SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULED 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant _X_
Filed by a Party other than the Registrant ___
Check the appropriate box:
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Only (as permitted by rule 14a-6(e)(2)
_X_ Definitive Proxy Statement
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
GRADALL INDUSTRIES, .INC.
--------------------------------------------------
(Name of Registrant as Specified in Its Charter
GRADALL INDUSTRIES, .INC.
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant
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_X_ No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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previously. Identify the previous filing by registration statement number, or
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GRADALL INDUSTRIES, INC.
406 MILL AVENUE, S.W. - NEW PHILADELPHIA, OHIO 44663
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Gradall Industries, Inc. will be held at
One Cleveland Center, 1375 East Ninth Street, Cleveland, Ohio, on June 3, 1997
at 10:00 a.m. Eastern Daylight Time for the following purposes:
1. To elect directors for the ensuing year; and
2. To consider and vote upon an amendment to the Company's Stock Option Plan
increasing the number of shares available for issuance thereunder.
3. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on April 10, 1997 as
the record date for determining the stockholders entitled to notice of and to
vote at the meeting. Only stockholders of record at the close of business are
entitled to vote at the meeting.
Whether or not you plan to attend the meeting, please complete, sign, date and
return the enclosed proxy card in the enclosed return envelope to assure that
your shares will be represented. Sending in your proxy will not prevent you
from voting in person if you attend the meeting.
By order of the Board of Directors
Joseph H. Keller
Secretary
May 5, 1997
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Gradall Industries, Inc. (the "Company") of proxies to
be voted at the Annual Meeting of Shareholders to be held on June 3, 1997, and
any adjournment thereof.
If a proxy card is duly signed and returned, the shares represented thereby
will be voted as specified therein, and if no specification is made, the
shares will be voted in accordance with the recommendations of the Board of
Directors. Any stockholder returning a proxy may revoke it by executing a
later dated proxy or by giving notice of revocation to the Company in writing
or by casting a ballot at the meeting.
At April 10, 1997, the record date, there were 8,939,294 shares of Common Stock
outstanding and entitled to vote, and each share is entitled to one vote on
each matter to be considered. There are no cumulative voting rights in the
election of directors.
This Proxy Statement is first being mailed on or about May 5, 1997.
ELECTION OF DIRECTORS
Eight directors are to be elected at the Annual Meeting, to hold office until
the next Annual Meeting of Stockholders or until their successors are elected.
The following nominees have been proposed by the Board of Directors and are
currently serving as directors:
Sangwoo Ahn
Ernest Green
Perry J. Lewis
John A. Morgan
Barry L. Phillips
Jack D. Rutherford
William C. Ughetta, Jr.
and
David S. Williams
Sangwoo 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 Kaneb Pipeline Partners, L.P.,
Kaneb Services, Inc., PAR Technology Corporation, Quaker Fabric Corporation,
Stuart Entertainment, Inc. and ITI Technologies, Inc. Mr. Ahn is 58 years old.
Ernest 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., DPL Inc., Duriron Company, Inc., Eaton Corporation,
And Fluor Daniel GTI, Inc. Mr. Green is 58 years old.
Perry J. 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, Quaker Fabric Corporation, Stuart
Entertainment, Inc. and ITI Technologies, Inc. Mr. Lewis is 59 years old.
John A. 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, Masco Tech, Inc., Masco Corp., Allied Digital Technologies, Inc.
and Lifestyle Furnishings International Ltd. Mr. Morgan is 66 years old.
Barry L. Phillips has served as President - Chief Executive Officer and has
been a director of the Company since 1995 and has served as President of The
Gradall Company, its wholly-owned subsidiary, 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.
Phillips is 55 years old.
Jack D. 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 served as President and Vice
Chairman of ICM Krebsoge, Inc., a manufacturer of component parts for the
automotive industry, from January 1993 until December 1996. Mr. Rutherford
also served as Vice Chairman of Magna LLC, and its predecessors, a holding
company whose operating subsidiary manufactures hydraulic cylinders, pumps and
valves, from 1986 through September 1996. Mr. Rutherford also serves on the
Board of Directors of Code Alarm, Inc. Mr. Rutherford is 63 years old.
William C. Ughetta, Jr. has been a director of the Company since 1995. Mr.
Ughetta has been a managing director 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. Ughetta is 36 years old.
David S. 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 as President of Claas of America and held various management
positions at International Harvester, including General Sales Manager. Mr.
