<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 7, 1997
REGISTRATION NO. 333-36887
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
MPW INDUSTRIAL SERVICES GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
Ohio 7349 31-1567260
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
NO.)
OF INCORPORATION OR CLASSIFICATION CODE NUMBER)
ORGANIZATION)
</TABLE>
------------------------
9711 Lancaster Road, S.E.
Hebron, Ohio 43025
(614) 927-8790
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
Daniel P. Buettin
Vice President, Chief Financial Officer and Secretary
MPW Industrial Services Group, Inc.
9711 Lancaster Road, S.E.
Hebron, Ohio 43025
(614) 927-8790
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
Robert J. Gilker, Esq. Timothy R. Bryant, Esq.
Jones, Day, Reavis & Pogue McDermott, Will & Emery
1900 Huntington Center 227 West Monroe Street
Columbus, Ohio 43215 Chicago, Illinois 60606-5096
(614) 469-3939 (312) 372-2000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after this 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 number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<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 NOVEMBER 7, 1997
3,750,000 SHARES
MPW INDUSTRIAL SERVICES GROUP, INC.
COMMON STOCK
------------------------
All of the shares of common stock (the "Common Stock") offered hereby
(the "Offering") are being offered by MPW Industrial Services Group, Inc. ("MPW"
or the "Company"). Prior to the Offering, there has been no public market for
the Common Stock. It is currently estimated that the initial public offering
price will be between $9.00 and $11.00 per share. A significant portion of the
net proceeds of the Offering will be received by the existing shareholders of
the Company. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price. Application has been made to list
the Common Stock for quotation on the Nasdaq National Market under the symbol
"MPWG."
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6 HEREOF.
------------------------
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>
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========================================================================================================
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY (1)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................... $ $ $
- --------------------------------------------------------------------------------------------------------
Total (2).................................... $ $ $
========================================================================================================
</TABLE>
(1) Before deducting expenses estimated at $600,000, which are payable by the
Company.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
562,500 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent the option is exercised, the Underwriters will offer
the additional shares at the Price to Public shown above. If the option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them, and subject to
certain other conditions. It is expected that delivery of the shares of Common
Stock will be made on or about , 1997 at the offices of Raymond James &
Associates, Inc., St. Petersburg, Florida.
RAYMOND JAMES & ASSOCIATES, INC. ROBERT W. BAIRD & CO.
INCORPORATED
The date of this Prospectus is , 1997
<PAGE> 3
The inside front cover of the Prospectus will contain pictures as follows:
1. Under the "MPW" logo in the upper left-hand corner is a background
picture containing two MPW employees at a pulp and paper mill cleaning
the inside of a lime kiln. The MPW employee on the right, with the
four-inch, black flex hose, is vacuuming the soft lime from the lime
kiln with a vacuum system. The second employee is working ahead of the
vacuum hose loosening the adhered hardened lime from the kiln with a
Jackhammer. Both employees are wearing white tyvek coveralls, dust
masks, gloves, boots and hard hats to provide proper safety protection
from the lime environment.
2. On top of the background picture are four pictures as follows: (i) above
the caption "PROCESS WATER PURIFICATION" is a photograph of an MPW
48-foot mobile semi-trailer containing a portable, reverse osmosis water
treatment system; (ii) above the caption "TECHNOLOGY-BASED SERVICES" is
a photograph of an MPW employee reviewing a blueprint of the design and
construction of a new piece of equipment while cutting material with
cutting equipment. The employee is wearing a protective face shield and
hard hat; (iii) above the caption "INDUSTRIAL CONTAINER CLEANING" is a
photograph of an MPW employee, wearing a hard hat and coveralls,
aligning the cleaning system of container cleaning equipment suspended
over a large paint container about to be cleaned; and (iv) above the
caption "WATER BLASTING SERVICES" is a photograph of an MPW employee
demonstrating a water blasting technique with a water blasting gun. The
employee is wearing coveralls, gloves, protective goggles and a hard
hat.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENTS, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING
TRANSACTIONS, AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information in this Prospectus assumes no exercise of the Underwriters'
over-allotment option. Except where the context otherwise requires, references
to the terms "MPW" and the "Company" refer to MPW Industrial Services Group,
Inc. and its subsidiaries. References to fiscal years are references to the
twelve-month period ending on June 30 of the stated year.
THE COMPANY
MPW Industrial Services Group, Inc. is a leading provider of industrial
services in the Midwest and Southeast, focused on technology-based industrial
services, including industrial cleaning and facility support services,
industrial air filtration services, industrial container cleaning, industrial
process water purification and other specialized services. In fiscal 1997, the
Company provided services to more than 500 customers. The Company serves
customers in a broad range of industries including automotive, electric power,
chemical, pulp and paper, steel, transportation, aerospace and other heavy
manufacturing. The Company's services typically are performed within large
industrial facilities and require the use of Company-owned equipment and
specially trained personnel. See "Business -- Safety, Training and Quality
Assurance." The Company believes that its services are generally recurring in
nature and are essential to manufacturing efficiency and safety at its
customers' facilities. The Company has over 25 years of experience and currently
has more than 1,300 employees, a network of 31 offices and over 1,000 pieces of
operating equipment. See "Business -- Equipment."
The Company was founded in 1972 by Monte R. Black, Chairman and Chief
Executive Officer, as a local power washing business. Upon completion of the
Offering, Mr. Black will own beneficially, directly or indirectly, 62.3% of the
outstanding Common Stock. Since its founding, the Company has grown primarily by
broadening its customer base, expanding the scope of services it offers and
increasing the number of locations from which it provides services. These remain
the principal elements of the Company's strategy for generating internal revenue
growth in the future. In recent years, the Company has expanded from its
historical strength in industrial cleaning and facility support services into
other industrial services including air filtration, container cleaning and
process water purification. MPW believes that diversification into other
in-plant and related services provides opportunities to expand the Company's
presence within the facilities in which it already operates. MPW believes it can
also generate internal growth by gaining access to other facilities owned and
operated by its existing customers.
An independent market research firm, Farkas Berkowitz & Company, has
provided materials to the Company that indicate the industrial cleaning and
maintenance market is estimated to be in excess of $12 billion in annual
revenues, and is estimated to exceed 9,500 firms. The Company believes the
industry has begun a period of consolidation as firms combine to improve
personnel and equipment utilization, increase market share, reduce cost of
capital and acquire additional service lines useful to their customers.
The industrial services industry has benefitted from a trend toward
outsourcing among industrial concerns as a means of reducing costs and enhancing
operational efficiency. With outsourcing, companies contract with reliable
suppliers for the performance of certain non-core functions, allowing them to
focus on core business activities. Outsourcing allows companies to convert fixed
costs to variable costs, streamline their organizations and shift the cost of
specialized equipment to service providers like MPW.
In recent years, the Company added several key members to its management
team and developed a strategy to more aggressively pursue acquisitions and
internal growth initiatives, as well as to implement systems, controls and other
infrastructure necessary to support future growth. In April 1996, the Company
expanded into the complementary business of industrial air filtration services
through the acquisition of Weston Engineering ("Weston"), with revenues of $8.6
million for the twelve-month period ended June 30, 1996. In October 1997, the
Company acquired ESI International ("ESI"), another industrial air filtration
services business, with revenues of $6.7 million for the twelve-month period
ended June 30, 1997.
3
<PAGE> 5
The Company's objective is to be the premier provider of technology-based
industrial cleaning, facility support and related services to industrial
customers. The principal elements of MPW's competitive strategy are the
following:
- Industrial Market Focus. MPW focuses only on the industrial market and
offers a diverse range of services to maximize market share within a
specific industrial facility.
- Ongoing Customer Relationships. In fiscal 1997, over 95% of the
Company's revenues were derived from customers for whom MPW performed
work during the preceding fiscal year.
- Quality Workforce. MPW uses broad and proactive recruiting, safety and
training programs to strive to develop a quality workforce.
- Technology-Based Services. Customers retain MPW to perform services
requiring technology, experience or equipment that would be difficult or
costly for customers to duplicate. Advanced equipment and skilled
personnel are essential for minimizing task completion time and facility
downtime.
- Responsiveness to Customers. The ability to provide prompt response is a
critical component of the Company's strategy. The Company maintains a
culture of responsiveness to its customers by establishing facilities
close to or within its customers' locations and using a decentralized
operational structure.
The Company's principal executive offices are located at 9711 Lancaster
Road, S.E., Hebron, Ohio 43025 and its telephone number is (614) 927-8790.
RISK FACTORS
Any investment in the Common Stock offered hereby involves a high degree of
risk. For a discussion of certain risks of an investment in the Common Stock
offered hereby, see "Risk Factors" on pages 6 through 8.
THE OFFERING
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<S> <C>
Common Stock offered by the Company.......... 3,750,000 shares
Common Stock to be outstanding after the
Offering................................... 10,046,000 shares (1)
Use of Proceeds.............................. To repay the outstanding principal amount of
the promissory notes (the "AAA Notes") issued
in connection with a dividend of
undistributed S Corporation earnings (the
"Distribution"), to repay indebtedness and
for general corporate purposes. See "Use of
Proceeds" and "Prior S Corporation Status."
Proposed Nasdaq National Market symbol....... MPWG
</TABLE>
- ---------------
(1) Includes 96,000 shares issued in connection with the acquisition of ESI in
October 1997. Excludes 1,204,000 shares of Common Stock issuable upon
exercise of outstanding stock options at a weighted average exercise price
of $3.94 per share. See "Executive Compensation -- Stock Option Plans." Also
excludes 67,800 shares of Common Stock to be issued in connection with the
Company's repurchase of certain minority stock ownership interests. See
"Certain Related Party and Other Transactions."
The business of the Company operates primarily through its wholly-owned
subsidiary, MPW Industrial Services, Inc. ("Industrial"), which, prior to the
Offering, was an S Corporation for tax purposes. Prior to the Offering, (i) the
shareholders of Industrial exchanged their shares of Industrial for shares of
the Company, and (ii) the Company effected a 4-to-1 stock split. As a result of
these transactions, Industrial's S Corporation status was terminated and the
shareholders of Industrial owned all of the outstanding Common Stock of MPW.
Unless otherwise indicated, the information in this Prospectus assumes the
consummation of the above transactions.
This Prospectus contains certain forward-looking statements that are based
on the beliefs of the Company's management, as well as assumptions made by, and
information currently available to, the Company's management. The Company's
future results, performance or achievements could differ materially from those
expressed in, or implied by, any such forward-looking statements. See "Risk
Factors" for a discussion of factors that could cause or contribute to such
material differences.
4
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA (1)
--------------------------------------------------------- ----------------------------
THREE MONTHS THREE MONTHS
ENDED YEAR ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------------------- ----------------- JUNE 30, -----------------
1994 1995 1996 1997 1996 1997 1997 1996 1997
------- ------- ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.............................. $49,172 $56,305 $58,430 $72,908 $19,422 $21,865 $72,908 $19,422 $21,865
Costs and expenses:
Cost of services.................... 31,759 37,768 37,543 48,460 12,641 14,380 48,460 12,641 14,380
Selling, general and administrative
expenses.......................... 9,265 10,208 11,009 13,603 3,205 3,545 14,311 3,382 3,587
Depreciation and amortization (2)... 4,589 4,356 4,933 3,655 935 866 3,042 750 841
Deferred stock option compensation
(3)............................... -- -- -- 2,764 2,189 160 -- -- --
Non-recurring item (4).............. 1,011 -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total costs and expenses............ 46,624 52,332 53,485 68,482 18,970 18,951 65,813 16,773 18,808
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from operations................ 2,548 3,973 4,945 4,426 452 2,914 7,095 2,649 3,057
Interest expense, net................. 274 104 541 974 214 335 -- -- --
Minority earnings..................... -- -- 172 207 125 99 -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from continuing operations
before income taxes................. 2,274 3,869 4,232 3,245 113 2,480 7,095 2,649 3,057
Provision for income taxes (5)........ 134 331 360 1,085 44 149 2,838 1,060 1,223
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from continuing operations..... 2,140 3,538 3,872 2,160 69 2,331 4,257 1,589 1,834
Discontinued operations, net of income
taxes............................... 268 367 163 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income............................ $ 2,408 $ 3,905 $ 4,035 $ 2,160 $ 69 $ 2,331 $ 4,257 $ 1,589 $ 1,834
======= ======= ======= ======= ======= ======= ======= ======= =======
Earnings per common share............. $ 0.40 $ 0.15 $ 0.17
======= ======= =======
Weighted average common shares
outstanding......................... 10,747 10,747 10,747
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------
PRO FORMA
ACTUAL AS ADJUSTED (6)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................................................... $ 9,234 $15,992
Net property and equipment................................................................ 23,119 17,406
Total assets.............................................................................. 46,438 47,884
Total debt and capital leases, including current maturities............................... 15,089 --
Total shareholders' equity................................................................ 17,688 37,625
</TABLE>
- ---------------
(1) The pro forma statement of income data give effect to the following
adjustments as if the transactions had been completed as of the beginning of
the periods indicated: (i) the adjustments to historical lease costs for
certain facilities leased by the Company from related parties and the
recharacterization of such leases from capital to operating; (ii) the
elimination of deferred stock option compensation; (iii) the reduction of
interest expense related to existing debt obligations to be repaid from the
net proceeds from the Offering; (iv) the elimination of minority earnings as
a result of the Company's purchase of certain minority stock ownership
interests; and (v) the recording of federal and state income taxes as if all
operations of the Company had been taxed as a C Corporation.
The pro forma weighted average common shares outstanding has been increased
by the 3,750,000 shares of the Offering, the net proceeds of which will fund
the Distribution and the retirement of existing debt obligations, and the
Company's issuance of 67,800 shares of Common Stock in exchange for certain
minority stock ownership interests. See "Selected Unaudited Condensed Pro
Forma Financial Data" and related Notes thereto, included elsewhere in this
Prospectus.
The Company expects that its quarter ended December 31, 1997 will be
affected by two non-recurring adjustments. The Company will incur a non-cash
expense of approximately $2.6 million, net of tax, associated with the
elimination of repurchase obligations contained in certain of its stock
option plans. Also, in connection with the termination of S Corporation
status, the Company will record a non-cash benefit from net deferred tax
assets of approximately $3.3 million. These adjustments have not been
reflected in the pro forma statement of income data.
(2) Effective July 1, 1996, the Company changed its useful life assumptions for
certain categories of property and equipment, resulting in a $1,620,000
reduction in depreciation and amortization expense in fiscal 1997. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" and Note 3 to the Consolidated Financial Statements.
(3) Represents compensation expense related to the Company's obligation, under
certain conditions, to repurchase securities issued under certain of the
Company's stock option plans. Such repurchase obligation terminates
effective with the Offering.
(4) Represents charges related principally to the termination of certain
workers' compensation insurance with the State of Ohio's Bureau of Workers'
Compensation by the Company. This change occurred effective October 1, 1993
whereby the Company restructured its primary workers' compensation insurance
program with respect to the State of Ohio.
(5) Certain of the Company's subsidiaries were historically taxed as C
Corporations and appropriate provisions for federal and state income taxes
were recorded.
(6) Adjusted to reflect the following as if they had occurred on September 30,
1997: (i) the Distribution and a related sale of certain assets; (ii) the
recognition of net deferred tax assets resulting from the termination of S
Corporation status; (iii) the elimination of deferred stock option
compensation related to certain of the Company's stock option plans; (iv)
the issuance of Common Stock in connection with the Company's purchase of
certain minority stock ownership interests; (v) the elimination of capital
lease liability as a result of restructuring certain lease agreements with
related parties; and (vi) the sale of 3,750,000 shares of Common Stock
hereby offered by the Company and the application of the net proceeds
therefrom.
5
<PAGE> 7
RISK FACTORS
An investment in the Common Stock offered by this Prospectus involves a
high degree of risk. In addition to the other information in this Prospectus,
the following risk factors should be considered carefully in evaluating an
investment in the Common Stock.
HIGHLY COMPETITIVE INDUSTRY
The industrial services industry is highly competitive and fragmented and
requires substantial labor and capital resources. Each of the geographic markets
in which the Company competes or will likely compete is served by one or more of
the larger national or regional industrial services companies, as well as
numerous local industrial services companies of varying sizes and resources. The
larger national or regional industrial service companies, which are typically
divisions or subsidiaries of engineering, construction or other service firms,
are estimated to account for approximately 40% of the market. The remainder of
the industrial services market is estimated to be serviced by over 9,000 private
firms with estimated revenues of less than $10 million per year each. The larger
industrial services companies may have significantly greater financial and other
resources than the Company. From time to time, these or other competitors may
reduce the price of their services in an effort to expand market share. These
practices may either require MPW to reduce the pricing of its services or result
in a loss of business. There can be no assurance that the Company will be able
to compete effectively with existing or potential competitors and any inability
to compete would have a material adverse effect on the Company's competitive
strategies, results of operations and its efforts to achieve its objectives. See
"Business -- Competition."
VOTING CONTROL OF CURRENT SHAREHOLDERS
Upon the completion of the Offering, Monte R. Black, Chairman and Chief
Executive Officer, will own beneficially, directly and indirectly, approximately
62.3% of the outstanding Common Stock (approximately 59.0% assuming exercise of
the Underwriters' over-allotment option). Accordingly, Mr. Black will be able to
exercise control over the Company's affairs, the election of individuals to the
Board of Directors and the outcome of other matters submitted to a vote of
shareholders. See "Principal Shareholders."
DEPENDENCE ON CUSTOMER OUTSOURCING
The Company's business and growth strategies depend in large part on the
continuation of a trend toward outsourcing industrial services. The decision to
outsource is dependent upon customer perception that outsourcing may provide
higher quality services at a lower overall cost and such decision is subject to
change at the customer's discretion. There can be no assurance that the trend
toward outsourcing industrial services will continue, as organizations, due to
perceptions of quality or pricing advantages, may elect to perform such services
in-house. In addition, labor unions representing employees of certain of the
Company's current and prospective customers have generally opposed the
outsourcing trend and sought to direct to union employees the performance of
services typical of those offered by the Company. A reversal of the trend toward
outsourcing could have a material adverse effect on the Company's business and
growth strategies. See "Business -- Industry Overview."
CONCENTRATION OF CUSTOMERS
In fiscal 1997, MPW's ten largest customers represented 42.1% of revenues.
General Motors Corporation represented 10.4% of fiscal 1997 revenues.
Substantially all of the Company's arrangements to perform services may be
terminated or modified by its customers at will and without penalty. Although
MPW has historically maintained long-term relationships with many customers, a
portion of the Company's services are project oriented and the Company has few
long-term contracts. The Company's loss of, and failure to replace the revenues
from, one or more large customers, could have a material adverse effect on the
Company's business, results of operations and financial condition.
6
<PAGE> 8
AVAILABILITY OF LABOR PERSONNEL
MPW's industrial cleaning and facility support services are labor
intensive. The Company employs a large number of hourly workers in order to
provide its services and incurs substantial expenses for recruiting and training
new personnel. Approximately 80% of the Company's workforce is comprised of
hourly workers. The current low unemployment rate in certain geographic areas in
which MPW operates has contracted the labor pool available to the Company in
those areas. The Company has historically experienced a high level of turnover,
and there can be no assurance that the Company will be able to successfully
attract and retain employees. There can be no assurance that the Company will be
able to maintain a labor force adequate to operate efficiently, that the
Company's labor expenses will not increase as a result of a shortage in the
supply of hourly workers or that the Company will not have to curtail its growth
strategy as a result of labor shortages.
RISKS RELATED TO GROWTH THROUGH ACQUISITIONS
One of MPW's business strategies is to increase its revenues, earnings and
market share through the acquisition of businesses that complement its existing
operations, expand its service capabilities or provide it with an entry into
markets it does not currently serve. Growth through acquisitions involves
substantial risks, including the risk of improper valuation of the acquired
business and the risk of inadequate integration. There can be no assurance that
suitable acquisition candidates will be available, that the Company will have
access to financing or that MPW will be able to acquire or profitably integrate
such additional businesses. The Company may compete for acquisition and
expansion opportunities with companies that have significantly greater financial
resources than the Company. In addition, to the extent that consolidation
becomes more prevalent in the industry, the prices for attractive acquisition
candidates may be increased, and there can be no assurance that businesses
acquired in the future will achieve levels of profitability that justify the
investment therein. The risks associated with growth through acquisitions could
have a material adverse effect on the Company's growth strategies as well as its
business, results of operations and financial condition. See
"Business -- Strategy."
DEPENDENCE ON SENIOR MANAGEMENT
MPW's success is largely dependent upon the efforts of the members of its
senior management team, particularly Monte R. Black, Chairman and Chief
Executive Officer, and Ira O. Kane, President and Chief Operating Officer. If
these executive officers or certain other officers of the Company do not to
continue in their present positions, or if a material number of other managers
fail to continue with the Company, MPW's business could be adversely affected.
See "Management."
FLUCTUATIONS IN QUARTERLY RESULTS
The Company's quarterly results of operations may fluctuate as a result of
a number of factors over which the Company has no control, including its
customers' budgetary constraints, the timing and duration of its customers'
planned maintenance activities and shutdowns and changes in its competitors'
pricing policies. Also, certain operating and fixed costs remain relatively
constant throughout the fiscal year, which when offset by differing levels of
revenues may result in fluctuations in quarterly operating results. The
Company's results of operations tend to vary seasonally, with the third quarter
generating the least amount of revenues, higher revenues in the second quarter
and the greatest amount of revenues in the first and fourth quarters. As a
result, the Company's financial performance can vary significantly from quarter
to quarter, which could have an impact on the Company's stock price.
