prior to, an during the 180 day period
(or such shorter period as requested by any underwriter) which begins on the
effective date of such registration statement (except as part of such
registration), provided that each Shareholder has received written notice of
such registration at least two business days prior to the anticipated beginning
of the fourteen-day period referred to above.
4.4 Registration Procedures. Whenever any shares of Registrable Stock
are requested to be registered pursuant to Section 4.1 or 4.2 hereof, the
Company will, subject to the provisions of such Sections, use its best efforts
to effect the registration and the sale of such Registrable Stock in accordance
with the intended method of disposition thereof as quickly as practicable, and
in connection with any such request:
(a) The Company will as expeditiously as possible prepare and
file with the SEC a registration statement on any form for which the Company
then qualifies or which counsel for the Company shall deem appropriate and which
form shall be available for the sale of the Registrable Stock to be registered
thereunder in accordance with the intended method of distribution thereof, and
use its best efforts to cause such registration statement to become and remain
effective for a period of not less than 90 days.
(b) The Company will, if requested, prior to filing a
registration statement or prospectus or any amendment or supplement thereto,
furnish to each Holder and each underwriter, if any, of the Registrable Stock
covered by such registration statement copies of
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such registration statement as proposed to be filed, and thereafter the Company
will furnish to such Holder and underwriter, if any, such number of copies of
such registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference therein),
the prospectus included in such registration statement (including each
preliminary prospectus and such other documents as such Holder or underwriter
may reasonably request in order to facilitate the disposition of the Registrable
Stock owned by such Holder.
(c) After the filing of the registration statement, the
Company will promptly notify each Holder of any stop order issued or threatened
by the SEC and take all reasonable actions required to prevent the entry of such
stop order or to remove it if entered.
(d) The Company will use its best efforts to (i) register or
qualify the Registrable Stock under such other securities or blue sky laws of
such jurisdictions in the United States as any Holder reasonably (in light of
such Holder's intended plan of distribution) requests and (ii) cause such
Registrable Stock to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business and
operations of the Company and do any and all other acts and things that may be
reasonably necessary or advisable to enable such Holder to consummate the
disposition of the Registrable Stock owned by such Holder' provided that the
Company will not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph (d), (B) subject itself to taxation in any such jurisdiction or (C)
consent to general service of process in any such jurisdiction.
(e) The Company will immediately notify each Holder, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the occurrence of an event requiring the preparation of a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Stock, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and promptly prepare and make available to each Holder any such supplement or
amendment.
(f) The Board may select, subject to the approval of MLGA,
which approval shall not be unreasonably withheld, such underwriter or
underwriters as it may deem appropriate. The Company will enter into customary
agreements (including an underwriting agreement in customary form) and take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Stock.
(g) The Company will furnish to each Holder and to each
underwriter, if any, a signed counterpart, addressed to such underwriter, of (i)
an opinion or opinions of counsel to the Company and (ii) a comfort letter or
comfort letters from the Company's independent public accountants, each in
customary form and covering such matters of the type customarily covered by
opinions or comfort letters, as the case may be, as a majority of the Holders or
the managing underwriter therefor reasonably requests.
(h) The Company will otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC, and make available to its
security holders, as soon
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as reasonably practicable, an earnings statement covering a period of 12 months,
beginning within three months after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act.
The Company may require each Holder to promptly furnish in
writing to the Company such information regarding the distribution of the
Registrable Securities as the Company may from time to time reasonably request
and such other information as may be legally required in connection with such
registration.
Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 4.4(e)
hereof, such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 4.4(e) hereof, and, if so directed by
the Company, such Holder will deliver to the Company all copies, other than any
permanent file copies then in such Holder's possession, of the most recent
prospectus covering such Registrable Stock at the time of receipt of such
notice. In the event that the Company shall give such notice, the Company shall
extend the period during which such registration statement shall be maintained
effective by the number of days during the period from and including the date of
the giving of notice pursuant to Section 4.4(e) hereof to the date when the
Company shall make available to the Holders a prospectus supplemented or amended
to conform with the requirements of Section 4.4(e) hereof.
4.5 Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Holder holding Registrable Stock covered by a registration
statement, its officers, directors and agents, and each person, if any, who
controls such Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Stock (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished in writing
to the Company by such Holder or on such Holder's behalf expressly for use
therein; provided that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus, or in
any prospectus, as the case may be, the indemnity agreement contained in this
paragraph shall not apply to the extent that any such loss, claim, damage,
liability or expense results from the fact that a current copy of the
prospectus, as amended or supplemented, was not sent or given to the person
asserting any such loss, claim, damage, liability or expense at or prior to the
written confirmation of the sale of the Registrable Stock to such person if it
is determined that the Company has provided such prospectus and such prospectus
would have cured the defect giving rise to such loss, claim, damage, liability
or expense. The Company also agrees to indemnify any underwriters of the
Registrable Stock, their officers and directors and each person who controls
such underwriters on substantially the same basis as that of the indemnification
of the Holders provided in this Section 4.5.