Williams is 56 years old.
Directors who are not officers or employees of the Company are entitled to
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.
INFORMATION ABOUT THE BOARD OF DIRECTORS
The Board of Directors held five meetings during 1996. Each director attended
At least 75% of the total number of meetings of the Board and Committees on
Which he served, except Messrs. Morgan and Williams.
The Board of Directors has an Audit Committee and a Compensation Committee. It
does not have a Nominating Committee. The Board functions as a committee of
the whole to nominate candidates for election as directors.
The Compensation Committee consists of Messrs. Ahn, Rutherford and Phillips.
The functions of the Compensation Committee are to review and approve
senior executive base and incentive compensation. The Compensation Committee
met twice in 1996.
The Audit Committee, which in 1996 consisted of Messrs. Ahn, Ughetta,
Rutherford and Green, held one meeting in 1996. During 1997, the Audit
Committee will consist of Messrs. Green, Rutherford and Ughetta. The Audit
Committee's functions are to review the plan and results of the annual audit
by the Company's independent accountants, to review the adequacy of the
Company's system of internal controls, to monitor related party transactions
and to recommend to the directors the firm of accountants to serve as the
Company's auditors.
EXECUTIVE COMPENSATION
The following table provides information relating to compensation for the year
ended December 31, 1996 and 1995 of the Company's Chief Executive Officer and
its other four most highly compensated executive officers (collectively, the
"Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE(1)
Long-Term
Annual Compensation Awards
Name and Compensation Securities All Other
Principal Position Year Salary Bonus Underlying Options Compensation
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Barry L. Phillips
President and 1996 $166,000 $107,000 24,930 $18,290(2)
Chief Executive Officer 1995 165,666 99,000 28,373 18,290(2)
David S. Williams
Vice President 1996 143,096 77,000 23,545 12,534(3)
Marketing and Sales 1995 139,524 75,000 25,220 12,534(3)
Joseph H. Keller, Jr.
Vice President, 1996 91,711 46,000 6,925 5,139(4)
Engineering and Sec. 1995 88,806 50,000 6,305 5,139(4)
James C. Cahill
Vice President, 1996 88,906 56,000 13,850 5,064(4)
Manufacturing 1995 80,681 55,500 12,610 5,064(4)
Bruce A. Jonker
Vice President and 1996 87,982 64,500 13,850 5,064(4)
Chief Financial Officer 1995 78,792 55,500 12,610 5,064(4)
</TABLE>
1.Under rules promulgated by the Securities and Exchange Commission, since the
Company was not a reporting company during 1994, only the information with
respect to 1996 and 1995 is reported inthe 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 $10,000 in life insurance premiums
the Company paid pursuant to a deferred compensation agreement with Mr.
Williams.
4.Represents the amount the Company contributed on behalf of the Named Executive
Officer to its Supplemental Executive Retirement Plan.
The following tables provide information relating to stock options granted to
and exercised by the Named Executive Officers during the year ended December 31,
1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
Potential Realizable
Number % of Total Value at Assumed
of Securities Options Annual Rates of Stock
Underlying Granted to Exercise or Price Appreciation for
Options Employees in Base Price Expiration Option Term
---------------------
Name Granted(1) Fiscal Year ($/sh)(2) Date 5%($) 10%($)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Barry L. Phillips 24,930 17% $6.32 4/17/06 $98,972 $251,045
David S. Williams 23,545 16 6.32 4/17/06 93,474 237,098
James C. Cahill 13,850 9 6.32 4/17/06 54,985 139,470
Bruce A. Jonker 13,850 9 6.32 4/17/06 54,985 139,470
Joseph H. Keller, Jr. 6,925 5 6.32 4/17/06 27,492 69,735
</TABLE>
1. All options become exercisable in three equal annual installments commencing
on April 18, 1998.
2. The options were granted prior to the existence of a public trading market
for the Common Stock. Pursuant to the Option Plan, the exercise price of
options Outstanding under the Option Plan is the fair market value of the Common
Stock on the date of grant, as determined by the Board of Directors.
STOCK OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Options at Fiscal Year End at Fiscal Year End(1)
-------------------------- ------------------------
Name on Exercise Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Barry L. Phillips -0- 9,458 43,845 $91,412 $333,764
David S. Williams -0- 8,407 40,358 81,254 305,063
James C. Cahill -0- 4,203 22,257 40,622 165,116
Bruce A. Jonker -0- 4,203 22,257 40,622 165,116
Joseph H. Keller, Jr. -0- 2,102 11,128 20,316 82,553
<FN>
1. Values are calculated as the difference between the exercise price of the
options and the market value of the Company's Common Stock as of December 31, 1996.