GENERAL ECONOMIC CONDITIONS
The Company's results of operations may fluctuate as a result of general
economic conditions. Many of the Company's customers operate in industries, such
as the automotive and steel industries, which have historically shown
sensitivity to recessions and other adverse conditions in the general economy.
Consequently, a general or regional economic downturn may result in a reduction
in the demand for the Company's services and, thus, have a material adverse
effect on the Company's business, results of operations and financial condition.
7
<PAGE> 9
NO PRIOR PUBLIC MARKET FOR COMMON STOCK
Prior to the Offering, there has been no public market for the Common
Stock. MPW has made application to list the Common Stock for quotation on the
Nasdaq National Market; however, there can be no assurance that an active
trading market will develop subsequent to the Offering or, if developed, that it
will be sustained. The initial public offering price for the Common Stock was
determined by negotiation between the Company and the Underwriters and may bear
no relationship to the price at which the Common Stock will trade after the
Offering. See "Underwriting" for the factors considered in determining the
initial public offering price.
POTENTIAL STOCK PRICE VOLATILITY
After the Offering, the market price of the Common Stock may be subject to
significant fluctuations in response to numerous factors, including the timing
of any acquisitions by the Company, variations in the Company's or its
competitors' annual or quarterly financial results, changes by financial
analysts in their estimates of the future earnings of the Company, conditions in
the economy in general or in the Company's industry in particular, unfavorable
publicity or changes in applicable laws and regulations. The stock market has
also, from time-to-time, experienced significant price and volume fluctuations
that have often been unrelated to the operating performance of companies whose
securities are publicly traded. Following periods of volatility in the market
price of a company's securities, securities class action litigation frequently
has been commenced against such companies. Such litigation could result in
substantial costs and a diversion of management's attention and resources, which
could have a material adverse effect on the Company. Any adverse determination
in such litigation could also subject the Company to significant liabilities.
DILUTION
Purchasers of the Common Stock offered hereby will experience an immediate
and substantial dilution of $6.52 in the net tangible book value per share of
their investment (assuming an initial public offering price of $10.00 per
share). In the event MPW issues additional Common Stock in the future, including
Common Stock that may be issued in connection with future acquisitions,
purchasers of Common Stock in the Offering may experience further dilution in
the net tangible book value per share of the Common Stock. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market following
the Offering, or the perception that such sales could occur, could adversely
affect prevailing market prices for the Common Stock. Upon consummation of the
Offering, 10,046,000 shares of Common Stock will be outstanding. The shares of
Common Stock sold in the Offering are freely saleable in the public market,
unless acquired by affiliates of MPW. All of the shares outstanding prior to
completion of the Offering are subject to contractual or other restrictions that
prohibit the shareholder from offering, selling, transferring, pledging,
contracting to do the same or otherwise disposing of such shares for a period of
180 days after the date of this Prospectus without the consent of Raymond James
& Associates, Inc. After this 180-day period expires, 6,200,000 shares will be
eligible for resale in the public market under Rule 144 promulgated under the
Securities Act of 1933, as amended ("Securities Act"). See "Shares Eligible for
Future Sale." After the completion of the Offering, the Company intends to file
a registration statement under the Securities Act to register up to 1,204,000
shares issuable upon exercise of stock options granted or to be granted under
its stock option plans. After the filing of such registration statement and
subject to certain restrictions under Rule 144, these shares will be freely
saleable in the public market immediately following exercise of such options.
See "Description of Capital Stock," "Executive Compensation -- Stock Option
Plans," "Shares Eligible for Future Sale" and "Certain Related Party and Other
Transactions."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Amended and Restated Articles of
Incorporation (the "Articles of Incorporation") and the Amended and Restated
Code of Regulations (the "Code of Regulations") and of the Ohio General
Corporation Law (the "OGCL"), together or separately, could discourage potential
acquisition
8
<PAGE> 10
proposals, delay or prevent a change in control of the Company and limit the
price that certain investors might be willing to pay in the future for the
Common Stock, including provisions that (i) require certain supermajority votes;
and (ii) establish certain advance notice procedures for nomination of
candidates for election as directors and for shareholder proposals to be
considered at shareholders' meetings. The Board of Directors of the Company will
also have authority to issue one or more series of preferred stock without
further shareholder approval and upon terms as the Board of Directors may
determine. Issuance of preferred stock could adversely affect holders of the
Common Stock in the event of liquidation of the Company or delay, defer or
prevent an attempt to obtain control of the Company by means of a tender offer,
merger, proxy contest or otherwise. Additionally, Section 1701.831 of the OGCL
contains provisions that require shareholder approval of any proposed "control
share acquisition" of any Ohio corporation; and Chapter 1704 of the OGCL
contains provisions that restrict certain business combinations and other
transactions between an Ohio corporation and interested shareholders. See
"Description of Capital Stock -- Ohio Law and Certain Charter Provisions."
DIVIDEND POLICY
The Company currently anticipates that, after the completion of the
Offering, all of its earnings will be retained for development and expansion of
the Company's business and does not anticipate paying any cash dividends on the
Common Stock in the foreseeable future. The Company's credit facilities contain
covenants that prohibit the payment of cash dividends. See "Dividend Policy."
9
<PAGE> 11
PRIOR S CORPORATION STATUS
Effective July 1, 1987, MPW Industrial Services, Inc. ("Industrial")
elected to be treated as an S Corporation under subchapter S of the Internal
Revenue Code of 1986, as amended, for federal income tax purposes and under
comparable state tax laws. As a result of the S Corporation election,
Industrial's shareholders have been taxed directly on Industrial's income,
whether or not such income was distributed, and Industrial has not been subject
to federal income tax at the corporate level.
Since 1987, Industrial has made periodic distributions to its shareholders.
The balance of taxed or taxable accumulated undistributed earnings that have not
been distributed is reflected in an "accumulated adjustments account" (the "AAA
account"). Prior to the Offering, Industrial terminated its S Corporation status
and declared a dividend of $21.2 million evidenced by promissory notes (the "AAA
Notes"), an amount approximately equal to the undistributed earnings in the AAA
account on which the shareholders either have paid or will be required to pay
income taxes (the "Distribution"). A portion of the proceeds of the Offering
will be used to repay the AAA Notes. See "Use of Proceeds" and "Certain Related
Party and Other Transactions."
The existing shareholders have agreed to indemnify the Company for any
federal and state taxes (including penalties and interest, if any) payable by
the Company as a result of Industrial not qualifying as an S Corporation for any
period prior to the termination of its S Corporation status.
USE OF PROCEEDS
The net proceeds to the Company from the sale of 3,750,000 shares of Common
Stock offered hereby are estimated to be $34.3 million at an assumed initial
offering price of $10.00 per share ($39.5 million if the Underwriters'
over-allotment option is exercised in full). Of the net proceeds to be received
by the Company, approximately $12.4 million will be used to repay a portion of
the outstanding principal amount of the AAA Notes, and approximately $13.0
million will be used to repay outstanding indebtedness including amounts owed
under a revolving credit facility and long-term note arrangement with the
Company's principal banks (the "Banks"). The net proceeds will also be used to
pay when due the remaining $5.2 million outstanding principal amount of the AAA
Notes (approximately $1.0 million due on December 31, 1997 and the balance of
$4.2 million due on April 15, 1998), which amount approximates the income tax
liability of Industrial's shareholders for income earned from January 1, 1997
through the termination of S Corporation status. The remaining net proceeds, if
any, will be used for general corporate purposes. Pending specific application
of the net proceeds, the Company intends to invest unused net proceeds in
short-term investment grade securities or money market instruments.
As of September 30, 1997, the Company's revolving credit facility had an
outstanding balance of $7.1 million and a weighted average interest rate of
7.06%. The revolving credit facility bears interest at the prime rate less 0.5%
or, at the Company's option, the Eurodollar market rate plus 1.0%. Under the
long-term note arrangement, the Company entered into promissory notes with the
Banks with an aggregate outstanding balance as of September 30, 1997 of $5.9
million. The long-term notes bear interest at the prime rate less 0.25% or, at
the Company's option, the Eurodollar market rate plus 1.25%. The weighted
average interest rate for the notes as of September 30, 1997 was 6.91%.
DIVIDEND POLICY
The Company anticipates that all future earnings will be retained to
finance the Company's operations and for the growth and development of its
business. Accordingly, the Company does not currently anticipate paying cash
dividends on its Common Stock. The payment of any future dividends will be
subject to the discretion of the Board of Directors of the Company and will
depend on the Company's results of operations, financial condition, contractual
restrictions, restrictions imposed by applicable law and other factors that the
Board of Directors deem relevant. The Company's credit facilities contain
covenants that prohibit the payment of cash dividends.
10
<PAGE> 12
CAPITALIZATION
The following table sets forth the current maturities of long-term debt and
capitalization as of September 30, 1997 on an actual basis, pro forma as of such
date to reflect the transactions set forth in Note (1) hereto, and pro forma as
adjusted to reflect the transactions set forth in Note (1) hereto and
application of the estimated net proceeds from the sale of the 3,750,000 shares
of Common Stock offered hereby at an assumed initial offering price of $10.00
per share, after deducting the estimated underwriting discounts and commissions
and offering expenses. See "Use of Proceeds." This table should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA (1) AS ADJUSTED
------- ------------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Current maturities of long-term debt and capital lease
obligations............................................ $ 965 $ 880 $ --
======= ======= =======
Long-term debt, excluding current maturities............. $12,096 $29,696 $ --
Capital lease obligations, excluding current
maturities............................................. 2,028 -- --
Shareholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares
authorized; no shares outstanding................... -- -- --
Common stock, no par value; 30,000,000 shares
authorized; 6,200,000 shares outstanding, Actual;
6,267,800 shares outstanding, Pro Forma; 10,017,800
shares outstanding, Pro Forma As Adjusted........... 62 63 100
Additional paid-in capital............................. 837 2,022 36,260
Retained earnings...................................... 16,789 1,265 1,265
------- ------- -------
Total shareholders' equity..................... 17,688 3,350 37,625
------- ------- -------
Total capitalization........................... $31,812 $33,046 $37,625
======= ======= =======
</TABLE>
- ---------------
(1) Pro forma data assume the following transactions had occurred on September
30, 1997: (i) the issuance of $17.6 million of AAA Notes; (ii) the
recognition of net deferred tax assets resulting from the termination of S
Corporation status; (iii) the elimination of deferred stock option
compensation related to certain of the Company's stock option plans; (iv)
the issuance of Common Stock in connection with the Company's purchase of
certain minority stock ownership interests; (v) the elimination of capital
lease liability as a result of restructuring certain lease agreements with
related parties; and (vi) the reclassification of the remaining AAA account
from retained earnings to additional paid-in capital as a result of
termination of S Corporation status. See "Prior S Corporation Status" and
Note 14 to the Consolidated Financial Statements.
11
<PAGE> 13
DILUTION
The Company's net tangible book value as of September 30, 1997 was $15.2
million (excluding intangible assets of $2.5 million), or $2.45 per share of
Common Stock. Net tangible book value per share represents the amount of the
Company's total tangible assets less its total liabilities, divided by the total
number of shares of Common Stock outstanding. After giving effect to the
adjustments described in Note (1) hereto, the pro forma net tangible book value
as of September 30, 1997 would have been $632,000 or $0.10 per share.
After giving effect to the adjustments described in Note (1) hereto and to
the sale by the Company of Common Stock in the Offering at an assumed initial
public offering price of $10.00 per share (and after deduction of the estimated
underwriting discounts and commissions and offering expenses), the pro forma net
tangible book value as of September 30, 1997 would have been approximately $34.9
million or $3.48 per share of Common Stock. This represents an immediate
increase in pro forma net tangible book value of $3.38 per share to existing
shareholders and an immediate dilution in net tangible book value of $6.52 per
share to purchasers of Common Stock in the Offering, as illustrated in the
following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................ $10.00
Net tangible book value per share at September 30, 1997.................. $ 2.45
Adjustment in net tangible book value per share (1)...................... (2.35)
------
Pro forma net tangible book value per share.............................. 0.10
------
Increase per share attributable to existing shareholders................... 3.38
------
Pro forma net tangible book value per share after the Offering............. 3.48
------
Net tangible book value dilution per share to new investors................ $ 6.52
======
</TABLE>
- ---------------
(1) Pro forma data assume the following transactions had occurred on September
30, 1997: (i) the issuance of $17.6 million of AAA Notes; (ii) the
recognition of net deferred tax assets resulting from the termination of S
Corporation status; (iii) the elimination of deferred stock option
compensation related to certain of the Company's stock option plans; and
(iv) the issuance of Common Stock in connection with the Company's purchase
of certain minority stock ownership interests. See "Prior S Corporation
Status" and Note 14 to the Consolidated Financial Statements.
The Company had outstanding stock options exercisable for 1,204,000 shares
of Common Stock at a weighted average exercise price of $3.94 per share. If
these options are exercised, further dilution to new investors will occur. The
Company may also issue additional shares to effect future potential business
acquisitions or upon exercise of future stock option grants or equity awards,
which could also result in additional dilution to then existing shareholders.
See "Executive Compensation -- Stock Option Plans."
12
<PAGE> 14
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data presented below as of and for each of the years
in the five-year period ended June 30, 1997 have been derived from the
Consolidated Financial Statements, which have been audited by Ernst & Young LLP,
independent auditors. The selected financial data set forth below for the
Company as of and for the three months ended September 30, 1996 and 1997 have
been derived from unaudited consolidated financial statements of the Company
that have been prepared on the same basis as the audited Consolidated Financial
Statements and include all adjustments, consisting of normal recurring
adjustments, that the Company considers necessary for a fair presentation of the
financial position and results of operations for the periods presented.
Operating results for the three-month period ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the full fiscal
year. The selected consolidated financial data below should be read in
conjunction with the audited Consolidated Financial Statements and Notes thereto
included elsewhere in this Prospectus and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
----------------------------------------------- -----------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues......................... $47,875 $49,172 $56,305 $58,430 $72,908 $19,422 $21,865
Costs and expenses:
Cost of services............... 31,696 31,759 37,768 37,543 48,460 12,641 14,380
Selling, general and
administrative expenses..... 8,260 9,265 10,208 11,009 13,603 3,205 3,545
Depreciation and amortization
(1)......................... 4,493 4,589 4,356 4,933 3,655 935 866
Deferred stock option
compensation (2)............ -- -- -- -- 2,764 2,189 160
Non-recurring item (3)......... -- 1,011 -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Total costs and expenses....... 44,449 46,624 52,332 53,485 68,482 18,970 18,951
------- ------- ------- ------- ------- ------- -------
Income from operations........... 3,426 2,548 3,973 4,945 4,426 452 2,914
Interest expense, net............ 479 274 104 541 974 214 335
Minority earnings................ -- -- -- 172 207 125 99
------- ------- ------- ------- ------- ------- -------
Income from continuing operations
before income taxes............ 2,947 2,274 3,869 4,232 3,245 113 2,480
Provision for income taxes (4)... 112 134 331 360 1,085 44 149
------- ------- ------- ------- ------- ------- -------
Income from continuing
operations..................... 2,835 2,140 3,538 3,872 2,160 69 2,331
Discontinued operations, net of
income taxes................... 121 268 367 163 -- -- --
------- ------- ------- ------- ------- ------- -------
Net income....................... $ 2,956 $ 2,408 $ 3,905 $ 4,035 $ 2,160 $ 69 $ 2,331
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
----------------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997 1997
------- ------- ------- ------- ------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................. $ 6,106 $ 4,394 $ 3,906 $ 2,521 $ 7,069 $ 9,234
Net property and equipment....... 14,391 13,004 12,775 21,258 23,400 23,119
Total assets..................... 26,948 26,579 27,695 39,468 45,285 46,438
Total debt and capital leases,
including current maturities... 5,163 2,328 1,234 12,471 14,732 15,089
Total shareholders' equity....... 16,808 16,681 16,605 16,067 16,478 17,688
</TABLE>
- ---------------
(1) Effective July 1, 1996, the Company changed its useful life assumptions for
certain categories of property and equipment, resulting in a $1,620,000
reduction in depreciation and amortization expense in fiscal 1997. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" and Note 3 to the Consolidated Financial Statements.
(2) Represents compensation expense related to the Company's obligation, under
certain conditions, to repurchase securities issued under certain of the
Company's stock option plans. Such repurchase obligation terminates
effective with the Offering.
(3) Represents charges related principally to the termination of certain
workers' compensation insurance with the State of Ohio's Bureau of Workers'
Compensation by the Company. This change occurred effective October 1, 1993
whereby the Company restructured its primary workers' compensation program
with respect to the State of Ohio.
(4) Certain of the Company's subsidiaries were historically taxed as C
Corporations and appropriate provisions for federal and state income taxes
were recorded.
13
<PAGE> 15
SELECTED UNAUDITED CONDENSED PRO FORMA FINANCIAL DATA
The selected unaudited condensed pro forma financial data have been derived
from the historical financial statements of the Company. The unaudited pro forma
statement of income data for the year ended June 30, 1997 and the three months
ended September 30, 1997 give effect to the Offering and certain other
transactions described below as if these transactions had occurred at the
beginning of each such period. The unaudited condensed pro forma balance sheet
data give effect to such transactions and to the Offering and the use of the net
proceeds therefrom after deducting underwriting discounts and estimated expenses
payable by the Company as if such transactions had occurred on September 30,
1997. See "Prior S Corporation Status" and "Use of Proceeds." The Company
expects that its quarter ended December 31, 1997 will be affected by two
non-recurring adjustments. The Company will incur a non-cash expense of
approximately $2.6 million, net of tax, associated with the elimination of
repurchase obligations contained in certain of its stock option plans. Also, in
connection with the termination of S Corporation status, the Company will record
a non-cash benefit from net deferred tax assets of approximately $3.3 million.
These adjustments have not been reflected in the pro forma statement of income
data. The selected unaudited condensed pro forma financial data and accompanying
Notes should be read in conjunction with the Consolidated Financial Statements
and the Notes thereto appearing elsewhere herein. The unaudited pro forma
financial data is provided for informational purposes only and does not purport
to represent what the Company's financial position or results of operations
actually would have been had the transactions described therein been completed
as of the date or at the beginning of the period indicated, or to project the
Company's financial position or results of operations at any future date or for
any future period.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1997 THREE MONTHS ENDED SEPTEMBER 30, 1997
------------------------------------ ------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues..................................... $ 72,908 $ -- $72,908 $ 21,865 $ -- $21,865
Costs and expenses:
Cost of services........................... 48,460 -- 48,460 14,380 -- 14,380
Selling, general and administrative
expenses................................. 13,603 708(1) 14,311 3,545 42(1) 3,587
Depreciation and amortization.............. 3,655 (613)(1) 3,042 866 (25)(1) 841
Deferred stock option compensation......... 2,764 (2,764)(2) -- 160 (160)(2) --
------- ------- ------- ------- ------- -------
Total costs and expenses................... 68,482 (2,669) 65,813 18,951 (143) 18,808
------- ------- ------- ------- ------- -------
Income from operations....................... 4,426 2,669 7,095 2,914 143 3,057
Interest expense, net........................ 974 (347)(1) -- 335 (85)(1) --
(627)(3) (250)(3)
Minority earnings............................ 207 (207)(4) -- 99 (99)(4) --
------- ------- ------- ------- ------- -------
Income before income taxes................... 3,245 3,850 7,095 2,480 577 3,057
Provision for income taxes................... 1,085 1,753(5) 2,838 149 1,074(5) 1,223
------- ------- ------- ------- ------- -------
Net income................................... $ 2,160 $ 2,097 $ 4,257 $ 2,331 $ (497) $ 1,834
======= ======= ======= ======= ======= =======
Earnings per common share.................... $ 0.40 $ 0.17
======= =======
Weighted average common shares outstanding
(6)........................................ 10,747 10,747
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------------------------------------------------
PRO FORMA OFFERING PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA ADJUSTMENTS (7) AS ADJUSTED
---------- ----------- --------- --------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets:
Current assets..................................... $ 20,458 $ 2,094(8) $22,552 $ 3,699 $26,251
Net property and equipment......................... 23,119 (2,113)(1) 17,406 -- 17,406
(3,600)(9)
Other assets....................................... 2,861 200(10) 4,227 -- 4,227
1,166(8)
------- -------- ------- -------- -------
Total assets....................................... $ 46,438 $ (2,253) $44,185 $ 3,699 $47,884
======= ======== ======= ======== =======
Liabilities and equity:
Current liabilities, excluding current maturities
of long-term debt................................ $ 10,259 $ -- $10,259 $ -- $10,259
Current maturities of long-term debt............... 965 (85)(1) 880 (880) --
Long-term debt, excluding current maturities....... 12,096 21,200(11) 29,696 (29,696) --
(3,600)(9)
Capital leases, excluding current maturities....... 2,028 (2,028)(1) -- -- --
Deferred stock option compensation................. 2,924 (2,924)(2) -- -- --
Minority interest.................................. 478 (478)(4) -- -- --
Shareholders' equity:
Common stock..................................... 62 1(12) 63 37 100
Additional paid-in capital....................... 837 1,185(12) 2,022 34,238 36,260
Retained earnings................................ 16,789 (15,524)(12) 1,265 -- 1,265
------- -------- ------- -------- -------
Total equity....................................... 17,688 (14,338)(12) 3,350 34,275 37,625
------- -------- ------- -------- -------
Total liabilities and equity....................... $ 46,438 $ (2,253) $44,185 $ 3,699 $47,884
======= ======== ======= ======== =======
</TABLE>
14
<PAGE> 16
- ---------------
(1) Reflects the adjustment of historical lease costs for certain facilities
leased by the Company from related parties and the recharacterization of
such leases from capital to operating pursuant to restructured lease
agreements to take effect in connection with the Offering.