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4.6 Indemnification by Holders. Each Holder holding Registrable Stock
included in any registration statement agrees, severally but not jointly, to
indemnify and hold harmless the Company, its officers, directors and agents and
each person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Company to such Holder, but only with
respect to information furnished in writing by such Holder or on such Holder's
behalf expressly for use in any registration statement or prospectus relating to
the Registrable Stock, or any amendment or supplement thereto, or any
preliminary prospectus. Each such Holder also agrees to indemnify and hold
harmless the underwriters of the Registrable Securities, their officers and
directors and each person who controls such underwriters on substantially the
same basis as that of the indemnification of the Company provided in this
Section 4.6. As a condition to including Registrable Stock in any registration
statement filed in accordance with Article 4 hereof, the Company may require
that it shall have received an undertaking reasonably satisfactory to it from
any underwriter to indemnify and hold it harmless to the extent customarily
provided by underwriters with respect to similar securities.
4.7 Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnity may be sough pursuant to
Article 4, such person (an "Indemnified Party") shall promptly notify the person
against whom such indemnity may be sought (the "Indemnifying Party") in writing
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party;
provided that the failure of any Indemnified Party so to notify the Indemnifying
Party shall not relieve the Indemnifying Party of its obligations hereunder
except to the extent that the Indemnifying Party is materially prejudiced by
such failure to notify. In any such proceeding, any Indemnified Party shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the Indemnifying
Party and the Indemnified Party shall have mutually agreed to the retention of
such counsel or (ii) in the reasonable judgment of such counsel representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
Indemnifying Party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) at any time for all such Indemnified Parties, and that all such fees
and expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Indemnified Parties, such firm shall be designated in
writing by the Indemnified Parties. The Indemnifying Party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent, or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Party is or
could have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability arising out of such proceeding.
4.8 Contribution. If the indemnification provided for in this Article 4
is unavailable to the Indemnified Parties in respect of any losses, claims,
damages or liabilities referred to
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<PAGE> 15
herein, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (i)
as between the Company and the Holders holding Registrable Stock covered by a
registration statement on the one hand and the underwriters on the other, in
such proportion as is appropriate to reflect the relative benefits received by
the Company and such Holder on the one hand and the underwriters on the other,
from the offering of the Registrable Securities, or if such allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits but also the relative fault of the Company and such
Holders on the one hand and of the underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations and (ii) as
between the Company on the one hand and each such Holder on the other, in such
proportion as is appropriate to reflect the relative fault of the Company and of
each such Holder in connection with such statements or omissions, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and such Holders on the one hand and the underwriters on the other shall
be deemed to be in the same proportion as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Company and the Holders bear to the total underwriting discounts
and commissions received by the underwriters, in each case as set forth in the
table on the cover page of the prospectus. The relative fault of the Company and
the Holders on the one hand and of the underwriters on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company and the Holders
or by the underwriters and such parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The relative fault of the Company on the one hand and of each Holder on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 4.8 were determined by pro
rata allocation (even if the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.8, no Holder shall be required
to contribute any amount in excess of the amount by which the total price at
which the Registrable Securities of such Holder were offered to the public
exceeds the amount of any damages which such Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Each Holder's obligation to contribute pursuant to this
Section 4.8 is several in the proportion that the proceeds of the
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<PAGE> 16
offering received by such Holder bears to the total proceeds of the offering
received by all the Holders and not joint.
4.9 Participation in Public Offering. No person may participate in any
Public Offering hereunder unless such person (a) agrees to sell such person's
securities on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements and these Registration Rights.
ARTICLE 5
CONFIDENTIALITY
5.1 Confidentiality. (a) Each Shareholder agrees that it will use
Confidential Information only in connection with its investment in the Company
and not in any way to the competitive disadvantage of the Company. Each
Shareholder further acknowledges and agrees that he or it will not disclose any
Confidential Information to any Person; provided that Confidential Information
may be disclosed (i) to such Shareholder's Representatives (as defined below)
only in connection with advising the Shareholders in connection with its
investment in the Company, (ii) to the extent required by applicable law, rule
or regulation (including complying with any oral or written questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process to which a Shareholder is subject),
(iii) to any Person to whom such Shareholder is contemplating a transfer of his
or its Shares, provided that such transfer would not be in violation of the
provisions of this Agreement and as long as such Person is advised of the
confidential nature of such information and agrees to be bound by a
confidentiality agreement in form and substance satisfactory to the Company.