</TABLE>
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:
Years of Service
<TABLE>
<CAPTION>
Remuneration 15 20 25 30 35
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 80,000 $12,000 $16,000 $20,000 $24,000 $28,000
100,000 15,000 20,000 25,000 30,000 35,000
120,000 18,000 24,000 30,000 36,000 42,000
140,000 21,000 28,000 35,000 42,000 49,000
160,000 22,500 30,000 37,500 45,000 52,500
180,000 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, 1996 for the Named Executive Officers were as
follows: Mr. Phillips, 11; Mr. Williams, 11; Mr. Cahill, 13; Mr. Jonker, 13;
and Mr. Keller, 13. 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 Retirement 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 1997. 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 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, 1996,
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 1996 and 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 1996 and 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 1996 and 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 1996 and 1995 are included
in "All Other Compensation" column of the "Summary Compensation Table"
above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, the Compensation Committee of the Board of Directors consisted of
Sangwoo Ahn and Jack D. Rutherford, 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.
CERTAIN TRANSACTIONS
In January 1995, the Company entered into a Supply Agreement with Iowa
Industrial Hydraulics, Inc. ("Iowa"), a wholly-owned subsidiary of Magna Power
of which Jack D. Rutherford, a director of the Company, is a principal
shareholder. Iowa was sold by Magna Power on August 1, 1996. The Supply
Agreement has a rolling three year term, subject to termination by either
party at the end of the then current term or for breach. Under the terms of
the Supply Agreement, the Company purchases hydraulic cylinders from Iowa at
agreed prices, subject to adjustments 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 negotiation in the event the actual volume of purchases differ
from the estimated volume by more than 25%. The Company is not required to
purchase any minimum quantity of products under the Supply Agreement. During
the year ended December 31, 1996, the Company paid Iowa $2,818,738 for
products purchased. The Company believes that the prices and 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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
oversees the Gradall executive compensation programs. The Committee met two
times in 1996 to review and approve executive compensation matters.
The Gradall executive compensation philosophy is designed to meet four
primary goals:
1. Ensure a strong linkage between individual performance and total
compensation.
2. Integrate compensation programs with Gradall's annual and long-term
strategic goals.
3. Encourage long-term strategic management and enhancement of shareholder
value through equity awards.
4. Attract and retain key executives critical to the long-term success of
Gradall by providing a fully competitive reward package that is
appropriately sensitive to performance.
These principles are reflected in the key components of the executive
compensation programs which consist of base salary, annual incentive awards,
and long-term incentive awards. Increases in the base salaries and the specific
level of participation in the incentive compensation plans for the executive
officers is determined by the Committee based on the factors described
below.
BASE SALARY
An executive's base salary and subsequent adjustments are determined relative
to the following factors: individual and Company performance, scope of
responsibility and accountability, and comparison with industry pay
practices. The Committee feels that all of these factors are significant
and the relevance of each varies from executive to executive. Therefore,
no specific weight has been assigned to these factors in the evaluation of
an executive's base salary.
The specific measures of the Company's performance vary depending upon the
executive's performance area and the goals periodically set for the
performance area by the Company. Industry comparisons of manufacturing
organizations of comparable asset size and net sales are drawn from survey
data relating to various executive levels published by independent sources.
Although the Committee reviews data representing base pay and annual cash
incentive awards practices of the 25th to 75th percentiles of the competitive
market, in terms of compensation, the Committee does have a policy to
target base compensation at the 25th percentile of the competitive
market, and the combination of base pay and annual cash compensation at the
50th percentile.
ANNUAL CASH INCENTIVE AWARDS
Under the Gradall Incentive Compensation Plan in effect for 1996, executive
officers earned annual cash incentive awards determined as a percentage of
base salary. The percentage of base salary for an executive was determined by
(i) the category to which the executive was assigned for 1996 based upon
his level of responsibility and (ii) Gradall's performance as measured by
growth in net income and growth in earnings per share. Awards were assigned
weights of 75% for Company performance and 25% for individual performance.
LONG-TERM INCENTIVE AWARDS
Long-term incentive awards are in the form of stock options granted under the
Company's Stock Option Plan.