(2) Reflects the elimination of deferred stock option compensation related to
the Company's obligation, under certain conditions, to repurchase
securities issued under certain of the Company's stock option plans. Such
repurchase obligation terminates effective with the Offering.
(3) Reflects the reduction in interest expense related to the repayment of
existing debt obligations from the net proceeds of the Offering.
(4) Reflects the elimination of minority earnings and liability as a result of
the issuance of Common Stock in connection with the Company's purchase of
certain minority stock ownership interests to take effect upon completion
of the Offering.
(5) Reflects the recording of federal and state income taxes at an effective
rate of 40% as if all operations of the Company had been taxed as a C
Corporation.
(6) Based on the weighted average common shares outstanding as adjusted for the
Company's sale of 3,750,000 shares of Common Stock in the Offering, the net
proceeds of which will be used to fund the Distribution and the reduction
of existing debt obligations, and the Company's issuance of 67,800 shares
of Common Stock in exchange for certain minority stock ownership interests.
(7) Reflects the sale of 3,750,000 shares of Common Stock offered by the
Company and the application of the net proceeds therefrom.
(8) Reflects the recognition of net deferred tax assets resulting from the
termination of S Corporation status.
(9) Reflects the sale of a corporate aircraft to an entity controlled by the
Company's principal shareholder.
(10) Reflects increase in goodwill related to purchase of minority stock
ownership interests.
(11) Reflects the Distribution.
(12) Reflects adjustments to shareholders' equity as follows (in thousands):
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TOTAL
STOCK CAPITAL EARNINGS EQUITY
------ ---------- -------- --------
<S> <C> <C> <C> <C>
AAA account distribution...................... $ -- $ -- $(21,200) $(21,200)
Elimination of deferred stock option
compensation................................ -- 2,924 -- 2,924
Purchase of minority stock ownership
interests................................... 1 677 -- 678
Recognition of net deferred tax assets........ -- -- 3,260 3,260
Reclassification of undistributed AAA......... -- (2,416) 2,416 --
--- ------- -------- --------
$ 1 $ 1,185 $(15,524) $(14,338)
=== ======= ======== ========
</TABLE>
15
<PAGE> 17
(13) The following table presents the Company's unaudited consolidated quarterly
financial results on a pro forma basis represented by the individual line
items reflected in the Company's consolidated statements of income for each
of the four quarters in fiscal 1997. This information has been presented on
the same basis as the Selected Unaudited Condensed Pro Forma Financial Data
appearing previously and, in the Company's opinion, contains all necessary
adjustments (consisting of normal recurring adjustments) to present fairly
the Company's unaudited quarterly results. Interim operating results,
however, are not necessarily indicative of the Company's results for any
future period. See "Risk Factors -- Fluctuations in Quarterly Results."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------- YEAR ENDED
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, JUNE 30,
1996 1996 1997 1997 1997
------------- ------------- ------------- ------------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.................... $19,422 $18,157 $15,994 $19,335 $ 72,908
Costs and expenses:
Cost of services.......... 12,641 11,925 10,900 12,994 48,460
Selling, general and
administrative
expenses............... 3,382 3,476 3,588 3,865 14,311
Depreciation and
amortization........... 750 759 764 769 3,042
------- ------- ------- ------- -------
Total costs and
expenses............... 16,773 16,160 15,252 17,628 65,813
------- ------- ------- ------- -------
Income from operations...... 2,649 1,997 742 1,707 7,095
------- ------- ------- ------- -------
Provision for income
taxes..................... 1,060 798 297 682 2,838
------- ------- ------- ------- -------
Net income.................. $ 1,589 $ 1,199 $ 445 $ 1,025 $ 4,257
======= ======= ======= ======= =======
Earnings per common share... $ 0.15 $ 0.11 $ 0.04 $ 0.10 $ 0.40
======= ======= ======= ======= =======
Weighted average common
shares outstanding........ 10,747 10,747 10,747 10,747 10,747
</TABLE>
16
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains certain forward-looking statements that are based
on the beliefs of the Company's management, as well as assumptions made by, and
information currently available to, the Company's management. The Company's
future results, performance or achievements could differ materially from those
expressed in, or implied by, any such forward-looking statements. See "Risk
Factors" for a discussion of factors that could cause or contribute to such
material differences.
OVERVIEW
The Company has been providing industrial services to customers for over 25
years. In recent years, the Company added several key members to its management
team and developed a strategy to more aggressively pursue acquisitions and
internal growth initiatives, as well as to implement systems, controls and other
infrastructure necessary to support future growth.
In April 1996, the Company expanded into the complementary business of
industrial air filtration services through the acquisition of Weston, with
revenues of $8.6 million for the twelve-month period ended June 30, 1996. In
October 1997, the Company acquired ESI, another industrial air filtration
services business, with revenues of $6.7 million for the twelve-month period
ended June 30, 1997. The Company intends to continuously evaluate opportunities
to make acquisitions consistent with its growth strategy.
MPW primarily derives its revenues by providing industrial services and
materials under time and materials or fixed price agreements with its customers.
Revenues from time and materials agreements are recognized based on labor and
materials expended. Revenues from fixed price agreements are recorded based on
the percentage of completion method.
Cost of services includes all direct labor, materials, subcontractor and
other costs related to the performance of MPW's services. Cost of services also
includes all costs associated with the Company's operating equipment, excluding
depreciation and amortization.
Selling, general and administrative expenses include management salaries,
clerical and administrative overhead, professional services, costs associated
with marketing and sales efforts and costs associated with the Company's
information systems.
Depreciation and amortization consists of depreciation of operating
equipment and amortization of capital leases and goodwill. Depreciation is
calculated using the straight-line method over the estimated useful lives of
property and equipment. Capital leases are amortized on a straight-line basis
over the lease term and goodwill is amortized on a straight-line basis over a
period not exceeding 25 years. Depreciation and amortization as a percentage of
revenues declined in fiscal 1997 primarily as a result of the Company's decision
to change its estimates of the useful lives of certain property and equipment,
effective July 1, 1996. The Company made this change in order to more accurately
reflect the Company's actual history of useful lives. The Company used the net
book value of each of its property and equipment assets as of July 1, 1996 and
applied the remaining useful life of each asset in the calculation of
depreciation from that date forward. The change reduced fiscal 1997 depreciation
and amortization expense by $1.6 million.
The Company's consolidated results of operations include deferred stock
option compensation in the amounts of $2.8 million for fiscal 1997 and $160,000
for the three months ended September 30, 1997. Under the terms of the Company's
1991 and 1994 stock option plans (the "Prior Stock Option Plans"), the Company
was obligated to repurchase Common Stock issued by exercise of stock options at
prices determined by a formula. The Company recorded deferred stock option
compensation to reflect the appreciation relating to options granted and
outstanding under the Prior Stock Option Plans. See Note 11 to the Consolidated
Financial Statements. The Company's redemption obligation under the Prior Stock
Option Plans terminates upon completion of the Offering. Deferred stock option
compensation relating to the Company's redemption obligation will no longer be
required to be reported in the Company's results of operations in future
periods.
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<PAGE> 19
Effective December 31, 1995, MPW disposed of its 70% interest in B&B
Underground. See Note 4 to the Consolidated Financial Statements. The operations
and subsequent sale of the Company's interest in B&B Underground have been
accounted for as discontinued operations and the Consolidated Financial
Statements have been restated to report this business separately as discontinued
operations for all periods presented.
Prior to the Offering, Industrial's S Corporation status was terminated. As
such, the Company will be subject to applicable corporate income tax rates for
all periods after this date. See "Prior S Corporation Status" and Note 9 to the
Consolidated Financial Statements.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
consolidated statement of income data as a percentage of revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
---------------------------- ---------------------
1995 1996 1997 (1) 1996 (1) 1997 (1)
----- ----- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses
Cost of services................. 67.1 64.3 66.5 65.1 65.8
Selling, general and
administrative expenses....... 18.1 18.8 18.7 16.5 16.2
Depreciation and amortization.... 7.7 8.4 5.0 4.8 4.0
----- ----- ----- ----- -----
Total costs and expenses......... 92.9 91.5 90.1 86.4 85.9
----- ----- ----- ----- -----
Income from operations............. 7.1 8.5 9.9 13.6 14.1
Interest expense, net............ 0.2 0.9 1.3 1.1 1.5
Minority earnings................ -- 0.3 0.3 0.6 0.5
----- ----- ----- ----- -----
Income from continuing operations
before income taxes.............. 6.9% 7.2% 8.2% 11.9% 12.1%
===== ===== ===== ===== =====
</TABLE>
- ---------------
(1) Excludes deferred stock option compensation of $2.8 million for the year
ended June 30, 1997 and $2.2 million and $160,000 for the three months ended
September 30, 1996 and 1997, respectively. Including the effect of such
expense, income from operations as a percentage of revenues would have been
6.1% for the year ended June 30, 1997 and 2.3% and 13.3% for the three
months ended September 30, 1996 and 1997, respectively. Including the effect
of such expense, income from continuing operations before income taxes as a
percentage of revenues would have been 4.5% for the year ended June 30, 1997
and 0.6% and 11.3% for the three months ended September 30, 1996 and 1997,
respectively.
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
Revenues. Revenues increased by $2.4 million, or 12.6%, to $21.9 million
for the three months ended September 30, 1997 from $19.4 million for the three
months ended September 30, 1996 as a result of internal growth in each of the
Company's principal service lines.
Cost of Services. Cost of services increased by $1.7 million, or 13.8%, to
$14.4 million for the three months ended September 30, 1997 from $12.6 million
for the three months ended September 30, 1996. Cost of services as a percentage
of revenues increased to 65.8% for the three months ended September 30, 1997
from 65.1% for the three months ended September 30, 1996 as a result of certain
projects performed in the prior year's quarter that experienced higher margins
than projects performed in the current year's quarter.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $340,000, or 10.6%, to $3.5 million for the
three months ended September 30, 1997 from $3.2 million for the three months
ended September 30, 1996. This increase was primarily due to the Weston
acquisition, the commencement of operations of the container cleaning facility
and an increase in other infrastructure investments in support of the Company's
growth. Selling, general and administrative expenses decreased as a percentage
of revenues to 16.2% for the three months ended September 30, 1997 from 16.5%
for the three months ended September 30, 1996.
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<PAGE> 20
Depreciation and Amortization. Depreciation and amortization decreased by
$69,000, or 7.4%, to $866,000 for the three months ended September 30, 1997 from
$935,000 for the three months ended September 30, 1996 and decreased as a
percentage of revenues to 4.0% for the three months ended September 30, 1997
from 4.8% for the three months ended September 30, 1996. This decrease was
primarily the result of the expiration of capital leases in April 1997 offset by
increases in depreciation as a result of capital expenditures.
Income from Operations. Income from operations increased $433,000, or
16.4%, to $3.1 million for the three months ended September 30, 1997 from $2.6
million for the three months ended September 30, 1996 and increased as a
percentage of revenues to 14.1% for the three months ended September 30, 1997
from 13.6% for the three months ended September 30, 1996. The increase was due
to the factors discussed above. Income from operations for the three months
ended September 30, 1996 and 1997 have been calculated to exclude deferred stock
option compensation of $2.2 million and $160,000, respectively.
Interest Expense, net. Interest expense, net increased $121,000 to
$335,000 for the three months ended September 30, 1997 from $214,000 for the
three months ended September 30, 1996. This increase was primarily the result of
an increase in the Company's borrowings under its credit facility to support the
Company's working capital needs and the commencement of a capital lease with
respect to the Company's container cleaning facility.
Income from Continuing Operations before Income Taxes. For the reasons
described above, the Company's income from continuing operations before income
taxes increased by $338,000, or 14.7%, to $2.6 million for the three months
ended September 30, 1997 from $2.3 million for the three months ended September
30, 1996. Income from continuing operations before income taxes as a percentage
of revenues increased to 12.1% from 11.9% for the three months ended September
30, 1997 and 1996, respectively.
FISCAL 1997 COMPARED TO FISCAL 1996
Revenues. Revenues increased by $14.5 million, or 24.8%, to $72.9 million
in fiscal 1997 from $58.4 million in fiscal 1996. This increase resulted
primarily from the April 1996 acquisition of Weston, internal growth and
revenues generated from the Company's industrial container cleaning facility
that began full scale operations in September 1996. Revenues, exclusive of
revenues resulting from the Weston acquisition, increased $5.4 million, or 9.7%,
in fiscal 1997 over fiscal 1996. In addition to the opening of the Company's new
industrial container cleaning facility in September 1996, internal growth was
aided by three new offices opened in fiscal 1997 and related new customers,
price increases and increased volume of services provided to certain existing
customers.
Cost of Services. Cost of services increased by $10.9 million, or 29.1%,
to $48.5 million in fiscal 1997 from $37.5 million in fiscal 1996 and increased
as a percentage of revenues to 66.5% in fiscal 1997 from 64.3% in fiscal 1996.
As a percentage of revenues, exclusive of the effect of the Weston acquisition,
costs of services increased to 64.8% for fiscal 1997 from 63.6% for fiscal 1996,
which was primarily a result of investments made in personnel and infrastructure
during fiscal 1996 and fiscal 1997 to strengthen the Company's service delivery
capabilities in certain of its operations. The Weston operations tend to have
higher cost of services as a percentage of revenues than the average for other
Company operations.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $2.6 million, or 23.6%, to $13.6 million in
fiscal 1997 from $11.0 million in fiscal 1996. This increase was primarily due
to the Weston acquisition, the commencement of operations of the container
cleaning facility and an increase in other infrastructure investments in support
of the Company's growth. Selling, general and administrative expenses decreased
as a percentage of revenues to 18.7% for fiscal 1997 from 18.8% for fiscal 1996
primarily due to the benefits of absorbing certain fixed selling, general and
administrative expenses over an increased revenue base.
Depreciation and Amortization. Depreciation and amortization decreased by
$1.3 million, or 25.9%, to $3.7 million in fiscal 1997 from $4.9 million in
fiscal 1996 and decreased as a percentage of revenues to 5.0% for fiscal 1997
from 8.4% for fiscal 1996. Effective July 1, 1996, the Company changed its
estimates for the remaining useful lives of certain property and equipment to
more accurately reflect the Company's actual history
19
<PAGE> 21
of useful lives. The Company used the net book value of each of its property and
equipment assets as of July 1, 1996 and applied the remaining useful life of
each asset in the calculation of depreciation from that date forward.
Income from Operations. Income from operations increased $2.3 million, or
45.4%, to $7.2 million in fiscal 1997 from $4.9 million in fiscal 1996 and
increased as a percentage of revenues to 9.9% for fiscal 1997 from 8.5% for
fiscal 1996. The increase was due to the factors discussed above. The $7.2
million of fiscal 1997 income from operations has been calculated to exclude
$2.8 million of deferred stock option compensation.
Interest Expense, net. Interest expense, net increased $433,000 to
$974,000 in fiscal 1997 from $541,000 in fiscal 1996. This increase was
primarily the result of increased borrowings under the Company's credit
facilities due to the Weston acquisition, the completion of the Company's
industrial container cleaning facility and certain other capital expenditures.
Income from Continuing Operations before Income Taxes. For the reasons
described above, the Company's income from continuing operations before income
taxes increased by $1.8 million, or 42.0%, to $6.0 million in fiscal 1997 from
$4.2 million in fiscal 1996 and increased as a percentage of revenues to 8.2%
for fiscal 1997 from 7.2% for fiscal 1996.
FISCAL 1996 COMPARED TO FISCAL 1995
Revenues. Revenues increased $2.1 million, or 3.8%, to $58.4 million in
fiscal 1996 from $56.3 million in fiscal 1995. This increase resulted primarily
from the Company's internal growth and the April 1996 acquisition of Weston.
Such increase, however, was net of the loss of revenues from two significant
customers in fiscal 1996 and suspension of the Company's industrial container
cleaning operations during fiscal 1996 to complete the construction of its new
container cleaning facility, which began full scale operations in September
1996. Excluding revenues from the customers lost and from the industrial
container cleaning operations in fiscal years 1995 and 1996, the Company's
revenues would have increased 16.8% in fiscal 1996 over fiscal 1995.
Cost of Services. Cost of services decreased by $225,000, or 0.6%, to
$37.5 million in fiscal 1996 from $37.8 million in fiscal 1995 and decreased as
a percentage of revenues to 64.3% for fiscal 1996 from 67.1% for fiscal 1995.
The decrease was primarily a result of the Company's initiatives to improve
safety, reduce turnover and control insurance costs and, to a lesser extent, the
result of increased utilization of the Company's equipment and operations
personnel.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $801,000, or 7.8%, to $11.0 million in
fiscal 1996 from $10.2 million in fiscal 1995 and increased as a percentage of
revenues to 18.8% for fiscal 1996 from 18.1% for fiscal 1995. The increase was
primarily due to the loss of customer revenues and suspension of industrial
container cleaning operations in fiscal 1996.
Depreciation and Amortization. Depreciation and amortization increased by
$577,000, or 13.2%, to $4.9 million in fiscal 1996 from $4.4 million in fiscal
1995 and increased as a percentage of revenues to 8.4% for fiscal 1996 from 7.7%
for fiscal 1995. The increase was a result of depreciation related to increased
capital expenditures during fiscal 1996. During fiscal 1996, the Company had a
total of $14.3 million in capital expenditures, including its new industrial
container cleaning facility, capital equipment required as a result of the
Company's growth and a corporate aircraft. The aircraft was sold by the Company
at fair market value prior to the Offering. See "Certain Related Party and Other
Transactions."
Income from Operations. Income from operations increased $1.0 million, or
24.5%, to $4.9 million in fiscal 1996 from $4.0 million in fiscal 1995 and
increased as a percentage of revenues to 8.5% for fiscal 1996 from 7.1% for
fiscal 1995. The increase was due primarily to the factors discussed above.
Interest Expense, net. Interest expense, net increased $437,000 to
$541,000 in fiscal 1996 from $104,000 in fiscal 1995. This increase was
primarily the result of increased borrowings under the Company's credit
facilities due to the Weston acquisition, the construction of the Company's
industrial container cleaning facility and capital expenditures.
20
<PAGE> 22
Income from Continuing Operations before Income Taxes. For the reasons
described above, the Company's income from continuing operations before income
taxes increased by $363,000, or 9.4%, to $4.2 million in fiscal 1996 from $3.9
million in fiscal 1995 and increased as a percentage of revenues to 7.2% for
fiscal 1996 from 6.9% for fiscal 1995.
QUARTERLY RESULTS AND SEASONALITY
The Company's results of operations tend to vary seasonally, with the third
quarter generating the least amount of revenues, higher revenues in the second
quarter and the greatest amount of revenues in the first and fourth quarters.
The Company's quarterly results of operations may fluctuate significantly as a
result of a number of factors over which the Company has no control, including
its customers' budgetary constraints, the timing and duration of its customers'
planned maintenance activities and shutdowns, changes in its competitors'
pricing policies, and general economic conditions. Also, certain operating and
fixed costs remain relatively constant throughout the fiscal year, which when
offset by differing levels of revenues may result in fluctuations in quarterly
operating results.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity have been internally generated
cash flows from operations and borrowings under credit arrangements. Principal
uses of liquidity are capital expenditures, acquisitions and working capital
associated with the Company's growth. The Company plans to repay all or a
significant portion of its existing bank debt with proceeds from the Offering.
To provide additional liquidity, the Company has obtained a commitment from Bank
One and National City Bank, the Company's current banks, to provide a credit
facility of approximately $50.0 million following the Offering. See "Use of
Proceeds." The Company believes that the new credit facility will facilitate the
Company's expansion strategy by making increased resources available for
potential capital expenditures and acquisitions of other businesses. See
"Business -- Strategy."
During fiscal 1995, 1996 and 1997, net cash provided by operating
activities was $10.1 million, $7.4 million and $ 5.0 million, respectively. At
September 30, 1997, the Company had cash and cash equivalents of $532,000,
working capital of $9.2 million and had availability under its existing credit
agreements of $7.9 million.
Capital expenditures totaled $5.4 million, $14.3 million and $5.9 million
in fiscal 1995, 1996 and 1997, respectively, primarily for additional operating
equipment. During fiscal 1996, the Company completed its industrial container
cleaning facility for a total cost of approximately $5.8 million. The Company's
policy is to generally purchase or construct equipment required for its
operations rather than to lease such equipment.
During fiscal 1995, 1996, and 1997, the Company made distributions to its
shareholders primarily to fund their payment of taxes due on S Corporation
income in the amounts of $4.0 million, $4.6 million and $2.3 million,
respectively.
The Company is party to various credit arrangements with the Banks (the
"Existing Credit Agreement"). The Company currently has a $12.0 million
revolving credit facility that matures on December 31, 1998. The Company's
current borrowing rate under the revolving credit facility is the prime rate
minus 0.5% or, at the Company's option, the Eurodollar market rate plus 1.0%.