Nothing contained herein shall prevent the use of Confidential Information in
connection with the assertion or defense of any claim by or against the Company
or any Shareholder.
(b) "Confidential Information" means any information
concerning the Company, its financial condition, business, operations or
prospects in the possession of or to be furnished to any Shareholder; provided
that the term "Confidential Information" does not include information which (i)
was or becomes generally available publicly other than as a result of a
disclosure by a Shareholder or his or its partners, directors, officers,
employees, agents, counsel, investment advisers or representatives (all such
persons being collectively referred to as "Representatives") in violation of the
Recapitalization Agreement, this Agreement or any confidentiality agreement
executed in accordance herewith or (ii) becomes available to a Shareholder on a
nonconfidential basis from a source other than the Company, any regulatory
entity, or another Shareholder or his or its Representatives, provided that such
source is not, to the best of such Shareholder's knowledge, bound by a
confidentiality agreement with the Company or another Person.
(c) Each Shareholder agrees that money damages would not be a
sufficient remedy for any breach of this Section 5.1 by such Shareholder or any
of his or its Representatives and that, in addition to all other remedies which
may be available, the Company shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such breach. It is
further understood and agreed that no failure or delay by the Company
-13-
<PAGE> 17
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 right, power or privilege.
ARTICLE 6
MISCELLANEOUS
6.1 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and supersedes all prior agreements and understandings,
oral and written, among the parties and hereto with respect to the subject
matter hereof.
6.2 Binding Effect; Benefit. Upon the occurrence of the Effective Date,
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, successors, legal representatives and
permitted assigns. Nothing in this Agreement, expressed or implied, is intended
to confer on any person other than the parties hereto, and their respective
heirs, successors, legal representatives and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
6.3 Assignability. This Agreement shall not be assignable by any party
hereto, except (i) this Agreement shall be binding upon and inure to the benefit
of all transferees that are Affiliates of MLGA and (ii) that any Person
acquiring Shares who is required by the terms of this Agreement to become a
party hereto shall execute and deliver to the Company an agreement to be bound
by this Agreement and shall thenceforth be a "Shareholder," and any Shareholder
who ceases to beneficially own any Shares or Preferred Shares shall cease to be
bound by the terms hereof.
6.4 Information. The Company shall provide each Shareholder with annual
audited and quarterly unaudited financial statements.
6.5 Notices. All notices and other communications given or made
pursuant hereto or pursuant to any other agreement among the parties, unless
otherwise specified, shall be in writing and shall be deemed to have been duly
given or made if sent by fax (with confirmation in writing), delivered
personally or sent by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the fax number or address set forth below
or at such other addresses as shall be furnished by the parties by like notice,
and such notice or communication shall be deemed to have been given or made upon
receipt:
if to the Company:
Gradall Industries, Inc.
406 Mill Avenue S.W.
New Philadelphia, Ohio 44663
Attention: Barry Phillips
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<PAGE> 18
if to an MLGA Entity:
c/o MLGA Fund II, L.P.
2 Greenwich Plaza
Greenwich, Connecticut 06830
Attention: Sangwoo Ahn
Fax: (203) 3554
with a copy to (such copy not to constitute notice):
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: William L. Rosoff
Fax: (212) 450-4800
if to the Minority Shareholders:
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 (such copy not to constitute notice):
Laser, Pokorny, Schwartz, Friedman & Economos
205 N. Michigan Avenue
Suite 3800
Chicago, Illinois 60601
Attention: Bruce M. Friedman
Fax: (312) 540-0610
if to the Managers:
c/o The Gradall Company
406 Mill Avenue S.W.
New Philadelphia, Ohio 44663
Attention: Name of Manager
Any Person who becomes a Shareholder shall provide its address and fax
number to the Company, which shall promptly provide such information to each
other Shareholder.
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<PAGE> 19
6.6 Headings. The headings contained in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
6.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
6.8 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO THE CONFLICTS OF LAW RULES OF SUCH STATE.
6.9 Specific Enforcement. Each party hereto acknowledges that the
remedies at law of the other parties for a breach or threatened breach of this
Agreement would be inadequate and, in recognition of this fact, any party to
this Agreement, without posting any bond, shall be entitled to obtain equitable
relief in the form of specific performance, a temporary restraining order, a
temporary or permanent injunction or any other equitable remedy which may then
be available.
6.10 Consent to Jurisdiction. Each party hereto irrevocably submits to
the non-exclusive jurisdiction of any State or Federal court sitting in Delaware
over any suit, action or proceeding arising out of or relating to this Agreement
and waives, to the fullest extent permitted by law, any objection it may now or
hereafter have to the laying of venue of any such suite, action or proceeding
brought in any such court and any claim that any such suit, action or proceeding
brought in such a court has been brought in any inconvenient forum.