Stock option awards are considered annually, by the Committee and the number of
shares granted to an executive officer is based on the individual's scope of
responsibility, a subjective evaluation of the performance of the
individual and the Company's performance since the last grant, and industry
comparisons. No specific weight is attached to these factors.
Data from three surveys published by nationally known compensation and human
resources consulting firms was reviewed by the Committee to determine
competitive benchmarks for awarding 1996 base salary, annual cash incentive
and long-term incentive award. Competitive awards were considered by using
sources presenting data as a percentage of base salary and as a dollar value.
The Committee does not have a policy to target long-term incentive awards at
any specific level of data as provided from these sources.
Information as to the options awarded to each executive during recent years
was reviewed by the Committee. However, the Committee did not consider the
total amount of options held by an executive officer in determining the size of
an option awarded for 1996.
Each stock option has an exercise price equal to the fair market value of the
underlying Common Stock of the Corporation on the date of grant. Stock options
granted in 1996 become exercisable in three equal annual increments beginning on
the second anniversary of the grant and remain exercisable for a period of ten
years from the date of grant (subject to plan forfeiture restrictions). Since
the stock options are granted at market price, the value of the stock options
is entirely dependent upon the growth in the Company's stock price.
Barry L. Phillips, President and Chief Executive Officer, has an employment
contract that provides for an annual salary of $166,000, subject to increases at
the Company's discretion. In determining to leave his 1996 base salary
unchanged, the Committee applied the policies described above with respect to
base salaries for other executive officers.
Incentive compensation and stock option awards to Mr. Phillips were made on
the same basis described above for other executive officers. In the 1996 bonus
for Mr. Phillips, the Company considered, in addition to the Company's record
performance during 1996 with respect to sales and net income, the successful
completion of the Company's $27.4 million public offering of its Common Stock.
COMPENSATION COMMITTEE
Sangwoo Ahn
Jack D. Rutherford
Barry L. Phillips
PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the SIC Code Index and the NASDAQ Composite Index for
the period August 28, 1996 through December 31, 1996. Trading in the Company's
Common Stock commenced on August 28, 1996.
<TABLE>
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL RETURN OF GRADALL INDUSTRIES, INC., NASDAQ
MARKET INDEX AND SIC CODE INDEX
PERIOD ENDING
-----------------------------------------------------
BASE 8/30/96 9/30/96 10/31/96 11/29/96 12/31/96
<S> <C> <C> <C> <C> <C> <C>
GRADALL INDUSTRIES INC 100 106.30 112.50 108.80 133.80 123.80
SIC CODE INDEX 100 100.00 108.96 100.53 116.19 110.35
NASDAQ MARKET INDEX 100 100.00 106.98 105.75 112.32 112.07
</TABLE>
(Above numbers were used in the graph included in the Proxy Statement)
PROPOSAL TO AMEND THE COMPANY'S STOCK OPTION PLAN
On March 10, 1997, the Board of Directors adopted an amendment to the
Company's 1995 Stock Option Plan (the "Plan"), subject to stockholder
approval, to increase the number of shares available for issuance under the
Plan by 200,000 shares. At the time the Plan was adopted, 315,226 shares of
Common Stock were authorized for issuance pursuant thereto. As of February 28,
1997, stock options had been granted with respect to 277,831 shares, leaving
only 37,395 shares available for future grants.
The Board of Directors believes that stock options are an important means of
attracting, retaining and motivating the Company's officers and key employees.
Accordingly, the Board of Directors believes that it would be in the best
interests of the Company and the stockholders to increase the number of shares
available for the grant of stock options so as to permit the Company to
continue to offer these incentives in the future. The 200,000 shares for which
stockholder approval is sought represent approximately 2.2% of the Company's
outstanding shares of Common Stock as of February 28, 1997.
The Plan is administered by the Board of Directors of the Company (the
"Board"). The Plan authorizes only the granting of options which qualify as
incentive stock options ("ISO's") under Section 422 of the Internal Revenue
Code to full-time salaried employees (including officers and directors if they
are employees) of the Company or a subsidiary. Subject to limitations
contained in the Plan, the Board is given full authority to determine the
employees to whom options are to be granted, the number of shares for which
options are granted, to interpret the Plan and prescribe, amend and rescind
rules and regulations relating to the Plan and the options and to make other
determinations necessary or advisable for the administration of the Plan.
The identity or number of eligible employees to whom options may be granted in
the future and the number of shares covered thereby are not determinable at
this time. Currently there are 21 employees who are participants in the Plan.