Outstanding borrowings under the revolving credit facility were $7.1 million as
of September 30, 1997. The Company's weighted average interest rate on the
revolving credit facility as of September 30, 1997 was 7.06%. In addition, the
Company has term loans with the Banks totaling $5.9 million as of September 30,
1997, with maturities ranging from December 31, 2002 to July 31, 2006. The
Company's current borrowing rate for the term loans is the Eurodollar market
rate plus 1.25%. The Company's weighted average interest rate for the term loans
as of September 30, 1997 was 6.91%. The Company expects to repay the outstanding
balance of the revolving credit facility and the term notes with the proceeds of
the Offering.
Following the Offering, the Company expects to enter into a new credit
agreement with the Banks (the "New Credit Agreement") to replace its Existing
Credit Agreement. The New Credit Agreement will provide the Company with a $50.0
million, three-year, unsecured revolving credit facility with similar terms and
conditions
21
<PAGE> 23
as are in the Existing Credit Agreement. The Company believes that the New
Credit Agreement will provide it with additional financial and operating
flexibility. Specifically, the New Credit Agreement will increase the Company's
borrowing capacity, will permit the Company to continue to borrow at
Eurodollar-based rates and will facilitate capital expenditures and
acquisitions. Availability under the New Credit Agreement will be based on the
relationship of the Company's total long-term debt to equity and the pricing of
such funding will change in accordance with formulas based on aggregate
borrowings and financial performance as measured by interest coverage and by the
ratio of debt to equity, similar to the Existing Credit Agreement.
The Company believes that the proceeds from the Offering, cash on hand,
cash flow from operations and available borrowings under its Existing Credit
Agreement will be sufficient to fund its currently planned capital projects and
operations for at least the next 24 months. The Company continually seeks
opportunities to expand its industrial services business. If acquisition
opportunities develop, the Company may be required to obtain additional
financing. The Company believes that over the short term (the next 12 months),
the principal uses of liquidity will include capital expenditures and working
capital associated with the Company's growth. Over the long term (12 to 24
months) the Company believes that the principal uses of liquidity will include
capital expenditures, working capital and acquisitions of additional businesses.
The Company believes that capital expenditures over the next 24 months will not
be materially different from fiscal year 1997 levels, adjusted for revenue
growth.
INFLATION
The effects of inflation on the Company's operations were not significant
during the periods presented in the Consolidated Financial Statements.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted for financial
statements issued for periods ending after December 15, 1997. This statement
establishes standards for computing and presenting earnings per share. It
requires dual presentation of basic and diluted earnings per share on the face
of the income statement and a reconciliation between the computations. The
Company has not yet determined the impact of Statement No. 128 on its reported
earnings per share.
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, Disclosures about Segments of an Enterprise and Related Information, which
is effective for fiscal years beginning after December 15, 1997. This statement
establishes requirements for reporting information about operating segments.
This statement may require a change in the way the Company presently reports
financial information; however, the extent of the change, if any, has not been
determined.
22
<PAGE> 24
BUSINESS
GENERAL
MPW Industrial Services Group, Inc. is a leading provider of industrial
services in the Midwest and Southeast, focused on technology-based industrial
services, including industrial cleaning and facility support services,
industrial air filtration services, industrial container cleaning, industrial
process water purification and other specialized services. In fiscal 1997, the
Company provided services to more than 500 customers. The Company serves
customers in a broad range of industries including automotive, electric power,
chemical, pulp and paper, steel, transportation, aerospace and other heavy
manufacturing. The Company's services typically are performed within large
industrial facilities and require the use of Company-owned equipment and
specially trained personnel. The Company believes that its services are
generally recurring in nature and are essential to manufacturing efficiency and
safety at its customers' facilities. The Company has over 25 years of experience
and currently has more than 1,300 employees, a network of 31 offices and over
1,000 pieces of operating equipment. See " -- Equipment."
INDUSTRY OVERVIEW
The industrial services industry encompasses a broad range of manufacturing
support activities such as cleaning, maintenance, turn around services,
demolition and remediation. Farkas Berkowitz & Company, an independent market
research firm, has provided materials to the Company that indicate that the
industrial cleaning and maintenance market is in excess of $12 billion in annual
revenues.
The industrial services market is experiencing growth as increased
competition is driving manufacturers to improve efficiency by reducing efforts
expended on non-core operating activities. To increase efficiency, many
companies are outsourcing non-core services and reducing their number of
suppliers by developing mutually beneficial partnerships. Outsourcing allows
companies to convert fixed costs to variable costs and streamline their
organizations. More specifically, companies who outsource these types of
services can reduce the number of permanent employees dedicated to non-core
activities, increase their access to new technologies, reduce capital costs by
shifting the costs of specialized equipment to their service providers and
reduce liabilities by redirecting accountability. By reducing the number of
suppliers, companies are able to lower administrative costs and supervision,
increase suppliers' accountability and reduce potential liabilities. The Company
believes that the outsourcing of such non-core functions allows manufacturers to
better focus on revenue producing activities.
The industrial cleaning and facility support segment of the industrial
services market is fragmented and is estimated to exceed 9,500 firms, most of
which are small and local in scope, with a limited number of national or major
regional firms. The ability to offer customers a broad range of services at
multiple locations is becoming an important factor as more companies realize the
benefits of outsourcing. The Company believes that the industrial services
industry has begun a period of consolidation as firms combine to improve
personnel and equipment utilization, increase their market penetration, reduce
capital costs and acquire additional skills useful to the customers they serve.
SERVICES
The Company provides technology-based industrial services to over 500
customers from its 31 locations. Although industrial cleaning and facility
support services comprise the Company's primary service lines, MPW provides
other related services, such as air filtration, container cleaning and process
water purification. The ability to offer multiple industrial services is a
critical component of the Company's strategy.
The Company is focused on helping customers to maximize the performance of
their equipment through effective cleaning and to minimize equipment downtime
required to perform maintenance functions. Both factors lead to increased
efficiency and productivity in customer facilities. Several factors are critical
to the Company's ability to provide value-added services, including substantial
commitments to fleet and equipment maintenance and employee training. The
Company believes that the condition of its equipment and the knowledge and
training of its employees are critical components to each of its service
offerings.
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<PAGE> 25
The Company has developed PC-based software to assist in task design,
scheduling, execution and monitoring for facility support services and large and
complex projects. With this software, customers can obtain real-time progress
and cost reports on such projects.
The Company's industrial cleaning and facility support services principally
include dry vacuuming, wet vacuuming, industrial power washing, water blasting,
ultra-high pressure water blasting, cryojetic cleaning and chemical cleaning.
Additionally, MPW performs industrial air filtration, container cleaning and
process water purification. The following is a description of the Company's
primary service lines.
INDUSTRIAL CLEANING AND FACILITY SUPPORT
The cornerstone of the Company's business is its industrial cleaning and
facility support services that are provided primarily at customer facilities.
These services accounted for 76% of the Company's fiscal 1997 revenues. The
Company's industrial cleaning and facility support operations are provided on
both a daily recurring basis and a project-by-project basis, as well as pursuant
to longer-term arrangements. The Company uses conventional cleaning techniques
and employs a number of specialized technologies including the following:
Dry Vacuum. The Company's dry vacuum cleaning operation removes sand,
grain, resins, coke, fly ash, powder and dozens of other materials for customers
on regular cleaning schedules, during regularly scheduled outages and in
emergency spill situations. The Company's fleet of dry vacuum vehicles has both
trucks and chassis custom-built to the Company's specifications for maximum
versatility, performance and durability. The dry vacuum vehicles operate around
the clock if required, both on dry vacuum projects and as power boosters for wet
vacuum tankers. MPW performs its dry vacuum services for customers in
environments, such as heavy industrial boilers and precipitator ductwork, and
provides site cleaning at steel mills, foundries, pulp and paper plants, mines,
grain processing plants, aluminum plants and electric generating facilities.
Wet Vacuum. The Company's wet vacuum cleaning operations provide for the
removal of liquid and semi-solid waste for customers involved in the steel,
cement, foundry, aluminum, pulp and paper, mining and grain processing
industries as well as customers involved in electric power generation. The
Company's custom fabricated vacuum tankers, with custom hydraulics and up to
6,500 gallon capacities, can handle liquids, sludges and semi-solids with
pumping capacities ranging from 1,200 cfm to 4,500 cfm. The Company's wet vacuum
equipment includes transport tankers, vacuum tankers, straight truck turbo
vacuums and straight truck maxi vacuums.
Industrial Power Wash. The Company's customized, hot high-pressure wash
trucks, ideally suited for off-road heavy equipment cleaning, are totally
self-contained, complete with water supply and 1,500,000 btu kerosene heaters
and can deliver flow rates from 65 gpm to 180 gpm at pressures up to 3,000 psi.
Beyond truck and equipment washing, the Company's industrial power wash business
also services such diverse industrial needs as brick cleaning, building
restoration, factory floor and ceiling cleaning and mill cleaning. MPW also
performs hydrostatic pipeline testing to detect pipeline leaks through the
injection of water at a prescribed pressure. In connection with its industrial
power wash business, the Company has instituted certain environmental safeguards
ranging from the use of environmentally acceptable soaps and degreasers to
post-wash evaluation of residue.
Water Blasting. MPW began its water blasting business by cleaning kettles
and reactors in the paint and resin manufacturing industries. With custom-built
high pressure pumps capable of up to 20,000 psi, and specially designed
components for variable flow rates and coverage, the Company has the equipment
and technology necessary for a variety of water blasting projects. The Company's
water blasting projects have included such diverse services as exterior
cleaning; removal of latex, phosphates, resins, coke, fly ash, black liquor,
water scale, mastics, rust, asphalt, metal burrs, cement and other materials;
the cleaning of piping, heat exchangers and boilers; and the cutting of grooves
in cement pipes. The Company uses water blasting technology in paper mills,
chemical plants, paint plants, oil refineries, power plants and various other
industrial environments.
Ultra-High Pressure Water Blasting. The Company provides ultra-high
pressure industrial cleaning and cutting services using specially designed and
fabricated equipment. Such ultra-high pressure services, ranging
24
<PAGE> 26
from 20,000 psi to 40,000 psi, provide several benefits over conventional water
blasting methods, including the ability to apply ultra-high pressure cleaning
methods with a very low volume of water, the minimization of surface damage or
degradation, the reduction or elimination of by-products or waste products that
may require clean-up or disposal, the elimination of certain safety hazards as a
"non-spark generating" technique, the elimination of airborne contaminants, and
reduced preparatory and clean-up times. By introducing an abrasive material into
the water stream, ultra-high pressure cleaning can also be used to cut virtually
any material without the use of heat or open flames. The Company provides its
ultra-high pressure cleaning and cutting services primarily to the automotive
and power generation industries.
Cryojetic Cleaning. The Company's cryojetic cleaning process uses dry ice
pellets to remove surface contaminants without abrasives or chemicals, making it
well suited for sensitive cleaning applications, such as removing slag, epoxies,
urethanes or oils from such surfaces as hot molds, printed circuit boards, paint
hooks, storage vessels and radioactive surfaces. MPW's cryojetic system
incorporates the principles of mass transfer, thermal shock and supersonic
velocity, and utilizes dry ice pellets to create an inert non-abrasive, non-
contaminating cleaning medium. Once the dry ice has performed its cleaning
function, it evaporates, leaving only the removed surface contaminate material
as waste. The Company's cryojetic cleaning operation serves utility, automotive,
aerospace, electronics, chemical, tire, rubber and petroleum concerns.
Chemical Cleaning. Using equipment that is specially designed and
maintained, the Company's dedicated team of chemical technicians, engineers and
service engineers provide chemical cleaning services to a variety of customers.
Applications include the cleaning of boilers, cooling systems, condensers, heat
exchangers, tanks, piping systems and evaporators. The Company's chemical
cleaning operations primarily serve customers in the chemical, power utility,
paper, petroleum and steel industries. The Company utilizes mobile laboratories
that allow an analysis of solvents to be made on-site. The customers retain and
dispose of chemicals used in the cleaning process in accordance with their own
environmental programs.
Other Specialized Services. In response to special customer and industry
requirements, the Company has developed sophisticated equipment and technologies
designed to bring higher quality, greater efficiency and safety to the cleaning
process. Examples of such specialized services include: (i) on-line boiler
de-slagging for the electric power industry using high energy, robotically
controlled machinery; (ii) closed loop continuous line cleaning to reduce levels
of contamination for the nuclear power industry; and (iii) combination washing
and filtration processes to reduce contaminants for the gas pipeline industry.
INDUSTRIAL AIR FILTRATION SERVICES
MPW entered the industrial air filtration services market in April 1996
through the acquisition of Weston and expects to further expand this business
through its acquisition of ESI. The Company provides engineering and consulting
services through the identification of various contaminant sources and the
management of air flow. In addition, the Company installs and regularly services
filtration devices in 15 of the approximately 70 automotive paint shops in the
North American automotive market. Sophisticated air purification systems are an
integral part of quality assurance and production efficiency in automotive
production facilities.
Through the Weston acquisition, the Company is a major authorized
distributor of filters and filtration media and ancillary products used in
production automobile paint shops. The Company also manages certain other
commodity products, such as brushes, gloves, rags and equipment covers, used in
automotive paint shops. The Company markets products manufactured by over 100
different suppliers, primarily to major U.S. auto manufacturers. The Company
typically prices its filters and related products to recover the costs of
providing engineering and consulting support to customers.
INDUSTRIAL CONTAINER CLEANING
The Company's industrial container cleaning operations began in April 1993
within a single customer's facility. In 1996, the Company completed its
dedicated facility located in Chesterfield, Michigan, which is primarily
intended to serve the Mt. Clemens, Michigan facility of E.I. duPont de Nemours'
("duPont") automotive paint division. The automotive industry uses 30 to 575
gallon paint resin containers (called "totes")
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<PAGE> 27
in the vehicle painting process. Totes are portable stainless steel or aluminum
containers that are filled with paint resin and are refilled after use. In order
to produce a high-quality paint finish, these totes must be thoroughly cleaned
between each use. The Company utilizes a patented technology to high pressure
clean totes. Effective October 1995, the Company entered into a five-year
contract, with two three-year options, with duPont. Under the terms of the
contract, the Company is entitled to a minimum of 45% of the annual tote volume
of the Mt. Clemens facility. Although the Company currently provides industrial
container cleaning services to only one customer, the Company expects to service
additional customers at its Chesterfield facility in the future.
INDUSTRIAL PROCESS WATER PURIFICATION
The Company's industrial water purification operation is based at its
14,000 square foot resin regeneration facility located in Newark, Ohio and
provides pure feed water to customers primarily in the utility, steel and
automotive industries. MPW's water purification business offers reverse osmosis
treatment, deionization technologies and water filtration through a mobile fleet
of equipment and through temporary and permanent on-site servicing. The Company
also provides its water purification services on an emergency response basis.
MPW's industrial process water purification projects are typically priced on a
per gallon basis with the exception of emergency response projects.
The Company's mobile trailers feature an independent valve structure that
allows for maximum flexibility on every site. Because each tank is individually
accessible, it is used only for one pre-designated purpose, so the possibility
of cross-contamination is eliminated. The Company's mobile water units work in
tandem with existing water purification systems or function independently at a
particular site. The Company also offers service exchange, an economical
solution for small quantity requirements. Service exchange tanks are maintained
to the same high standards as the Company's mobile operations and provide an
ideal means of attaining on-site efficiency without incurring capital investment
costs.
STRATEGY
The Company's primary long-term objective is to be the premier provider of
technology-based industrial cleaning, facility support and related services to
industrial customers. The Company's principal competitive advantages are the
quality of the equipment that it uses, its ability to respond promptly to
customer needs and its reputation for competent and professional personnel. See
" -- Equipment." MPW intends to maintain its primary focus on providing
industrial cleaning and related services while continuing to offer complementary
services as a means to expand existing relationships and attract new
opportunities. The principal elements of the Company's competitive and growth
strategies are the following:
COMPETITIVE STRATEGY
Industrial Market Focus. The Company attributes its growth and
profitability, in part, to its specialization in services required by customers
in basic manufacturing and process industries. This focus enables it to develop
customer-specific expertise, build customer relationships and provide
high-quality services. The Company's exclusive focus differentiates it from
certain of its competitors that provide services outside industrial markets.
Ongoing Customer Relationships. In fiscal 1997, 95.7% of the Company's
revenues were derived from customers for whom it performed work during the
preceding fiscal year. The Company's goal is to have its customers view MPW as
an extension of their support and maintenance departments. The Company attempts
to develop long-term relationships with its customers rather than have its
services perceived as one-time assignments. To develop these relationships, the
Company remains in communication with most customers on a daily or weekly basis.
Quality Workforce. The Company strives to provide its customers with
quality operations personnel. The Company devotes substantial resources to
safety, training and development programs, and offers benefit programs to
attract and retain personnel. The Company has a broad and proactive recruiting
program that utilizes dedicated recruitment personnel, advertising, employment
agencies, referral networks, job fairs and other initiatives to attract and
screen personnel. The Company believes that minimization of employee turnover is
one of its
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<PAGE> 28
principal challenges and, therefore, provides economic incentives for
supervisory personnel to reduce turnover. See "-- Safety, Training and Quality
Assurance."
Technology-Based Services. Customers retain MPW to perform services
requiring technology, experience or equipment that would be difficult or costly
for customers to duplicate. Advanced equipment and skilled personnel are
essential for minimizing task completion time and facility downtime. As of
September 30, 1997, the Company had gross investment of $51.4 million in
property and equipment. The Company has fabrication and design capabilities that
allow it to customize equipment to meet unique operational challenges and
customer circumstances.
Responsiveness to Customers. The ability to provide prompt response with
respect to cleaning and maintenance of equipment or facilities is a critical
component to the Company's services. The Company maintains a culture of
responsiveness to its customers by establishing facilities close to or within
its customers' locations and using a decentralized operational structure. The
Company believes that this responsiveness, including its 24-hour per day
customer service centers and Company-developed software for maintenance
management, will continue to be a strong factor in the development of new
customer relationships and in expanding relationships with existing customers.
GROWTH STRATEGY
Expand Services Within Existing Customer Facilities. The Company intends
to achieve strong internal growth by continuing to focus its resources within
its existing customer facilities to capitalize on the trends toward outsourcing
and supplier reduction. The Company believes that it can become the leading
provider of industrial services within each of these existing facilities. The
Company pursues opportunities for cross-selling its services throughout its
customer base.
Leverage Existing Customer Relationships. MPW is focused on gaining access
to additional facilities owned and operated by its existing customers. When one
of MPW's customers seeks to outsource additional services within current or at
additional facilities, MPW believes its relationships result in an advantage
over competitors without a history of service to the customer. Favorable
references from satisfied personnel in one facility can be instrumental in
capturing such additional work. The Company believes that its efforts to develop
long-term partnerships with its customers will allow it to penetrate multiple
facilities of a given customer without incurring the same level of sales and
marketing costs associated with more traditional growth efforts.
Increase Concentration Within Regional Markets. The Company pursues a
strategy of disciplined expansion into markets within its principal geographic
regions that have a critical mass of industrial facilities. Consistent with this
strategy, the Company opened three new offices during fiscal 1997. Upon entering
a new geographic location, the Company uses its local presence as a selling
feature to penetrate industrial facilities in the area. The Company believes
that its geographic expansion will be predominantly in the Midwestern and
Southeastern United States in order to facilitate resource sharing and
coordination of the delivery of services.
Grow Through Selective Acquisitions. MPW intends to pursue acquisitions
that enable it to (i) increase its market share, (ii) expand the services that
it provides to customers or (iii) expand its geographic presence. The Company
seeks acquisition candidates with strong local reputations, a stable customer
base, strong management and efficient operating equipment. The industrial
services industry is fragmented with a significant number of small regional and
local companies that offer a more limited range of services than the Company.
MPW has acquired and intends to acquire such businesses, including the recent
acquisition of Weston and the pending acquisition of ESI, each of which provided
or will provide either a new line of services or a new market. The Company
believes it will be successful in competing for acquisitions based on (i) the
reputation of the Company, (ii) the Company's entrepreneurial operating
environment, (iii) its proactive acquisition program, and (iv) the Company's
greater visibility and resources as a public company.
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<PAGE> 29
MARKETING
MPW markets its services principally through the efforts of 12 marketing
personnel who are in regular contact with existing and prospective customers as
well as MPW account managers. The Company believes that it attracts and retains
customers primarily because of its ability to respond effectively and
efficiently to customers' needs and its broad service line. During fiscal 1997,
95.7% of the Company's revenues were derived from customers for which the
Company performed services in the prior year. The Company engages in
cross-selling as a means to obtain incremental business from its current
customers for new services.
While the Company has long term commitments with certain customers for the
provision of services, most orders for services are received on a job-by-job
basis. In certain instances the Company maintains equipment at the locations of
customers that have issued blanket purchase orders to the Company for the
provision of services over an extended period. Such blanket orders do not
obligate the customer to purchase a specified dollar amount of services. Blanket
orders permit the Company to be contacted to perform services when needed. Such
blanket orders, in combination with the location of the Company's personnel and
equipment, allow the Company to expedite its response to a particular customer's
needs and may constitute a competitive advantage versus service providers
without on-site equipment. The Company provides its services primarily at
prescribed rates or based upon competitive bidding and in some cases through
direct negotiation with the customer. The Company generally does not have any
meaningful backlog of service orders. The Company does not consider backlog to
be an important indicator of future performance.