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.
GRADALL INDUSTRIES, INC.
By:_________________________________
Title:
MLGA FUND II, L.P.
By: MLGAL Partners, as General Partner
By:___________________________
Title:
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<PAGE> 20
- ------------------------------------
Sangwoo Ahn
- ------------------------------------
Perry J. Lewis
- ------------------------------------
John A. Morgan
- ------------------------------------
William C. Ughetta, Jr.
- ------------------------------------
Ira Starr
- ------------------------------------
The Nippon Credit Bank, Inc.
MINORITY SHAREHOLDERS:
- ------------------------------------
Jack D. Rutherford
- ------------------------------------
David T. Shelby
MANAGERS:
- ------------------------------------
Barry L. Phillips
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<PAGE> 21
- ------------------------------------
David S. Williams
- ------------------------------------
Bruce A. Jonker
- ------------------------------------
James C. Cahill
- ------------------------------------
Joseph H. Keller
- ------------------------------------
Ky Kuehling
- ------------------------------------
Michael Haberman
- ------------------------------------
Matthew Stear
- ------------------------------------
John Arnold
- ------------------------------------
Phillip Keller
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<PAGE> 1
EXHIBIT 11.01
GRADALL INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
------------ -------------------------
1995 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Primary Actual Earnings Per Share (A):
(a) Net income as reported $6,607 $4,320 $3,526
========= ========= =========
Weighted average number of common shares outstanding
assuming the Recapitalization had occurred on
January 1, 1995 1,000 1,000 1,000
Shares issuable upon conversion of outstanding warrants,
assumed to be converted January 1, 1995 81.1 81.1 81.1
Weighted average number of common shares and common stock
equivalents outstanding 1081.1 1081.1 1081.1
--------- --------- ---------
Effect of 5540 to 1 stock split which will become effective
at the time of the Offering X5540 X5540 X5540
--------- --------- ---------
(b) Weighted average actual common shares and common stock
equivalents outstanding after giving effect to the
stock split 5,989,294 5,989,294 5,989,294
========= ========= =========
Primary actual earnings per share (a divided by b) $1.10 $.72 $.59
========= ========= =========
Primary Supplementary Earnings Per Share (B):
Net income as reported $6,607 $4,320 $3,526
Pro forma adjustments:
Reduce amortization of deferred financing fees 80 - 162
Change in interest expense resulting from payoff
of debt from proceeds of the Offering 737 2 1,658
Tax expense related to pro forma adjustments (294) (1) (706)
--------- --------- ---------
(a) Pro forma net income $7,130 $4,321 $4,640
========= ========= =========
Weighted average number of common shares outstanding
assuming the Recapitalization had occurred on
January 1, 1995 1,000 1,000 1,000
Shares issuable upon conversion of outstanding warrants,
assumed to be converted January 1, 1995 81.1 81.1 81.1
--------- --------- ---------
1081.1 1081.1 1081.1
Effect of 5540 to 1 stock split which will become effective
at the time of the Offering X5540 X5540 X5540
--------- --------- ---------
5,989,294 5,989,294 5,989,294
Stock options to become effective August 15, 1996 10,000 10,000 10,000
Shares assumed to be issued in connection with the Offering 2,500,000 2,500,000 2,500,000
--------- --------- ---------
(b) Pro forma weighted average shares of common stock and
common stock equivalents outstanding after giving effect
to the stock split 8,499,294 8,499,294 8,499,294
========= ========= =========
Primary supplementary earnings per share (a divided by b) $.84 $.51 $.55
========= ========= =========
</TABLE>
A Presented based on actual earnings and average shares outstanding in
the periods indicated after giving effect to the anticipated 5540 to 1
stock split and the conversion of the outstanding warrants.
B Presented as if the 1995 Recapitalization, the exercise of the Warrants
and an option for 10,000 shares, 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 $0.5 million extraordinary loss (net of
a tax benefit of $0.4 million) to be incurred on repayment in full of
the Senior Subordinated Notes and a $0.4 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.
C Primary and fully diluted earnings per share are the same because the
outstanding stock options are the only additional common stock
equivalents, and under the treasury stock method there would be no
impact upon their exercise at the current estimated market value of the
stock.
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Admendment No. 1 to the registration
statement on Form S-1 (File No. 333-06777) of our report dated July 25, 1996, on
our audits of the consolidated financial statements of Gradall Industries, Inc.
(formerly ICM Industries, Inc.). We also consent to the reference to our firm
under the caption "Experts".
Coopers & Lybrand L.L.P.
Cleveland, Ohio
August 2, 1996