The Plan provides that the option price of any option granted thereunder may
not be less than 100% of the fair market value of the underlying shares of
Common Stock on the date of grant. Payment of the option price in cash must
be made in full at the time of exercise unless the Board approves another
form of payment permitted by Section 422 of the Internal Revenue Code.
The term of each option will be determined by the Board, but may not exceed
ten years from the date of grant. Options become exercisable at such times and
in such installments as determined by the Board.
Options are not transferable or assignable during the recipient's lifetime,
but upon the recipient's death may be exercised by the person to whom such
option rights pass by will
or by the laws of descent and distribution.
Each option granted under the Plan will terminate upon the cessation of the
recipient's employment, except that for a period of three (3) months following
such cessation of employment (or twelve (12) months in the case of death or
disability), the option may be exercised to the extent it was exercisable
on the date the recipient's employment ceased. If the recipient's employment is
terminated by the Company or a subsidiary for cause, his options immediately
terminate and become void.
Under the Plan, if there is any change in the outstanding shares of Common
Stock by reason of any stock split, stock dividend, recapitalization, merger
or other similar capital or corporate structure change, the Board of Directors
may make appropriate changes in the number or kind of securities that may be
issued under the Plan, as well as the number or kind of securities issuable
under, and the option price of, each outstanding option.
The Plan will expire, if not sooner terminated, on October 13, 2005. The Board
of Directors may terminate or amend the Plan at any time, except that no
amendment may become effective without shareholder approval which would
increase the number of shares issuable under the Plan, alter the eligibility
requirements or materially increase the benefits accruing to participants
under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
Under current law and existing regulations, the grant of an ISO will not
result in income taxable to the employee or provide a deduction to the
Company.
On the exercise of an ISO, the employee will not realize taxable income. If
the shares acquired upon exercise of an ISO are sold more than one year after
the date of exercise and more than two years after the date of grant, the
employee will recognize long-term capital gain or loss equal to the difference
between the sales price of such shares and the option price. If the shares are
sold before the foregoing holding period requirements are satisfied, the
employee will recognize ordinary compensation income equal to the amount by
which the fair market value of the shares on the date of exercise exceeds the
option price, and will realize long-term or short-term capital gain to the
extent the sales price exceeds the fair market value of the shares on the
date of exercise.
The Company will be entitled to a deduction for tax purposes in the same
amount as the employee is considered to have realized ordinary compensation
income.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the votes cast at the meeting is
required to approve the amendment to the Plan. For this purpose, abstentions
and broker non-votes shall not be counted. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE PROPOSAL TO AMEND THE STOCK OPTION PLAN.
OWNERSHIP OF VOTING SECURITIES
The following table sets forth information as of March 31, 1997 with respect to
each person known to the Company to be the beneficial owner of more than
five percent of the Company's outstanding Common Stock, the only class of
voting securities of the Company which is outstanding.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of Class
------------------ ------------------ -----------------
<S> <C> <C>
MLGA Fund II, L.P.(1) 3,865,637 43.1%
Sangwoo Ahn(1)(2) 3,931,458 43.8
John A. Morgan(1)(2) 3,921,458 43.7
Perry J. Lewis(1)(2) 3,921,458 43.7
The Prudential Insurance
Company of America(3) 641,900 7.2
Templeton Investment
Counsel, Inc.(4) 525,000 5.9
Franklin Resources, Inc.(4) 525,000 5.9
Charles B. Johnson(4) 525,000 5.9
Rupert H. Johnson, Jr.(4) 525,000 5.9
</TABLE>
1. The business address of MLGA Fund II, L.P. and Messrs. Ahn, Lewis and
Morgan, is Two Greenwich Plaza, Greenwich, CT 06830.
2. Includes 3,865,637 shares held by MLGA Fund II, L.P. MLGAL Partners L.P.,
the general partner of MLGA Fund II, L.P. has the power to vote or dispose of
the shares held by MLGA Fund II, L.P. Therefore, as generalpartners of MLGAL
Partners L.P., Messrs. Ahn, Lewis and Morgan, may be deemed to be the
Beneficial owners of shares held by MLGA Fund II, L.P. Messrs. Ahn, Lewis and
Morgan disclaim beneficial ownership of the shares held by MLGA Fund II, L.P.