The Company does not typically provide a separate written guaranty or
warranty to customers for the services it provides. Due to the size and type of
customers serviced, the Company does not generally experience significant delays
or other problems in collecting its accounts receivable.
CUSTOMERS
During fiscal 1997, MPW had sales to more than 500 customers and its ten
largest customers represented 42.1% of revenues. General Motors Corporation
represented approximately 10.4% of MPW's fiscal 1997 revenues. No other customer
represented more than 6% of MPW's fiscal 1997 revenues. MPW's customers are
diversified across a broad range of industries and across several different
markets.
The Company relies heavily on repeat customers and uses both the written
and verbal referrals of its satisfied customers to help generate new customers.
Many of the Company's customers or prospective customers have a qualification
procedure for becoming an approved bidder or vendor based upon the satisfaction
of particular performance and safety standards set by the customer. Such
customers often maintain a list of vendors meeting such standards and award
contracts for individual jobs only to such suppliers. The Company strives to
maintain its status as a preferred or qualified vendor.
EMPLOYEES
As of September 30, 1997, the Company employed over 1,300 full-time
employees. Of these, approximately 75 employees were employed by Aquatech
Environmental, Inc., a subsidiary located in Michigan and a signatory to a
collective bargaining agreement with certain unions. The Company has not
experienced any work stoppages. The Company believes that its relations with
employees are good.
SAFETY, TRAINING AND QUALITY ASSURANCE
Performance of the Company's services requires the use of equipment and
exposure to conditions that can be dangerous. Although the Company is committed
to a policy of operating safely and prudently, the Company has been and is
subject to claims by employees, customers and third parties for property damage
and personal injuries resulting from performance of the Company's services. To
minimize these risks, the Company has adopted broad training and educational
programs and comprehensive safety policies and regulations. The Company requires
that all operational personnel complete applicable safety courses mandated by
the Occupational Safety and Health Administration ("OSHA"), Environmental
Protection Agency, Department of Transportation and Mine Safety and Health
Administration in areas including hazard communication, protective equipment,
confined space entry, first aid, decontamination procedures and emergency
response. In addition to these mandated training courses, the Company requires
that water blast, dry and wet vacuum and power wash
28
<PAGE> 30
operational personnel complete a Company-designed hands-on skill training
program prior to commencing such activities. The Company's management regularly
monitors compliance with regulations promulgated by OSHA and the other
regulatory authorities and is responsible for directing the Company's overall
safety, training, quality assurance and environmental compliance programs. In
addition, most of the Company's service facilities have a designated
safety/training manager, who has responsibility for overseeing the Company's
safety policies and procedures at the facility.
The Company performs onsite services using employees who have completed
applicable Company safety and training programs. In addition, the Company's
policies require that employees complete a minimum amount of training and
service with the Company prior to performing more sophisticated and technical
jobs.
EQUIPMENT
Much of the equipment used by the Company is readily available (e.g.,
diesel and electrical motors, vehicular chassis, etc.). The design of other
pieces, especially components assembled into the Company's water cleaning
equipment, is proprietary to the Company. Such components are fabricated in the
Company's machine shops and assembled into finished pieces of equipment at the
Company's headquarters facility in Hebron, Ohio.
The Company operates over 1,000 pieces of equipment, including 650 vehicles
and other pieces of mobile equipment, such as vacuum trucks, wash trucks,
industrial water trailers, tank trucks, pickup trucks and passenger vehicles and
over 200 pieces of smaller equipment, including pumps, generators, compressors,
vacuum containers, and small water blast units, which are used in all aspects of
the Company's cleaning and maintenance services. The Company also operates
specialty equipment used in its water purification services including mobile
water heaters, oil water separators, regeneration stations, resin tanks and
remote monitoring systems. In addition, the Company's equipment includes safety
equipment in all aspects of its operations.
PROPRIETARY TECHNOLOGY
The Company has developed proprietary technology and know-how that it uses
in connection with its provision of cleaning services to customers. Certain of
the equipment used by the Company contains components that are readily available
in the industry; however, the Company custom designs and fabricates many
components. The design of these custom components and the design of certain
equipment used in specialized operations are proprietary to the Company. The
Company owns a substantial number of vehicles and other pieces of production
equipment that have been specially made or customized for MPW. Some of the water
cleaning services provided by the Company are dependent upon the Company's
proprietary technologies and self-designed equipment, tools and accessories.
This technology is not only encompassed by the techniques used by its service
personnel in providing services, but is inherent in the design of the component
parts of the equipment used by the Company in providing those services.
Other than the licensed patented technology with respect to tote cleaning,
the Company does not operate under any licenses or franchises granted by third
parties. The Company has not granted any right to others in connection with the
use of its own technology.
FACILITIES
The Company currently services customers through its Hebron, Ohio
headquarters, 18 leased office locations and 12 offices located on customer
facilities. The 18 leased facilities range from 3,000 to 18,000 square feet in
which the Company houses equipment and maintains a small sales and
administrative staff. The 12 on-site offices are workspaces within a customer
facility that the Company either leases from, or is permitted to occupy by, the
customer. Each location is equipped to perform minor equipment maintenance. The
Company leases its principal executive offices and main fabrication, maintenance
and training facility in Hebron, Ohio, consisting of approximately 67,000 square
feet. The Company also leases its industrial water facility located in Newark,
Ohio and its industrial container cleaning facility located in Chesterfield,
Michigan. The Newark facility consists of approximately 14,000 square feet and
the Chesterfield facility consists of approximately 36,000 square feet. See
"Certain Related Party and Other Transactions."
Most of the Company's facilities are in sufficient proximity to another of
the Company's facilities to enable the Company to transfer equipment and
personnel between locations to respond to fluctuating service demands
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<PAGE> 31
and to perform larger projects. The Company believes that such location strategy
maximizes utilization of equipment and personnel. Operating and sales personnel
staff the Company's service facilities and operate under the direction of a
divisional and regional management in accordance with policies, procedures and
objectives established by the Company's management.
COMPETITION
The market for industrial services is fragmented. There are many
competitors, no one of which MPW believes holds a substantial market share. The
Company competes with a number of companies in substantially all of the regions
in which it operates. The larger national or regional industrial service
companies, which are typically divisions or subsidiaries of engineering,
construction or other service firms, are estimated to account for approximately
40% of the market. The remainder of the industrial services market is estimated
to be serviced by over 9,000 private firms with estimated revenues of less than
$10 million per year each. In recent years there has been a greater
concentration of resources in the industrial cleaning industry. In October 1996,
ServiceMaster L.P. acquired Premier Manufacturing Support Services, Inc., one of
the leading providers of outsourcing services to the automotive industry. In
July 1997, Philip Services Corp. (formerly Philip Environmental, Inc.) acquired
Allwaste, Inc. and Serv-Tech, Inc., both competitors of the Company. Some of the
larger industrial services companies have significantly greater financial and
other resources than the Company.
The Company believes that the principal competitive factors in the
industrial services industry are experience, capability and price
competitiveness. The Company believes that its principal competitive advantages
are the quality of the equipment that it uses, its ability to respond quickly to
customer needs and its reputation for competent and professional personnel. MPW
positions itself competitively as a value leader and not a price leader, though
it remains necessary for MPW to price its services at levels where its customers
will achieve cost savings versus performing the same services themselves.
REGULATION
The Company's operations are subject to numerous rules and regulations at
the federal, state and local levels. All of the Company's operations are subject
to regulations issued by the United States Department of Labor under the
Occupational Safety and Health Act. These regulations have strict requirements
for protecting employees involved with any materials that are classified as
hazardous.
As part of its services, the Company provides support to its customers for
the management of their hazardous materials and other contaminants. The Company
does not take regulatory responsibility for these wastestreams, nor does the
Company transport or dispose of such wastes treams. As part of its industrial
container cleaning operation in Chesterfield, Michigan, the Company manages
certain solvents used in the cleaning process. Once they are used, these
solvents are sent by licensed transporters to licensed recycling facilities. The
Company does not believe that its current activities are subject to the
regulations pertaining to hazardous waste treatment, storage or disposal
facilities or transporters of such wastes. The Company's industrial container
cleaning operation is subject to regulations pertaining to the disposition of
spent solvents. This facility was constructed by the Company in compliance with
such regulatory requirements and provides adequate safeguards to prevent
environmental exposure.
The Company's employees typically perform their work within the customer's
operating facilities. These work environments generally do not expose the
customer's employees or the Company's employees to hazardous materials beyond
levels allowed by applicable regulations. The Company's employees also generally
do not perform work that requires any direct contact with harmful materials. The
Company maintains a full-time staff of safety and environmental specialists to
ensure that the Company's personnel operate in safe conditions and are properly
protected against harmful exposure.
The Company believes that it has obtained the permits and licenses required
to perform its business and believes that it is in substantial compliance with
all federal, state and local laws and regulations governing its business. To
date, the Company has not been subject to any significant fines, penalties or
other liabilities under such laws and regulations. However, no assurance can be
given that future changes in such law and regulations, or interpretations
thereof, will not have an adverse impact on the Company's operations.
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INSURANCE
Much of the work performed by the Company is pursuant to contracts that
require the Company to indemnify the customer for injury or damage occurring on
the work site. The terms of such indemnity agreements vary, but generally they
provide that the Company is required to indemnify the customer for losses
resulting from or incurred in connection with the actions of the Company in
providing its services whether or not the Company has been negligent. Liability
for such indemnification claims is covered primarily by the Company's insurance
policies.
Although the Company believes that its insurance coverage is consistent
with industry practice, there are exclusions from the Company's insurance
coverage for matters of environmental pollution and other types of environmental
damage claims. An uninsured or partially insured claim, if successful and of
sufficient magnitude, could have a material adverse effect on the Company or its
financial condition.
LEGAL MATTERS
Various legal actions arising in the ordinary course of business are
pending against the Company. None of the litigation pending against the Company,
individually or collectively, is expected to have a material adverse effect on
the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding MPW's current
Directors, executive officers and the persons who will serve as Directors
following completion of the Offering.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ ---- ---------------------------------------------------------------
<S> <C> <C>
Monte R. Black................ 47 Chairman of the Board of Directors and Chief Executive Officer
Ira O. Kane................... 50 President and Chief Operating Officer, Director
Daniel P. Buettin............. 44 Vice President, Chief Financial Officer and Secretary
Brad A. Martyn................ 36 Corporate Controller
Robert E. Oyster.............. 51 Director
Timothy A. Walsh.............. 36 Director
Scott N. Whitlock............. 55 Director
Pete A. Klisares (1).......... 62 Director Nominee
Gerald Nilsson-Weiskott (1)... 48 Director Nominee
</TABLE>
- ---------------
(1) The Company has reached agreements with Mr. Klisares and Dr.
Nilsson-Weiskott to join the Board of Directors upon the consummation of the
Offering.
Monte R. Black founded the Company in 1972 and has served as Chief
Executive Officer and Chairman of the Board of Directors since that time.
Ira O. Kane has served as President, Chief Operating Officer and a Director
of the Company since March 1994. Prior to joining the Company, Mr. Kane served
as chairman of the board of directors and executive vice president of NSC
Corporation, an asbestos abatement and industrial services company, from June
1993 until February 1994. Prior to joining NSC Corporation, Mr. Kane served as a
director and an executive vice president of OHM Corporation, an environmental
services company, from January 1984 until June 1993. Prior to joining OHM
Corporation, Mr. Kane was a partner with Crabbe, Brown, Jones, Potts & Schmidt,
a law firm.
Daniel P. Buettin has served as Vice President, Chief Financial Officer and
Secretary of the Company since September 1995. Prior to joining the Company, Mr.
Buettin served in the following capacities with OHM Corporation: (i) chief
financial officer and vice president of finance from November 1994 until June
1995; (ii) vice president and general manager-midwest region from April 1992
until November 1994; and (iii) corporate controller from February 1987 until
April 1992. Before joining OHM Corporation, Mr. Buettin was employed by Arthur
Andersen & Co., a public accounting firm.
Brad A. Martyn has served as Corporate Controller of the Company since
December 1995. Prior to joining the Company, Mr. Martyn served in the following
capacities for OHM Corporation: (i) corporate director of finance from May 1995
until November 1995; (ii) controller-eastern operations from August 1994 until
May 1995; (iii) controller-southern region from February 1990 until August 1994;
and (iv) corporate tax manager from May 1987 until February 1990. Before joining
OHM Corporation, Mr. Martyn was employed by Arthur Andersen & Co.
Robert E. Oyster has served as a Director of the Company since February
1995. Mr. Oyster served in the following capacities with Sun Television and
Appliances, Inc., an electronics retailer: (i) chairman of the board of
directors and chief executive officer from June 1995 until June 1996; (ii)
president and chief operating officer from November 1989 until February 1996;
and (iii) chief financial officer and treasurer from June 1979 until June 1996.
Prior to this time, Mr. Oyster was employed by KPMG Peat Marwick, a public
accounting firm.
Timothy A. Walsh has served as a Director of the Company since September
1994. Mr. Walsh has served as executive vice president-finance and treasurer for
Farm Family Holdings, Inc., a property and casualty insurance company, since
October 1996. Prior to this time, Mr. Walsh served in the following capacities
with Farm Family Insurance Company, a subsidiary of Farm Family Holdings, Inc.:
(i) senior vice president-finance from
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<PAGE> 34
March 1996 to November 1996; and (ii) director of corporate development from
September 1995 to March 1996. Prior to this time, Mr. Walsh served as Vice
President-Finance, Chief Financial Officer and Secretary of the Company from
April 1994 until August 1995 and as corporate controller for NSC Corporation
from June 1992 until April 1994. Before joining NSC Corporation Mr. Walsh was
employed by KPMG Peat Marwick.
Scott N. Whitlock has served as a Director of the Company since November
1995. Mr. Whitlock has been of counsel with Vorys, Sater, Seymour and Pease, a
law firm, since August 1995. Prior to this time, Mr. Whitlock served in the
following capacities with Honda of America Mfg., Inc., an automobile
manufacturer: (i) executive vice president from January 1990 to April 1995; and
(ii) senior vice president and manager of Honda's Marysville, Ohio plant from
January 1985 to January 1990. Before joining Honda of America, Mr. Whitlock was
a partner with Vorys, Sater, Seymour and Pease.
Pete A. Klisares has agreed to serve as a Director of the Company
commencing upon the closing of the Offering. Mr. Klisares serves as president
and chief executive of Karrington Health, Inc., a provider of assisted living
facilities, and as assistant to the chairman of the board of directors of
Worthington Industries, Inc., a manufacturer of processed steel and custom and
cast products, since August 1997. Prior to this time, Mr. Klisares served in the
following capacities with Worthington Industries: (i) executive vice president
from August 1993 to July 1997, and (ii) assistant to the chairman of the board
of directors from December 1991 to July 1993. Before joining Worthington
Industries, Mr. Klisares served as executive director of JMAC, Inc. an
investment vehicle, from December 1991 to May 1991 and as Manufacturing Vice
President and General Manager of AT&T, a telecommunications firm, for more than
five years prior to May 1991.
Gerald Nilsson-Weiskott has agreed to serve as a Director of the Company
commencing upon the closing of the Offering. Dr. Nilsson-Weiskott founded and
has served as senior partner of Organizational Horizons Incorporated, a
comprehensive human resource consulting firm, since 1983. Dr. Nilsson-Weiskott
also served as director of marketing and development of Healthy Lifestyle
Consultants, a behavioral health company, from 1979 until March 1997. Prior to
this time, Dr. Nilsson-Weiskott served as the director of training of The Ohio
State University Consultation and Counseling Services.
BOARD OF DIRECTORS
Each Director will hold office until the next annual meeting of
shareholders, at which time he, or his successor, will be elected by a majority
vote of the shareholders. See "Risk Factors -- Voting Control of Management."
MPW's Board of Directors intends to establish an Audit Committee prior to,
and a Compensation Committee effective upon, the completion of the Offering. The
Audit Committee will be responsible for reviewing with management the financial
controls, accounting and audit and reporting activities of the Company. The
Audit Committee will review the qualifications of the Company's independent
auditors, make recommendations to the Board of Directors regarding the selection
and engagement of independent auditors, review the scope, fees and results of
any audit, review non-audit services and related fees provided by independent
auditors, and review the Company's general policies and procedures with respect
to audits, accounting and financial controls. The Audit Committee will consist
of at least three Directors who are not employees of the Company ("Non-Employee
Directors").
The Compensation Committee will be responsible for establishing
compensation policies and administering all salary, bonus and incentive
compensation plans for the Company's officers and key employees. The
Compensation Committee will also administer the Company's 1997 Stock Option Plan
and other employee benefit plans. See "Executive Compensation -- Stock Option
Plans." The Compensation Committee will consist of at least three Non-Employee
Directors.
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EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding compensation
earned by the Company's Chief Executive Officer and each of the Company's
executive officers whose salary and bonus exceeded $100,000 for services
rendered to the Company during fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
----------------- ---------------------
SALARY BONUS SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS(#) (1)
- ---------------------------------------------------- ---- ------- ------- ---------------------
<S> <C> <C> <C> <C>
Monte R. Black 1997 453,131 100,000 --
Chairman of the Board and Chief Executive Officer
Ira O. Kane 1997 200,000 175,000 518,000
President and Chief Operating Officer
Daniel P. Buettin 1997 110,000 55,000 148,000
Vice President, Chief Financial Officer and
Secretary
Brad A. Martyn 1997 89,375 32,750 74,000
Corporate Controller
</TABLE>
- ---------------
(1) Pursuant to contractual commitments made by the Company at the time the
named executive officers commenced their employment, the vesting provisions
and exercise price of such stock options are effective as of the date of the
commencement of such named executive officer's employment, which preceded
the date of grant of such stock options.
The Company expects that for the 1998 fiscal year (i) the annual base
salary of Messrs. Black, Kane, Buettin and Martyn will be $450,000, $300,000,
$168,000 and $120,000, respectively, and (ii) such officers will receive bonus
compensation based on the achievement of certain performance objectives. The
Company expects that such bonus compensation will not exceed 50% of the annual
base salaries of Messrs. Black, Kane and Buettin and 35% of the annual base
salary of Mr. Martyn, in each case, subject to the approval of the Compensation
Committee.
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END OPTION VALUES.
The following table sets forth information concerning the number of
unexercised options and the fiscal 1997 year-end value of such unexercised
options on an aggregated basis held by each of the executive officers. The
Company has not granted any stock appreciation rights and no options were
exercised in fiscal 1997.
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($) (1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ira O. Kane........................ 518,000 -- 4,070,125 --
Daniel P. Buettin.................. 18,500 129,500 136,484 933,731
Brad A. Martyn..................... 9,250 64,750 67,479 452,926
</TABLE>
- ---------------
(1) No public trading market for the Common Stock existed at the end of fiscal
1997. Accordingly, as permitted by the rules of the Securities and Exchange
Commission, these values have been calculated on the basis of the assumed
initial public offering price of $10.00 less the exercise price.
34
<PAGE> 36
EMPLOYMENT AND SEVERANCE AGREEMENTS WITH CERTAIN EXECUTIVES
Ira O. Kane entered into an employment agreement with the Company with a
term extending through June 30, 1999. Mr. Kane's employment agreement provides
for a minimum annual base salary of $300,000 and incentive compensation. In
general, Mr. Kane's employment agreement provides that if he is terminated for
any reason other than cause, he will receive a lump sum severance payment equal
to the greater of (i) the remaining base salary that would have been distributed
to him by the Company under the remaining term of his employment agreement or
(ii) one year's base salary, and the incentive compensation earned by Mr. Kane
for the most recent fiscal year. In the event that Mr. Kane is terminated
without cause following the term of his employment agreement, he will receive a
severance payment of one year's base salary and the incentive compensation
earned for the prior year. In addition, Mr. Kane's employment agreement provides
for the continuation of certain employee benefits for the longer of the
remaining term of the agreement or one year following his termination.
Mr. Kane has agreed pursuant to his employment agreement not to compete
with MPW for the longer of the term of his employment agreement or one year
following the payment of the foregoing severance benefit.
The Company has also entered into separate severance agreements (the
"Severance Agreements"), which are designed to ensure the continuity of
management in the event of a change in control, with Mr. Black, Mr. Kane, Mr.
Buettin and Mr. Martyn. The Severance Agreements provide that following a change
in control such executives will be entitled to severance compensation upon
termination of employment during the period commencing with the occurrence of
the change in control and continuing until the earliest of (i) the third
anniversary of the occurrence of the change in control, (ii) death or (iii)
attainment of age 65 and the occurrence of one or more certain additional
events.
Under the Severance Agreements, severance compensation will be a lump sum
payment in an amount equal to three times the sum of (i) base pay at the highest
rate in effect for the three calendar years immediately preceding the year in
which the change in control occurs, plus (ii) incentive pay in an amount equal
to not less than the highest aggregate annual bonus, incentive or other payments
of cash compensation made or to be made in regard to services rendered in any
fiscal year during the three fiscal years immediately preceding the year in
which the change in control occurs, less the sum of (iii) any and all payments
received from the Company, a successor or their affiliates following a change in
control, plus (iv) any future payments to be made in accordance with any
employment agreements or other contracts between the Company and such other
entities. For three years following termination, the Company will arrange to
provide the executives with welfare benefits substantially similar to those they
were receiving or were entitled to receive immediately prior to the termination
date, with such three-year period qualifying as service with the Company for the
purpose of determining service credits and benefits under the Company's various
retirement benefit plans.
The Company has agreed to pay any and all legal fees incurred by these
executives in connection with the interpretation, enforcement or defense of
their rights under the Severance Agreements. The terms of the Severance
Agreements run until the later of (i) the close of business on June 30, 2002 or
(ii) the expiration of the three-year period of severance benefit coverage.
Beginning in fiscal 2003, the Severance Agreements will automatically be renewed
for successive one year terms unless the Company or the executive gives notice
of intent to terminate before such renewal.
In the event of a termination of employment following a change in control,
at the option of Mr. Kane, the terms of his employment agreement may govern such
termination in lieu of the terms of his Severance Agreement.
STOCK OPTION PLANS
1997 Stock Option Plan. The Company has adopted a 1997 Stock Option Plan
(the "1997 Plan") that will become effective upon the completion of the
Offering. Options under the 1997 Plan may be (i) options that are intended to
qualify under particular provisions of the Code; (ii) options that are not
intended to so qualify; or (iii) combinations of the foregoing. Such options may
be granted from time to time to attract and retain outstanding individuals as
directors, officers and employees of the Company, and to furnish incentives to
such persons to increase the Company's profits. The exercise price of stock
options granted will be determined by the
35
<PAGE> 37
Compensation Committee administering the 1997 Plan. These stock options will
vest over a period of time determined by the Compensation Committee and will
expire after ten years. The 1997 Plan authorizes the granting of options up to
an aggregate of 700,000 shares of Common Stock. The Compensation Committee will
administer the 1997 Plan and make the determination as to the grant of awards
thereunder.
The Board of Directors has granted under the 1997 Plan stock options to
acquire 225,000 shares of Common Stock at an exercise price equal to the initial
public offering price per share effective upon the consummation of the Offering.
Under the 1997 Plan, each director who is not an associate of the Company
or of a subsidiary will receive, on the first business day after the first
annual meeting of shareholders, a grant of a non-qualified stock option to
purchase 2,000 shares of Common Stock and, on the first business day after each
subsequent annual meeting of shareholders, a grant of a non-qualified stock
option to purchase 1,000 shares of Common Stock, in each case at an exercise
price equal to the fair market value of the Common Stock on the date of grant. A
director option will be exercisable until the earlier of (i) the tenth
anniversary of the date of grant and (ii) three months (one year in the case of
a director who becomes disabled or dies) after the date the director ceases to
be a director. The exercise price of the director options may be satisfied in
cash or, in the discretion of the Committee, by exchanging Common Stock owned by
the director, or by a combination of cash and Common Stock.
Other Employee Stock Option Plans. On September 12, 1991, the Company
adopted an Employee Stock Option Plan (the "1991 Plan") that provides for the
granting of up to 200,000 stock options to key management personnel. Under the
1991 Plan, the exercise per share price is equal to approximately two times the
net book value per share of the Company as of the date of grant. Each option is
issued for a term of ten years and vests ratably over a five-year period. See
Note 11 to the Consolidated Financial Statements. Under the terms of the 1991
Plan, the Company may be obligated to repurchase Common Stock issued upon
exercise of stock options at a price equal to two times the net book value per
share of the Company as of the date of the repurchase; this obligation
terminates upon completion of the Offering. Pursuant to the 1991 Plan, options
covering 64,000 shares of Common Stock have been granted and are outstanding.
Following completion of the Offering, no additional options will be granted
under the 1991 Plan.
On April 7, 1996, the Company adopted a second Employee Stock Option Plan
(the "1994 Plan") that provides for the granting of up to 1,000,000 stock
options to executive officers and key employees of the Company. Under the 1994
Plan, the exercise price of such options is equal to the adjusted net book value
per share of the Company as of the date of grant. Each option is issued for a
term of ten years and vests over periods ranging from three to five years. See
Note 11 to the Consolidated Financial Statements. Under the terms of the 1994
Plan, the Company may be obligated to repurchase Common Stock issued upon
exercise of stock options at a price ranging from one to two times the net book
value per share of the Company as of the date of the repurchase; this obligation
terminates upon completion of the Offering. Pursuant to the 1994 Plan, options
covering 915,000 shares of Common Stock have been granted and are outstanding.
Following completion of the Offering, no additional options will be granted
under the 1994 Plan.
36
<PAGE> 38
Stock Options Granted in Last Fiscal Year. The following table sets forth
stock options granted by the Company to the executive officers under the 1994
Plan during fiscal 1997.
OPTION GRANTS IN FISCAL 1997 (1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL
-------------------------------------------------------------------- RATES OF
% OF TOTAL STOCK PRICE
NUMBER OF SHARES OPTIONS APPRECIATION FOR
OF COMMON STOCK GRANTED TO EXERCISE OR OPTION TERM (4)
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR (2) ($/SH) (3) DATE 5% ($) 10% ($)
- ------------------------------ ------------------ --------------- ----------- --------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ira O. Kane................... 518,000 64.3% 2.14 8/1/06 697,900 1,768,800
Daniel P. Buettin............. 74,000 9.2 2.62 8/1/06 122,000 309,300
Daniel P. Buettin............. 74,000 9.2 2.92 8/1/06 135,700 343,800
Brad A. Martyn................ 37,000 4.6 2.71 8/1/06 62,900 159,500
Brad A. Martyn................ 37,000 4.6 3.23 6/30/07 75,200 190,500
</TABLE>
- ---------------
(1) Options were granted under the Company's 1994 Plan during fiscal 1997 but,
as a result of prior contractual commitments of the Company, were effective
as of earlier dates.
(2) Based on an aggregate of 806,000 shares subject to options granted to
employees of MPW in fiscal 1997.
(3) The exercise price per share of the options granted was equal to the
adjusted net book value per share of the Company as of the date the option
became effective. See Note 11 to the Consolidated Financial Statements.
(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date, and are not intended to forecast possible future
appreciation, if any, in the price of the Common Stock. The gains shown are
net of the option exercise price, but do not include deductions for federal
or state income taxes or other expenses associated with the exercise of the
options or the sale of the underlying shares of Common Stock. The actual
gains, if any, on the stock option exercises will depend on the future
performance of the Common Stock, the option holder's continued employment
through the option period and the date on which the options are exercised.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has never had a Compensation Committee or other committee of
the Board of Directors performing similar functions. Previously, decisions
concerning compensation of executive officers of the Company were made by the
Company's Chief Executive Officer. The Board of Directors will establish a
Compensation Committee effective upon completion of the Offering. See
"Management -- Board of Directors."
DIRECTOR COMPENSATION
Directors who are employees of the Company will not receive compensation
for serving as Directors. Non-Employee Directors will be paid a quarterly fee of
$1,500 as well as additional fees of $1,000 for each meeting of the Board of
Directors or of a committee of the Board of Directors attended by such Director.
All Directors of the Company will also be reimbursed for reasonable travel
expenses to and from meetings of the Board of Directors and committees.
37
<PAGE> 39
CERTAIN RELATED PARTY AND OTHER TRANSACTIONS
On August 9, 1996, MPW sold certain real estate and a commercial building
located in Chesterfield, Michigan, which currently serves as MPW's industrial
container cleaning facility, to the Black Family Limited Partnership, an Ohio
limited partnership in which Monte R. Black serves as the sole general partner,
for an aggregate consideration of $2.2 million. The terms of such sale were
based on an independent appraisal of such property that the Company believes
were no less favorable to the Company than those available from an unrelated
third party. As part of the same transaction, the partnership and MPW entered
into a long-term lease arrangement with respect to the facility for a term of
ten years at an annual payment amount of approximately $421,000, payable
monthly. In connection with the Offering, MPW will enter into an amended triple
net lease agreement through June 30, 2004, with options to renew for two
additional five-year periods, which lease provides for an annual rental of
$288,000, payable monthly. The lease agreement provides for an adjustment on
January 1, 2001 to the annual rental based on the fair market value of such
facility. The Company believes that the terms of this lease are no less
favorable to the Company than those reasonably available from unrelated third
parties for comparable space. See "Business -- Facilities."
As part of an industrial revenue bond financing in 1986, Monte R. and Susan
K. Black constructed an approximately 67,000 square foot building in Hebron,
Ohio, which the Company leased for a ten-year term. Annual rent payments on the
building and equipment during this ten-year term were $726,000, payable monthly.
In connection with the Offering, the Company will enter into an amended triple
net lease agreement through June 30, 2004, with options to renew for two
additional five-year periods, which provides for an annual rental of $600,000,
payable monthly. The lease agreement provides for an adjustment on January 1,
2001 to the annual rental based on the fair market value of such facility. The
Company believes that the terms of this lease are no less favorable to the
Company than those reasonably available from unrelated third parties for
comparable space. See "Business -- Facilities."
In 1989 the Company entered into a five-year agreement to rent certain real
estate and a commercial building located in Newark, Ohio from Monte R. and Susan
K. Black. In 1993 the Company extended the lease for an additional five-year
term. Annual lease payments were $46,920, payable monthly. Effective July 1,
1997, the Company has entered into a triple net lease agreement through June 30,
2004, with options to renew for two additional five-year periods, which provides
for an annual rental of $66,000, payable monthly. The Company believes that the
terms of this lease are no less favorable to the Company than those reasonably
available from unrelated third parties for comparable space. See
"Business -- Facilities."
The Company provides certain operational, administrative and financial
services to Pro-Kleen Industrial Services, Inc. ("Pro-Kleen"), a portable
sanitation services company wholly-owned by Monte R. Black. At September 30,
1997, the amount due from Pro-Kleen in connection with such services was
$72,000.
In connection with the Offering, the Company will sell a corporate aircraft
at a fair market value of $3.6 million to an entity controlled by Monte R. Black
in exchange for forgiveness of $3.6 million of AAA Notes. The Company expects to
lease such aircraft for business use from Mr. Black on terms no less favorable
to the Company than those reasonably available from unrelated third parties.
The Company's Board of Directors has approved a stock exchange agreement
with the minority shareholders of Aquatech Environmental, Inc. (the "Aquatech
Agreement"). Effective upon the consummation of the Offering, the Aquatech
Agreement provides for the exchange of 67,800 shares of Common Stock of the
Company for all of the outstanding shares of Aquatech Environmental, Inc. held
by the minority shareholders.
38
<PAGE> 40
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information, as of the date of this
Prospectus, with respect to the beneficial ownership of the Common Stock by: (i)
each person or entity known by the Company to own beneficially 5% or more of the
outstanding Common Stock; (ii) each director, director nominee and named
executive officer of the Company; and (iii) the Company's executive officers and
directors as a group. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, Common Stock subject to
options to purchase Common Stock held by that person that are currently
exercisable, or will become exercisable within 60 days after the date of this
Prospectus, are deemed outstanding. Such shares, however, are not deemed
outstanding for purposes of computing the percentage ownership of any other
person. Unless otherwise noted, each person has sole investment and voting power
with respect to the shares indicated (subject to applicable marital property
laws).
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OFFERING OWNED AFTER OFFERING
------------------------ ------------------------
PERCENT OF PERCENT OF
NUMBER OUTSTANDING NUMBER OUTSTANDING
OF SHARES SHARES OF SHARES SHARES
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Monte R. Black (1).............................. 6,200,000 100.0% 6,200,000 62.3%
Susan K. Black.................................. 620,000 10.0% 620,000 6.2%
Monte R. Black and Susan K. Black 1994
Irrevocable Trust............................. 503,784 8.1% 503,784 5.1%
Ira O. Kane (2)................................. 518,000 7.7% 518,000 4.9%
Robert E. Oyster................................ -- -- -- --
Timothy A. Walsh................................ -- -- -- --
Scott N. Whitlock............................... -- -- -- --
Daniel P. Buettin (3)........................... 55,500 * 55,500 *
Brad A. Martyn (4).............................. 14,800 * 14,800 *
Pete A. Klisares................................ -- -- -- --
Gerald Nilsson-Weiskott......................... -- -- -- --
All directors and executive officers as a group
(7 persons) (5)............................... 6,788,300 100.0% 6,788,300 64.4%
</TABLE>
- ---------------
* Less than 1%.
(1) Includes (i) 620,000 shares held by Mr. Black's wife, Susan K. Black, and
(ii) an aggregate of 503,784 shares held in trust for Mr. Black's children.
Mr. Black disclaims beneficial ownership of the foregoing shares.
(2) Includes 518,000 shares subject to options to purchase Common Stock
exercisable until August 1, 2006.
(3) Includes 55,500 shares subject to options to purchase Common Stock
exercisable until August 1, 2006.
(4) Includes 14,800 shares subject to options to purchase Common Stock
exercisable until August 1, 2006.
(5) Includes 588,300 shares subject to options to purchase Common Stock
exercisable until August 1, 2006.
39
<PAGE> 41
DESCRIPTION OF CAPITAL STOCK
GENERAL
Immediately prior to the issuance of the shares offered hereby, the
authorized capital of the Company will consist of 30,000,000 shares of Common
Stock, no par value per share, and 5,000,000 shares of undesignated preferred
stock, par value $0.01 per share (the "Preferred Stock"). The following summary
description of the capital stock of the Company is qualified in its entirety by
reference to the Articles of Incorporation of the Company and Code of
Regulations of the Company, a copy of each of which is filed as an exhibit to
the Registration Statement of which this Prospectus forms a part.
COMMON STOCK
As of September 30, 1997, assuming no exercise of options, there were
6,200,000 shares of Common Stock outstanding held of record by three
shareholders. There will be 10,046,000 shares of Common Stock outstanding after
giving effect to the sale of Common Stock offered hereby, the acquisition of ESI
and assuming no exercise of the Underwriters' over-allotment option. In
addition, there are 1,204,000 shares of Common Stock issuable upon exercise of
outstanding stock options and 67,800 shares of Common Stock to be issued in
connection with the Company's repurchase of certain minority stock ownership
interests. See "Certain Related Party and Other Transactions." All outstanding
shares are, and the Common Stock offered hereby will be, duly authorized,
validly issued, fully paid and nonassessable immediately following the closing
of the Offering.
Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the shareholders. The holders of Common Stock are not
entitled to cumulative voting rights. Holders of Common Stock are entitled to
receive dividends and other distributions when, as and if declared from time to
time by the Board of Directors out of funds legally available for such purposes
subject to any preferential rights of, and any sinking fund or redemption or
purchase rights with respect to, outstanding shares of Preferred Stock, if any.
In the event of a voluntary or involuntary liquidation, dissolution or winding
up of MPW, the holders of Common Stock would be entitled to share ratably in all
assets remaining after payment of liabilities subject to prior distribution
rights and payment of any distributions owing to holders of shares of Preferred
Stock then outstanding, if any. Holders of the Common Stock have no preemptive
or conversion rights, and the Common Stock are not subject to further calls or
assessment by the Company. There are no redemption or sinking fund provisions
applicable to the Common Stock.
PREFERRED STOCK
There are no shares of Preferred Stock outstanding. The Board of Directors
has the authority, without further action by the shareholders, to issue
Preferred Stock in one or more series and to fix the rights, designations,
preferences, privileges, qualifications, and restrictions thereof, including
dividend rights, conversion rights, terms and rights of redemption, liquidation
preferences and sinking fund terms (any or all of which may be greater than the
rights of the Common Stock). The Board of Directors also has the authority,
without further action by the shareholders and to the extent now or hereafter
permitted by law, to amend the Articles of Incorporation to fix the voting
rights of any unissued or treasury shares of any class of Preferred Stock. The
Board of Directors, without shareholder approval, can issue shares of Preferred
Stock with conversion, voting and other rights that could adversely affect the
rights of the holders of Common Stock.
OHIO LAW AND CERTAIN CHARTER PROVISIONS
Control of the Company by Monte R. Black, as well as certain statutory
provisions of Ohio law and the Company's Articles of Incorporation and Code of
Regulations, may have the effect of deterring hostile takeovers or delaying or
preventing changes in control or changes in management of the Company, including
transactions in which shareholders of the Company might otherwise receive a
premium over the then current market price for their shares. The size of the
Board of Directors is fixed by the Company's Code of Regulations at not less
than five nor more than nine directors. Each director will hold office until the
next annual meeting of shareholders, at which time his successor is elected.
40
<PAGE> 42
The Company's Articles of Incorporation and Code of Regulations contain
various provisions that may have the effect, either alone or in combination with
each other, of making more difficult or discouraging a business combination or
an attempt to obtain control of the Company that is not approved by the Board of
Directors. These provisions include the following: (i) the right of the Board of
Directors to issue unissued and unreserved Common Stock without shareholder
approval; (ii) the right of the Board of Directors to issue shares of Preferred
Stock, without shareholder approval, in one or more series and to designate the
number of shares of each such series and the relative rights and preferences of
such series, including voting rights (to the extent now or hereafter permitted
by law), terms of redemption, redemption prices and conversion rights; (iii) a
limitation on the removal of directors except upon the vote of 80% of the
outstanding shares; (iv) a limitation on the ability of shareholders to call a
special meeting except upon the consent of shareholders representing 50% of the
outstanding shares entitled to vote at such meeting; and (vi) a limitation on
the ability of shareholders to fill vacancies in the Board of Directors except
after a vote to increase the number of directors at a meeting called for that
purpose.
The Company's Code of Regulations also contains provisions requiring
advance notice to the Company of (i) nominations of candidates for election to
the Board of Directors who are not nominated by the Company, and (ii) proposals
to be brought before the Company's annual meeting of shareholders (other than
proposals made by the Company). Without compliance with these provisions, any
such nominations or shareholder proposals may not be considered by the Company.
Section 1701.831 of the OGCL (the "Control Share Acquisition Statute")
requires shareholder approval of any proposed "control share acquisition" of an
Ohio corporation. A "control share acquisition" is defined as the acquisition,
directly or indirectly, by any person (including any individual, partnership,
corporation, limited liability company, society, association or two or more
persons who have a joint or common interest) of stock of a corporation that,
when added to all other stock of the corporation that may be voted, directly or
indirectly, by the acquiring person, would entitle such person to exercise or
direct the exercise of 20% or more (but less than 33 1/3%) of the voting power
of the corporation in the election of directors or 33 1/3% or more (but less
than a majority) of such voting power or a majority or more of such voting
power. Under the Control Share Acquisition Statute, the control share
acquisition must be approved in advance by the holders of a majority of the
outstanding voting stock represented at a meeting at which a quorum is present
and by the holders of a majority of the portion of the outstanding voting stock
represented at such a meeting excluding the voting stock owned by the acquiring
shareholder and certain "interested shares," including shares owned by officers
elected or appointed by the directors of the corporation and by directors of the
corporation who are also associates of the corporation.
The Control Share Acquisition Statute applies not only to traditional
tender offers but also to open market purchases, privately negotiated
transactions and original issuances by the Company, whether friendly or
unfriendly. The procedural requirements of the Control Share Acquisition Statute
could render approval of any control share acquisition difficult in that a
majority of the voting power of the Company, excluding "interested shares," must
be represented at the meeting and must be voted in favor of the acquisition. The
Company recognizes that any corporate defense against persons seeking to acquire
control may have the effect of discouraging or preventing offers that some
shareholders might find financially attractive. On the other hand, the need on
the part of the acquiring person to convince the shareholders of the Company of
the value and validity of his offer may cause such offer to be more financially
attractive in order to gain shareholder approval.
Chapter 1704 of the OGCL (the "Merger Moratorium Statute") generally
prohibits a wide range of business combinations and other transactions
(including mergers, consolidations, asset sales, loans, disproportionate
distributions of property and disproportionate issuances or transfers of shares
or rights to acquire shares) between the Company and a person, other than Monte
R. Black, that owns, alone or with other related parties, shares representing at
least 10% of the voting power of the Company (an "Interested Shareholder") for a
period of three years after such person becomes an Interested Shareholder,
unless, prior to the date that the Interested Shareholder became such, the board
of directors approves either the transaction or the acquisition of the Common
Stock that resulted in the person becoming an Interested Shareholder. Following
the three-year moratorium period, the Company may engage in covered transactions
with an Interested Shareholder only if, among other things, (i) the transaction
receives the approval of the holders of 66 2/3% of all the voting stock and the
approval of the holders of a majority of the voting stock held by persons other
than an Interested Shareholder or (ii) the remaining shareholders receive an
amount for their shares equal to the higher of the highest amount paid in the
41
<PAGE> 43
past by the Interested Shareholder for the Common Stock or the amount that would
be due the shareholders if the Company were to dissolve. The legislative history
of the Merger Moratorium Statute indicates that it is designed to prevent many
of the self-dealing activities that often accompany highly-leveraged
acquisitions by prohibiting an Interested Shareholder from using the Company or
its assets or stock for his benefit. The Merger Moratorium Statute will likely
encourage potential tender offerors to negotiate with the Board of Directors of
the Company to ensure that the shareholders of the Company receive fair and
equitable consideration for their stock.
Other provisions of the OGCL may also have the effect of deterring hostile
takeovers or delaying or preventing changes in control or changes in management
of the Company.
DIRECTOR AND OFFICER INDEMNIFICATION AND LIABILITY
Under Ohio law, a director of the Company will not be found to have
violated his fiduciary duties unless there is proof by clear and convincing
evidence that the director has not acted in good faith, in a manner he
reasonably believes to be in or not opposed to the best interests of the
Company, or with the care that an ordinarily prudent person in a like position
would use under similar circumstances. In general, a director of the Company is
liable for monetary damages for any action or omission as a director only if
proven by clear and convincing evidence that such act or omission was undertaken
either with deliberate intent to cause injury to the Company or with reckless
disregard for the best interests of the Company.