3. The business address of The Prudential Insurance Company of America is
751 Broad Street, Newark, NJ 07102-3777.
4. Includes 525,000 shares owned by one or more open or closed-end investment
companies or other managed accounts, with respect to which
Templeton Investment Counsel, Inc. ("TIC"), as an investment advisor to such
accounts, has all voting and investment power. TIC is a subsidiary of Franklin
Resources, Inc. ("FRI"). FRI and its principal shareholders, Charles B.
Johnson and Rupert H. Johnson, Jr. may be deemed to be the beneficial owner of
shares held by persons or entities advised by FRI or TIC. The business address
of FRI and Messrs. Johnson and Johnson is 777 Mariners Island Blvd.,
San Mateo, CA 94404. The business address of TIC is 500 East Broward Blvd.,
Suite 2100, Fort Lauderdale, FL 33394-3094.
The following table sets forth information as of March 31, 1997 with respect to
the shares of Common Stock of the Company beneficially owned by each
director, the chief executive officer and the four other most highly
compensated executive officers and all directors and executive officers as a
group.
<TABLE>
<CAPTION>
Name Number of Shares Percent ofClass
---- ------------------ ------------------
<S> <C> <C>
Sangwoo Ahn 3,931,458(1) 43.8%
James C. Cahill 31,903(2) *
Ernest Green 10,000(2) *
Bruce A. Jonker 31,903(2) *
Joseph H. Keller 15,952(2) *
Perry J. Lewis 3,921,458(1) 43.7
John A. Morgan 3,921,458(1) 43.7
Jack D. Rutherford 138,507 1.5
Barry L. Phillips 286,458(2) 3.2
William C. Ughetta, Jr. 18,169 *
David S. Williams 146,907(2) 1.6
All of the above and other
executive officers as a group
(11 persons) 4,722,899(1) 52.6
<FN>
*Less than 1%
</TABLE>
1. Includes 3,865,637 shares held by MLGA Fund II, L.P., as to which Messrs.
Ahn, Lewis, Morgan and Ughetta disclaim beneficial ownership.
2. Includes shares subject to options exercisable within 60 days by Mr. Cahill
as to 4,203 shares, Mr. Green as to 10,000 shares, Mr. Jonker as to 4,203
shares, Mr. Keller as to 2,102 shares, Mr. Phillips as to 9,458 shares and Mr.
Williams as to 8,407 shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities to file
reports of beneficial ownership of such securities and changes in such
beneficial ownership with the Securities and Exchange Commission. Such persons
are also required to furnish to the Company copies of all reports they file
pursuant to Section 16(a).
Based solely on a review of the copies of the forms filed pursuant to Section
16(a) received by it, the Company believes that its directors, executive
officers and ten percent shareholders have complied with all such filing
requirements.
VOTE REQUIRED
The eight nominees for election as directors who receive the greatest number of
votes cast for the election of directors by the holders of the Company's Common
Stock present in person or by proxy at the Annual Meeting, a quorum being
present, shall become directors. The affirmative vote of a majority of the
votes cast by the holders of the Company's Common Stock, present in person or
by proxy at the meeting, a quorum being present, on the proposal to approve the
amendment to the Stock Option Plan will be necessary to approve the proposal.
Abstentions and broker non-votes will not be counted either for or against
matters submitted for vote by the stockholders.
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P., independent public accountants, are the Company's
independent auditors. A representative of Coopers & Lybrand L.L.P. is expected
to be present at the Annual Meeting and will have the opportunity to make a
statement and be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Proposals by stockholders which are intended to be presented at the next
Annual Meeting of Stockholders of the Company must be received by the Company
no later than December 16, 1997.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
meeting. If any other matter should properly come before the meeting, however,
it is the intention of the persons named in the enclosed proxy card to vote in
accordance with their best judgment on such matters.
The solicitation ofproxies is being made on behalf of the Board of Directors and
the cost will be borne by the Company. Brokerage firms and other custodians,
nominees and fiduciaries will be reimbursed by the Company for their expenses in
forwarding proxy materials to the beneficial owners of the voting securities of
the Company. Further solicitation of proxies may be made by telephone or other
communication by regular employees of the Company without additional
compensation.
By order of the Board of Directors
Joseph H. Keller
Secretary
May 5, 1997
A copy of the Company's Annual Report on Form 10-K for 1996 as filed with the
Securities and Exchange Commission, including the financial statements and
schedules thereto, but without exhibits, will be sent to any stockholder,
without charge, upon written request directed to Bruce A. Jonker, Vice
President and CFO, Gradall Industries, Inc., 406 Mill Avenue S.W., New
Philadelphia, Ohio 44663.