Under Ohio law, the Company must indemnify its directors, as well as its
officers, employees and agents, against expenses where any such person is
successful on the merits or otherwise in defense of an action, suit or
proceeding. The Company may indemnify such persons in actions, suits and
proceedings (including derivative suits) if the individual has acted in good
faith and in a manner that he believes to be in or not opposed to the best
interests of the Company. In the case of a criminal proceeding, the individual
must also have no reasonable cause to believe that his conduct was unlawful.
Indemnification may be made only if ordered by a court or if authorized in a
specific case upon a determination that the applicable standard of conduct has
been met. Such a determination may be made by a majority of the disinterested
directors, by independent legal counsel or by the shareholders. In order to
obtain reimbursement for expenses in advance of the final disposition of any
action, the individual must provide an undertaking to repay the amount if
ultimately he is determined not to be entitled to indemnification.
In general, Ohio law requires that all expenses, including attorneys' fees,
incurred by a director in defending any action, suit or proceeding be paid by
the Company as they are incurred in advance of final disposition if the director
agrees to repay such amounts if, proven by clear and convincing evidence that
his action or omission was undertaken with deliberate intent to cause injury to
the Company or with reckless disregard for the best interests of the Company and
if the director reasonably cooperates with the Company concerning the action,
suit or proceeding.
The Company's Amended Code of Regulations provides for indemnification that
is coextensive with that permitted under Ohio law. The Company's Amended Code of
Regulations authorizes the Company to enter into indemnification agreements with
each present and future director and such officers, employees or agents as
specified in the Amended Code of Regulations. The Amended Code of Regulations
also authorizes the Company to enter into agreements to indemnify such persons
to the maximum extent permitted by applicable law. The indemnification so
granted may exceed the indemnification specifically authorized by the OGCL Each
agreement represents a contractual obligation of the Company that can not be
altered unilaterally.
TRANSFER AGENT
The transfer agent for the Common Stock will be National City Bank,
Cleveland, Ohio.
42
<PAGE> 44
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 10,046,000 shares of
Common Stock outstanding. All of the shares offered hereby will be freely
saleable in the public market after completion of the Offering, unless acquired
by affiliates of the Company. All of the shares outstanding prior to completion
of the Offering are subject to contractual restrictions that prohibit the
shareholders from selling or otherwise disposing of shares for a period of 180
days after the date of this Prospectus without the consent of Raymond James &
Associates, Inc. After this 180-day period expires, 6,200,000 shares will be
eligible for resale in the public market under Rule 144 promulgated under the
Securities Act. Upon the expiration of the 180-day period, Common Stock then
held by affiliates of the Company will be subject to certain volume and other
limitations discussed below under Rule 144.
The Company, and the Company's directors, officers and shareholders have
agreed not to sell, contract to sell or otherwise dispose of any Common Stock
for a period of 180 days after the date of this Prospectus, except as
consideration for business acquisitions or upon exercise of currently
outstanding stock options, without the prior written consent of Raymond James &
Associates, Inc.
In general, under Rule 144 as amended effective April 29, 1997, a person
(or persons whose shares are aggregated), including persons who may be deemed
affiliates of the Company, who has beneficially owned his or her shares for at
least one year is entitled to sell within any three-month period that number of
shares that does not exceed the greater of 1% of the outstanding Common Stock
(approximately 100,000 shares after completion of the Offering) or the average
weekly trading volume during the four calendar weeks preceding each such sale.
Sales under Rule 144 also are subject to certain manner of sale provisions,
notice requirements and the availability of current public information about the
Company. Under Rule 144(k), a person (or persons whose shares are aggregated)
who is not or has not been deemed an "affiliate" of the Company for at least
three months and who has beneficially owned his or her shares for at least two
years would be entitled to sell such shares under Rule 144 without regard to the
limitations discussed above.
There has been no public market for the Common Stock prior to the Offering
and no assurance can be given that an active public market for the Common Stock
will develop or be sustained after completion of the Offering, and no prediction
can be made as to the effect, if any, that sales of stock under Rule 144 or the
availability of shares for sale will have on the market price of the Common
Stock prevailing from time to time after the Offering. Sales of substantial
amounts of the Common Stock, or the perception that such sales could occur,
could adversely affect the prevailing market price of the Common Stock and could
impair the Company's ability to raise capital or effect acquisitions through the
issuance of Common Stock.
43
<PAGE> 45
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters") have severally agreed to purchase
from the Company the following respective number of shares of Common Stock at
the initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
--------------------------------------------------------------------- ----------------
<S> <C>
Raymond James & Associates, Inc. ....................................
Robert W. Baird & Co. Incorporated...................................
---------
Total...................................................... 3,750,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the Common Stock offered hereby, if any of
such shares are purchased.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain other dealers. After commencement of the
initial public offering, the offering price and other selling terms may be
changed by the Underwriters.
The Company has granted the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 562,500
additional shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to the total number of shares offered by the
Company hereunder, and the Company will be obligated, pursuant to the option, to
sell such shares to the Underwriters. The Underwriters may exercise such option
only to cover over-allotments made in connection with the sale of the Common
Stock offered hereby. If purchased, the Underwriters will offer such additional
shares on the same terms as those on which the 3,750,000 shares of Common Stock
are being offered.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934 (the "Exchange Act"). Over-allotment
involves syndicate sales in excess of the offering size, which creates a
syndicate short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the securities in
the open
44
<PAGE> 46
market after the distribution has been completed in order to cover syndicate
short positions. Penalty bids permit the Underwriters to reclaim a selling
concession from a syndicate member when the securities originally sold by such
syndicate member are purchased in a syndicate covering transaction to cover
syndicate short positions. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the securities to be higher
than it would otherwise be in the absence of such transactions.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Company has agreed not to sell, contract to sell or otherwise dispose
of any Common Stock for a period of 180 days after the date of this Prospectus,
except as consideration for business acquisitions or upon exercise of currently
outstanding stock options, without the prior written consent of Raymond James &
Associates, Inc. All shareholders, directors and officers of the Company have
agreed not to sell, contract to sell or otherwise dispose of any Common Stock
for a period of 180 days without the prior written consent of Raymond James &
Associates, Inc. See "Shares Eligible For Future Sale."
The Underwriters have advised the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.
Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the Common Stock will
be determined by negotiations between the Company and the Underwriters. Among
the factors to be considered in such negotiations are prevailing market
conditions, the results of operations of the Company in recent periods, the
market capitalizations and stages of development of other companies which the
Company and the Underwriters believe to be comparable to the Company, estimates
of the business potential of the Company, the present state of the Company's
development and other factors deemed relevant.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for MPW by Jones, Day, Reavis & Pogue, Columbus, Ohio. Certain legal
matters related to the Offering will be passed upon for the Underwriters by
McDermott, Will & Emery, Chicago, Illinois.
EXPERTS
The consolidated financial statements of MPW Industrial Services Group,
Inc. as of June 30, 1996 and 1997, and for each of the three years in the period
ended June 30, 1997, included herein and in the Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
SHAREHOLDER REPORTS
The Company intends to furnish its shareholders with annual reports
containing consolidated financial statements audited by its independent
auditors.
45
<PAGE> 47
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 48
MPW INDUSTRIAL SERVICES GROUP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Report of Independent Auditors......................................................... F-2
Consolidated Balance Sheets as of June 30, 1996 and 1997 and September 30, 1997
(unaudited).......................................................................... F-3
Consolidated Statements of Income for the years ended June 30, 1995, 1996 and 1997 and
for the three months ended September 30, 1996 and 1997 (unaudited)................... F-4
Consolidated Statements of Changes in Shareholders' Equity for the years ended June 30,
1995, 1996 and 1997 and for the three months ended September 30, 1997 (unaudited).... F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1995, 1996 and 1997
and for the three months ended September 30, 1996 and 1997 (unaudited)............... F-6
Notes to Consolidated Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE> 49
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
MPW INDUSTRIAL SERVICES GROUP, INC.
We have audited the accompanying consolidated balance sheets of MPW
Industrial Services Group, Inc. and subsidiaries as of June 30, 1996 and 1997,
and the related consolidated statements of income, changes in shareholders'
equity, and cash flows for each of the three years in the period ended June 30,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of MPW Industrial
Services Group, Inc. and subsidiaries at June 30, 1996 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1997, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Columbus, Ohio
September 30, 1997,
except for Note 14
as to which the date is October 31, 1997
F-2
<PAGE> 50
MPW INDUSTRIAL SERVICES GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30,
JUNE 30, 1997 PRO FORMA
------------------- -------------- SEPTEMBER 30,
1996 1997 (UNAUDITED) 1997
------- ------- --------------
(UNAUDITED)
(NOTE 15)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 508 $ 489 $ 532
Accounts receivable (net of allowances of
$764 and $714 at June 30, 1996 and 1997,
respectively)............................ 11,517 13,560 15,074
Inventories................................. 1,632 3,361 3,353
Prepaid expenses............................ 532 960 1,022
Other current assets........................ 614 596 477
------- ------- -------
14,803 18,966 20,458
Property and equipment, net................... 21,258 23,400 23,119
Noncurrent assets:
Costs in excess of net assets of acquired
businesses, net.......................... 2,630 2,518 2,491
Other assets................................ 777 401 370
------- ------- -------
Total assets.................................. $39,468 $45,285 $46,438
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................ $ 4,077 $ 3,414 $ 3,748
Accrued compensation and related taxes...... 2,078 3,052 2,368
Current maturities of noncurrent
liabilities.............................. 1,524 965 965
Other accrued liabilities................... 4,603 4,466 4,143
------- ------- -------
12,282 11,897 11,224
Noncurrent liabilities:
Long-term debt.............................. 8,814 11,719 12,096
Capital leases.............................. 2,133 2,048 2,028
Deferred stock option compensation.......... -- 2,764 2,924
------- ------- -------
10,947 16,531 17,048
Commitments and contingencies................. -- -- --
Minority interest............................. 172 379 478
Shareholders' equity:
Preferred stock, $0.01 par value; 5,000,000
shares authorized; no shares issued and
outstanding.............................. -- -- --
Common stock, no par value; 30,000,000
shares authorized; 6,200,000 shares
issued and outstanding; 6,267,800 shares
pro forma................................ 62 62 62 $ 63
Additional paid-in capital.................. 64 837 837 2,022
Retained earnings........................... 15,941 15,579 16,789 1,265
------- ------- ------- ----
16,067 16,478 17,688 $ 3,350
------- ------- ------- ====
Total liabilities and shareholders' equity.... $39,468 $45,285 $46,438
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 51
MPW INDUSTRIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------- -------------------
1995 1996 1997 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues............................... $56,305 $58,430 $72,908 $19,422 $21,865
Costs and expenses:
Cost of services..................... 37,768 37,543 48,460 12,641 14,380
Selling, general and administrative
expenses.......................... 10,208 11,009 13,603 3,205 3,545
Depreciation and amortization........ 4,356 4,933 3,655 935 866
Deferred stock option compensation... -- -- 2,764 2,189 160
------- ------- ------- ------- -------
Total costs and expenses............. 52,332 53,485 68,482 18,970 18,951
------- ------- ------- ------- -------
Income from operations................. 3,973 4,945 4,426 452 2,914
Interest expense, net.................. 104 541 974 214 335
Minority earnings...................... -- 172 207 125 99
------- ------- ------- ------- -------
Income from continuing operations
before income taxes.................. 3,869 4,232 3,245 113 2,480
Provision for income taxes............. 331 360 1,085 44 149
------- ------- ------- ------- -------
Income from continuing operations...... 3,538 3,872 2,160 69 2,331
Discontinued operations, net of income
taxes................................ 367 163 -- -- --
------- ------- ------- ------- -------
Net income............................. $ 3,905 $ 4,035 $ 2,160 $ 69 $ 2,331
======= ======= ======= ======= =======
Unaudited pro forma information
(Note 15:
Historical income from continuing operations before taxes... $ 3,245 $ 113 $ 2,480
Pro forma adjustments other than income taxes............... 3,850 2,536 577
------- ------- -------
Pro forma income before income taxes........................ 7,095 2,649 3,057
Pro forma taxes on income................................... 2,838 1,060 1,223
------- ------- -------
Pro forma net income........................................ $ 4,257 $ 1,589 $ 1,834
======= ======= =======
Pro forma net income per common share....................... $ 0.40 $ 0.15 $ 0.17
======= ======= =======
Weighted average common shares outstanding.................. 10,747 10,747 10,747
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 52
MPW INDUSTRIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
------ ---------- --------
<S> <C> <C> <C>
Balance at July 1, 1994..................................... $ 62 $ 64 $ 16,555
Net income................................................ -- -- 3,905
Distributions............................................. -- -- (3,953)
Deferred translation adjustment........................... -- -- (28)
--- ---- -------
Balance at June 30, 1995.................................... 62 64 16,479
Net income................................................ -- -- 4,035
Distributions............................................. -- -- (4,616)
Deferred translation adjustment........................... -- -- 43
--- ---- -------
Balance at June 30, 1996.................................... 62 64 15,941
Net income................................................ -- -- 2,160
Distributions............................................. -- -- (1,161)
Distribution of previously consolidated affiliate......... -- -- (1,359)
Capital contributions..................................... -- 773 --
Deferred translation adjustment........................... -- -- (2)
--- ---- -------
Balance at June 30, 1997.................................... 62 837 15,579
Net income................................................ -- -- 2,331
Distributions............................................. -- -- (1,121)
--- ---- -------
Balance at September 30, 1997 (unaudited)................... $ 62 $837 $ 16,789
=== ==== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 53
MPW INDUSTRIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
---------------------------- -----------------
1995 1996 1997 1996 1997
------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income....................................... $ 3,905 $ 4,035 $ 2,160 $ 69 $ 2,331
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................ 3,865 4,421 2,953 756 811
Amortization................................ 491 512 702 179 55
(Gain) loss on disposals of assets.......... (80) (100) 76 15 (4)
Gain on disposition of discontinued
operation................................. -- (114) -- -- --
Minority interest........................... 74 172 207 125 99
Effect of exchange rate changes on cash..... (28) 43 (2) (2) --
Deferred stock option compensation.......... -- -- 2,764 2,189 160
Changes in operating assets and liabilities:
Accounts receivable....................... (577) (796) (2,043) (2,383) (1,514)
Inventories............................... 53 2 (1,729) 160 8
Prepaid expenses and other assets......... 215 (714) (267) (504) 88
Accounts payable.......................... (530) 722 (663) 92 334
Other accrued liabilities................. 2,742 (792) 837 (223) (1,007)
------- -------- -------- ------- -------
Net cash provided by operating activities........ 10,130 7,391 4,995 473 1,361
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment.............. (5,418) (14,269) (5,932) (1,619) (558)
Purchase of business, net of acquired cash....... -- (1,771) -- -- --
Proceeds from sale of affiliate.................. -- 500 -- -- --
Proceeds from disposal of property and
equipment...................................... 1,046 3,020 151 95 4
------- -------- -------- ------- -------
Net cash used in investing activities............ (4,372) (12,520) (5,781) (1,524) (554)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility.......... -- 15,556 32,668 9,031 11,414
Payments on revolving credit facility............ -- (13,521) (28,883) (6,196) (10,817)
Proceeds from notes payable...................... -- 7,600 -- -- --
Payments on notes payable........................ (521) (673) (880) (220) (220)
Payments on capital lease obligations............ (573) (634) (644) (180) (20)
Proceeds from capital contributions.............. -- -- 773 -- --
Distributions to shareholders.................... (3,953) (4,616) (2,267) (853) (1,121)
------- -------- -------- ------- -------
Net cash provided by (used in) financing
activities..................................... (5,047) 3,712 767 1,582 (764)
------- -------- -------- ------- -------
Increase (decrease) in cash and cash
equivalents.................................... 711 (1,417) (19) 531 43
Cash and cash equivalents at beginning of year... 1,214 1,925 508 508 489
------- -------- -------- ------- -------
Cash and cash equivalents at end of year......... $ 1,925 $ 508 $ 489 $ 1,039 $ 532
======= ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-6
<PAGE> 54
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 (UNAUDITED))
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS MPW Industrial Services
Group, Inc. ("MPW" or the "Company") is an industrial services firm that
provides industrial cleaning and facility support services, industrial process
water purification, industrial air filtration services and other specialized
services. Such services are typically provided at customer facilities. MPW also
operates a process facility for industrial containers cleaning. The Company's
principal customers are large industrial facilities in the automotive, electric
power, chemical, pulp and paper, steel, transportation, aerospace and other
heavy manufacturing industries. MPW provides services primarily in the
Midwestern and Southeastern United States.
The accompanying consolidated financial statements include the accounts of
the Company including MPW Industrial Services, Inc. ("Industrial"), Weston
Engineering, Inc. ("Weston"), and Aquatech Environmental, Inc. ("Aquatech")
which is 70% owned by the Company. The minority shareholders' interests in the
equity and net income of Aquatech are presented separately in the accompanying
financial statements. All intercompany transactions and balances have been
eliminated.
REVENUES AND COST RECOGNITION The Company primarily derives its revenues
from services under time and materials, fixed price and unit price contracts.
Revenues from time and materials type contracts are recorded based on
performance and efforts expended. Contract costs include all direct labor,
material, per diem, subcontract and other direct and indirect project costs
related to contract performance. Revenues derived from non-contract activities
are recorded as services are performed or goods are sold.
During fiscal 1997, the Company had revenues from General Motors
Corporation which represented 10.4% of consolidated revenues. In prior years, no
customer represented more than 7% of consolidated revenues.
DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments are used
by the Company in the management of its interest rate exposure. The
differentials to be paid or received under interest rate swap agreements and any
associated costs of such agreements are recognized in income over the life of
the swap agreement as adjustments to interest expense in the accompanying
financial statements.
INVENTORIES Inventories, primarily consisting of products purchased for
resale and operating supplies, are stated at the lower of cost or market. Cost
is determined using the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT Property and equipment, including assets under
capital leases, are recorded at cost and include expenditures which
substantially increase the useful lives of the assets. Maintenance and repairs
that do not improve or extend the life of the respective assets are expensed as
incurred. Depreciation is provided over the estimated useful lives of the
respective assets using the straight-line method. Amortization of capital leases
is provided over the lease terms using the straight-line method.
Depreciation and amortization on the Company's property and equipment has
been computed based on the following useful lives:
<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Buildings and improvements.................................................. 5 to 20
Motor vehicles and transportation equipment................................. 3 to 10
Machinery and equipment..................................................... 3 to 8
Furniture and fixtures...................................................... 5 to 7
</TABLE>
COSTS IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES Costs in excess of
net assets of acquired businesses ("goodwill"), resulting primarily from certain
acquisitions accounted for using the purchase method of accounting, is amortized
on a straight-line basis over periods not exceeding 25 years. Accumulated
amortization of goodwill as of June 30, 1996 and 1997 was $145,000 and $256,000,
respectively.
F-7
<PAGE> 55
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 (UNAUDITED))
FINANCIAL INSTRUMENTS Financial instruments consist primarily of cash,
accounts receivable, accounts payable and long-term debt. The carrying value of
all financial instruments at June 30, 1996 and 1997 approximated their fair
value.
INCOME TAXES The shareholders of Industrial have elected under Subchapter
S of the Internal Revenue Code to include income of Industrial in their own
income for income tax purposes. The accompanying financial statements do not
include provisions for federal income taxes and certain state income taxes for
Industrial. Other members of the Company are subject to income taxes and income
tax provisions are made in the accompanying financial statements. Deferred tax
assets and liabilities are recorded based on differences between the financial
reporting and tax basis of assets and liabilities which are measured by applying
enacted tax rates for years in which such differences are expected to reverse.
STATEMENT OF CASH FLOWS The Company considers all short-term deposits and
highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents. Cash paid for income taxes for fiscal 1995, 1996
and 1997 was $150,000, $224,000 and $525,000, respectively. Cash paid for
interest was $153,000, $315,000 and $1,255,000 for fiscal 1995, 1996 and 1997,
respectively. Distributions to shareholders during fiscal 1996 included a note
receivable of $250,000.
USE OF ESTIMATES The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the accompanying
financial statements. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial
Accounting Standards Board issued Statement No. 128, Earnings per Share, which
is required to be adopted for financial statements issued for periods ending
after December 15, 1997. This statement establishes standards for computing and
presenting earnings per share. It requires dual presentation of basic and
diluted earnings per share on the face of the income statement and a
reconciliation between the computations. The Company has not yet determined the
impact of Statement 128 on its reported earnings per share.
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, Disclosures about Segments of an Enterprise and Related Information, which
is effective for fiscal years beginning after December 15, 1997. This statement
establishes requirements for reporting information about operating segments.
This statement may require a change in the way the Company presently reports
financial information; however, the extent of the change, if any, has not been
determined.
INTERIM FINANCIAL REPORTING In the opinion of management, the unaudited
information as of September 30, 1997 and for the three months ended September
30, 1996 and 1997 includes all adjustments, consisting of normal recurring
adjustments, the Company considers necessary for a fair presentation of such
financial statements in accordance with generally accepted accounting
principles. Operating results for the three months ended September 30, 1997 are
not necessarily indicative of the results that may be expected for the year
ending June 30, 1998.
NOTE 2. ACQUISITIONS
Effective April 1, 1996, the Company purchased substantially all of the
assets of Weston Engineering, a Michigan partnership, for $2,050,000 and assumed
certain liabilities. The transaction was financed through borrowings under the
Company's loan agreement. The assets and liabilities assumed were merged into a
newly created, wholly-owned subsidiary, Weston Engineering, Inc. The acquisition
has been accounted for using the purchase method of accounting and, accordingly,
the acquired assets and assumed liabilities, including goodwill, have been
recorded at their estimated fair values as of April 1, 1996. The accompanying
financial statements include the results of operations of Weston from the
effective acquisition date through June 30, 1997.
F-8
<PAGE> 56
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 (UNAUDITED))
The following table sets forth the unaudited consolidated pro forma results
of operations for fiscal 1995 and 1996 giving effect to the acquisition of
Weston as if such acquisition had occurred on July 1, 1994.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revenues....................................... $64,628 $64,781
Net income..................................... 3,547 3,944
</TABLE>
NOTE 3. CHANGE IN ACCOUNTING ESTIMATE
Effective July 1, 1996, the Company changed its estimates for the useful
lives of certain property and equipment to more accurately reflect the Company's
actual history of useful lives. The Company utilized the net book value of each
of its property and equipment assets as of July 1, 1996 and applied the
remaining useful life of each asset in the calculation of depreciation from that
date forward. In fiscal 1997, the effect of applying these changes was a
reduction in depreciation expense of $1,620,000.
NOTE 4. DISCONTINUED OPERATIONS
Effective December 31, 1995, the Company disposed of its 70% interest in
B&B Underground, a general partnership, to the remaining partner for $750,000.
Under the terms of the agreement, $500,000 was received during fiscal 1996 with
the remainder to be received in five equal annual installments of $50,000 plus
interest. The transaction resulted in a gain of $114,000. The sale of the
Company's interest in B&B Underground has been accounted for as discontinued
operations and, accordingly, the accompanying consolidated statements of income
have been restated to report this business separately as discontinued
operations.
The results of operations of B&B Underground are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenues.......................................... $ 2,692 $ 968
Operating income.................................. 511 21
Net income........................................ 367 49
</TABLE>
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
---------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land and buildings................................ $ 5,830 $ 2,200
Motor vehicles and transportation equipment....... 30,526 32,613
Machinery and equipment........................... 9,559 9,627
Leasehold improvements............................ 2,748 3,323
Furniture and fixtures............................ 2,051 1,610
Construction in progress.......................... 1,248 1,486
-------- -------
51,962 50,859
Less accumulated depreciation and amortization.... (30,704) (27,459)
-------- -------
$ 21,258 $ 23,400
======== =======
</TABLE>
F-9
<PAGE> 57
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 (UNAUDITED))
NOTE 6. OTHER ACCRUED LIABILITIES
Other accrued liabilities are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Insurance retention reserves........................ $ 3,054 $ 2,722
Other............................................... 1,549 1,744
-------- -------
$ 4,603 $ 4,466
======== =======
</TABLE>
NOTE 7. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revolving credit facility.......................... $ 2,744 $ 6,529
Notes payable to financial institutions............ 6,950 6,070
------ ------
9,694 12,599
Less current maturities............................ (880) (880)
------ ------
$ 8,814 $11,719
====== ======
</TABLE>
The Company has a loan agreement with two banks (the "Loan Agreement")
which, as amended in September 1997, provides for a revolving credit facility
and three separate notes payable.
The revolving credit facility provides for $12,000,000 in aggregate
borrowings, is unsecured and bears interest at the prime rate less 0.50% or, at
the Company's option, the Eurodollar market rate plus 1.25%. The facility allows
for up to $3,000,000 in letters of credit and limits total cash borrowings based
on the ratio of debt to equity. The revolving credit facility expires on
December 31, 1998, at which time the principal balance outstanding may be
converted to a five-year term note, at the term note interest rate, with equal
quarterly principal payments. There were $1,302,000, and $1,062,000 of letters
of credit outstanding at June 30, 1996 and 1997, respectively. The weighted
average rate for the revolving credit facility was 7.44% at June 30, 1997.
The Company has three separate notes payable to financial institutions. The
first note, in the amount of $2,800,000, is unsecured and has principal payments
of $100,000 due quarterly through July 31, 2003. The outstanding balance at June
30, 1997 was $2,400,000. The second note, in the amount of $2,350,000, is
secured by a corporate aircraft and has principal payments of $75,000 due
quarterly through September 30, 2002 with the remaining principal due on
December 31, 2002. The outstanding balance at June 30, 1997 was $2,050,000. The
third note, in the amount of $1,800,000, is unsecured and has principal payments
of $45,000 due quarterly through July 31, 2006. The outstanding balance at June
30, 1997 was $1,620,000.
The notes bear interest at the prime rate less 0.25% or, at the Company's
option, the Eurodollar market rate plus 1.50%. The rate in effect for the notes
at June 30, 1997 was 6.94%. The Company entered into a forward interest rate
swap agreement with its principal bank which consists of an original notional
amount of $1,755,000 of floating to fixed rate interest rate swap. This
agreement contains the same terms, including principal payment provisions, as
the third bank note discussed above through October 31, 1999. This swap fixes
the effective interest rate on the third bank note at 7.50%. The Company
intends, based upon the provisions of the agreement, to
F-10
<PAGE> 58
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 (UNAUDITED))
eliminate the swap upon completion of the Offering (as defined in Note 14) at a
cost to the Company of less than $10,000.
The loan agreement provides for changes in the interest rate formulas based
on aggregate borrowings and financial performance as measured by interest
coverage and by the ratio of funded debt to equity. The loan agreement also
provides covenants which impose minimum levels for interest coverage and
tangible net worth and ceiling levels for funded debt to equity and
distributions to shareholders. At June 30, 1997, the amount of retained earnings
that was free of restrictions was $2,092,000.
The aggregate maturities of long-term debt for the five years ending June
30 are: 1998, $880,000; 1999, $7,409,000; 2000, $880,000; 2001, $880,000; 2002,
$880,000; 2003 and thereafter, $1,670,000.
NOTE 8. LEASE COMMITMENTS
The Company leases certain land, buildings and equipment under
noncancelable leases with entities controlled by its principal shareholder.
These leases, which expire in 1997 and 2001, may be extended for additional
terms ranging from one to five years. Each lease has been treated as a capital
lease in the accompanying financial statements. Property and equipment includes
the following amounts related to capital leases:
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land and buildings.................................. $ 5,830 $ 2,200
Machinery and equipment............................. 1,000 --
------- -------
6,830 2,200
Less accumulated amortization....................... (4,244) (206)
------- -------
$ 2,586 $ 1,994
======= =======
</TABLE>
The present value of future minimum lease payments for capital leases are
recorded as liabilities in the accompanying financial statements and are
summarized, by year and in the aggregate, as follows:
<TABLE>
<S> <C>
Year ending June 30 (in thousands):
1998...................................................... $ 421
1999...................................................... 421
2000...................................................... 421
2001...................................................... 421
2002...................................................... 485
Thereafter................................................ 2,005
--------
4,174
Less amount representing interest......................... (2,041)
--------
Present value of future minimum lease payments............ 2,133
Less current maturities................................... (85)
--------
Long-term maturities...................................... $ 2,048
========
</TABLE>
Rental expense related to all operating leases, including short-term
rentals, was approximately $753,000, $541,000 and $944,000 for fiscal 1995, 1996
and 1997, respectively.
F-11
<PAGE> 59
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 (UNAUDITED))
NOTE 9. INCOME TAXES
The shareholders of Industrial have elected under Subchapter S of the
Internal Revenue Code to include the income of Industrial in their own income
for federal income tax purposes. Accordingly, the earnings of Industrial are not
subject to federal and certain state income taxes. The accompanying financial
statements do, however, include provisions for income taxes for federal, state,
provincial and local tax purposes for members of the Company which are subject
to corporate income taxes. Certain of these subsidiaries file a federal income
tax return on a separate company basis. In addition, the provision for income
taxes includes certain state tax provisions for Industrial in states that do not
recognize Industrial's S Corporation tax status. The pre-tax income or loss of
the subsidiaries that are subject to corporate income tax was approximately
$499,000, $(185,000), and $1,492,000 for fiscal 1995, 1996, and 1997,
respectively. The temporary differences between book and tax income for these
subsidiaries have been insignificant.
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------
1995 1996 1997
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
United States:
Federal................................... $ 200 $ 133 $ 663
State and local........................... 103 227 317
Canada:
Federal................................... 20 -- 80
Provincial................................ 8 -- 25
---- ---- ------
$ 331 $ 360 $1,085
==== ==== ======
</TABLE>
NOTE 10. EMPLOYEE BENEFITS
The Company sponsors a Savings Plan, which qualifies for tax-deferred
contributions under Section 401(k) of the Internal Revenue Code, (the "401(k)
Plan") that covers substantially all employees of the Company who are over 21
years of age with at least one year of continuous service. Employees covered by
collective bargaining agreements are excluded from the plan. Contributions by
eligible employees are matched at a rate of 50% of the first 6% of the
employee's earnings contributed. Additional discretionary contributions may be
made to the 401(k) Plan by the Company. Matching contributions approximated
$131,000, $142,000 and $160,000 for fiscal 1995, 1996 and 1997, respectively.
NOTE 11. STOCK OPTION PLANS
1991 STOCK OPTION PLAN The Company's 1991 Stock Option Plan (the "1991
Plan") provides for the granting of up to 200,000 stock options to key
management personnel. The exercise price of such options is equal to
approximately two times the net book value per share of the Company as of the
date of the grant. Each option is issued for a term of ten years and vests
ratably over a five year period. Under the terms of the 1991 Plan, the Company
may be obligated to repurchase common stock issued by exercise of the stock
options at a price equal to two times the net book value per share of the
Company as of the date of the repurchase.
1994 STOCK OPTION PLAN The Company's 1994 Stock Option Plan (the "1994
Plan"), provides for the granting of up to 1,000,000 stock options to officers
and key employees of the Company. The exercise price of such options is equal to
the adjusted net book value per share of the Company as of the date of the
grant. Each option is issued for a term of ten years and vests over periods
ranging from three to five years. Under the terms of the 1994 Plan, the Company
may be obligated to purchase common stock issued by exercise of the stock
options at prices ranging from one to two times the adjusted net book value per
share of the Company as of the date of
F-12
<PAGE> 60
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 (UNAUDITED))
each purchase, subject to certain restrictions, including limitations on
redemption during employment, terms for settlement in the event of termination
of employment and limitations imposed by loan agreements of the Company.
The following table summarizes stock option activity:
<TABLE>
<CAPTION>
NUMBER OF
SHARES PRICE PER
(#) SHARE ($)
--------- -----------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Outstanding at July 1, 1994 and 1995 68 3.65
Granted....................................... -- --
Expired or canceled........................... (4) 3.65
Exercised..................................... -- --
---
Outstanding at June 30, 1996.................... 64 3.65
Granted....................................... 880 2.14 - 3.23
Expired or canceled........................... (74) 2.62
Exercised..................................... -- --
---
Outstanding at June 30, 1997.................... 870 2.14 - 3.65
===
</TABLE>
Adjusted net book value of the Company is defined in the 1994 Plan as an
amount equal to shareholders' equity as shown on the consolidated financial
statements of the Company plus distributions made to shareholders, other than
distributions made for the payment of income taxes, as a result of Subchapter S
status, of any member of the consolidated group. Other provisions provide
certain anti-dilution rights, restrict the sale or transfer of options, provide
for vesting in the event of a change in control of the Company and provide for
termination of the Company's redemption and anti-dilution obligations in the
event of a registration pursuant to the Securities Exchange Act of 1933.
The Company has recorded compensation expense to reflect the value of the
options at each date of grant and the appreciation in the options outstanding
under the stock option plans. This expense totaled $2,764,000 for fiscal 1997,
of which $1,980,000 related to prior years' service of the participants.
During 1995, the Financial Accounting Standards Board issued Statement No.
123 ("SFAS No. 123"), Accounting for Stock-Based Compensation, effective June 1,
1996. This statement set forth standards for accounting for stock-based
compensation. The Company has elected to adopt the disclosure only provision of
SFAS No. 123 and to continue to account for stock-based compensation under the
provisions of Accounting Principles Board Opinion No. 25. However, because the
Company's stock option plans are variable plans, the pro forma information
regarding net income and earnings per share required by SFAS No. 123 would not
be materially different than reported amounts.
NOTE 12. RELATED PARTY TRANSACTIONS
On August 9, 1996, the Company sold certain land and a commercial building
to an entity controlled by its principal shareholder for $2,200,000. The
transaction resulted in no gain or loss. MPW rents certain land, buildings and
equipment, including the commercial real estate described above, from entities
controlled by its principal shareholder under long-term lease agreements. Total
payments related to these leases were $726,000, $726,000 and $991,000 for fiscal
1995, 1996 and 1997, respectively. The Company is also a guarantor of a mortgage
note issued to an entity controlled by the Company's principal shareholder on
this facility. At June 30, 1997, there was $2,017,000 outstanding on this
mortgage note.
F-13
<PAGE> 61
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 (UNAUDITED))
MPW provides certain operational, administrative and financial services to
Pro-Kleen Industrial Services, Inc. ("Pro-Kleen"), a portable sanitation
services company wholly-owned by MPW's principal shareholder. At June 30, 1996
and 1997, the amount due from Pro-Kleen was $421,000 and $148,000, respectively.
These amounts have been included in other current assets in the accompanying
financial statements.
During fiscal 1997, the Company's shareholders contributed $773,000 in cash
to the Company.
NOTE 13. COMMITMENTS AND CONTINGENCIES
The Company is subject to various claims and lawsuits in the ordinary
course of its business. In the opinion of management, the outcome of these
actions, which is not clearly determinable at the present time, is either
adequately covered by insurance, or will not, in the aggregate, have a material
adverse effect upon the financial position or the results of future operations
of the Company.
NOTE 14. SUBSEQUENT EVENTS
On October 1, 1997, the Company filed a registration statement with the
Securities and Exchange Commission for the sale of 3,750,000 shares of its
authorized and unissued common shares.
In connection with the planned public offering (the "Offering"), during
October, 1997, the consolidated group was restructured resulting in the creation
of a new holding company, MPW Industrial Services Group, Inc., an Ohio
corporation. The outstanding shares of the existing company were converted into
common shares of the new company on a 1 for 1 basis (subsequently subject to a 4
to 1 stock split). The authorized capital stock of the new company consists of
5,000,000 preferred shares, $0.01 par, and 30,000,000 common shares, no par
value. These changes have been reflected in the accompanying financial
statements.
In connection with the reorganization, Industrial's S Corporation status
was terminated. Prior to the termination, Industrial made a distribution
totaling $21,200,000 of the undistributed earnings associated with Industrial's
S Corporation status (the "Distribution"). The distribution was in the form of
promissory notes (the "AAA Notes").
In October 1997, the Company acquired ESI International, Inc. and ESI
North, Limited (collectively, "ESI") for a combination of cash, promissory notes
and Common Stock for aggregate consideration of $4,903,000 and $1,043,000 of
assumed liabilities.
In October 1997, the Company further amended the Loan Agreement to modify
the covenants to allow for the Distribution and the acquisition of ESI.
The Company also plans to adopt a new stock option plan (the "1997 Plan").
The purpose of the 1997 Plan is to attract and retain key personnel, including
consultants and advisors to the Company, to enhance their interest in the
Company's continued success and to allow associates an opportunity to have an
ownership in the Company through stock options, stock awards and a stock
purchase plan. The maximum number of common shares available to be issued under
the 1997 Plan will be 700,000 shares of Common Stock.
In addition, the following actions are anticipated in connection with the
Offering:
1. The net proceeds of the Offering will be used to repay $17,600,000 of
the AAA Notes with approximately $12,400,000 paid upon the closing of the
Offering, $1,000,000 payable on December 31, 1997 and $4,200,000 payable
on April 15, 1998. After the payment of the $12,400,000 of AAA Notes with
the Offering proceeds, the Company's principal shareholder will repay
certain indebtedness for which the Company currently has a corporate
guarantee. As a result of this repayment, the corporate guarantee will be
eliminated. In addition, approximately $13,000,000 of the net proceeds
from the Offering will be used to repay existing debt of the Company.
F-14
<PAGE> 62
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 (UNAUDITED))
2. The Company's obligation to repurchase securities issued under certain
of the Company's stock option plans terminates. As a result of this
termination, the Company will incur a non-recurring, non-cash expense of
approximately $2,621,000, net of tax. This expense will result in a
concurrent increase in additional paid-in capital, and will not have an
adverse impact on shareholders' equity.
3. The Company will purchase certain minority stock ownership interests
from minority shareholders. Such purchase will be made through the
issuance of 67,800 shares of Common Stock in exchange for the shares of
the minority shareholders.
4. The Company will restructure certain lease agreements with its principal
shareholder for facilities currently used by the Company.
5. The Company plans to redeem $3,600,000 of the AAA Notes in consideration
of a corporate aircraft at its fair market value. The Company plans to
enter into a lease agreement with an entity controlled by the Company's
principal shareholder to lease the corporate aircraft at current market
rates.
NOTE 15. PRO FORMA INFORMATION (UNAUDITED)
PRO FORMA BALANCE SHEET INFORMATION
The pro forma balance sheet information as of September 30, 1997 reflects
the following transactions as if they had occurred at that date:
1. In connection with the termination of the S Corporation status:
- The distribution of undistributed earnings totaling $21,200,000.
- The recognition of net deferred tax assets of $3,260,000.
- The reclassification of remaining undistributed earnings of the S
Corporation from retained earnings to additional paid-in capital.
2. The elimination of the deferred stock option compensation of
$2,924,000 related to the Company's obligation, under certain
conditions, to repurchase securities issued under certain of the
Company's stock option plans. Such repurchase obligation terminates
effective with the Offering.
3. The issuance of 67,800 shares of Common Stock in connection with the
Company's purchase of certain minority stock ownership interests
effective with the Offering.
F-15
<PAGE> 63
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 (UNAUDITED))
PRO FORMA STATEMENTS OF INCOME ADJUSTMENTS
The following adjustments for fiscal 1997 and the three months ended
September 30, 1996 and September 30, 1997 have been reflected in the pro forma
statements of income information:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
------------- ------------------ ------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1. Reduction of historical lease costs for
certain facilities leased by the Company
from related parties pursuant to
restructured lease agreements to take
effect in connection with the Offering. $ 252 $ 68 $ 68
2. Elimination of deferred stock option
compensation related to the Company's
obligation, under certain conditions, to
repurchase securities issued under certain
of the Company's stock option plans. Such
repurchase obligation terminates effective
with the Offering. 2,764 2,189 160
3. Elimination of interest expense, net
related to the repayment of existing debt
from the proceeds of the Offering. 627 154 250
4. Elimination of minority earnings as a
result of the Company's purchase of
certain minority stock ownership interests
effective with the Offering. 207 125 99
------ ------ ------
Total $ 3,850 $2,536 $ 577
====== ====== ======
</TABLE>
In addition to the above adjustments, the pro forma financial results also
reflect an adjustment to pro forma taxes on income based on an effective rate of
40%.
PRO FORMA NET INCOME PER SHARE
Pro forma net income per share is based on the weighted average number of
common shares outstanding during the period (using the treasury stock method),
plus the estimated number of shares required to fund the planned distribution to
shareholders, the estimated number of shares to be issued to repay existing
debt, and the shares to be issued to acquire the minority interest of a
subsidiary.
F-16
<PAGE> 64
The inside back cover of the Prospectus will contain pictures as follows:
1. A background photograph of the sun setting against the outline of an
industrial plant.
2. Above the "MPW Industrial Services Group, Inc." logo in the bottom right
corner and on top of the background photograph is an outline of a map of
the Midwestern and Southeastern United States denoting locations of MPW
headquarters with a blue star, office locations with a green circle and
on-site locations with a red square.
3. On top of the background photograph are three pictures as follows: (i)
above the caption "CORPORATE HEADQUARTERS" is a photograph of MPW's
corporate headquarters in Hebron, Ohio; (ii) above the caption "HIGH
POWER CLEANING EQUIPMENT" is a picture of one of MPW's tractor trucks
with a 48(#) semi-trailer. Mounted on the semi-trailer is a mobile, high
volume, water blasting power unit and (iii) above the caption "AIR
FILTRATION MANAGEMENT SERIES" is a photograph of the Company's air
filtration laboratory.
<PAGE> 65
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS 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 BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER TO SELL IS NOT AUTHORIZED, OR IN WHICH THE PERSON IS NOT AUTHORIZED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Prior S Corporation Status............ 10
Use of Proceeds....................... 10
Dividend Policy....................... 10
Capitalization........................ 11
Dilution.............................. 12
Selected Consolidated Financial
Data................................ 13
Selected Unaudited Condensed Pro Forma
Financial Data...................... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 23
Management............................ 32
Executive Compensation................ 34
Certain Related Party and Other
Transactions........................ 38
Principal Shareholders................ 39
Description of Capital Stock.......... 40
Shares Eligible for Future Sale....... 43
Underwriting.......................... 44
Legal Matters......................... 45
Experts............................... 45
Shareholder Reports................... 45
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------------
THROUGH AND INCLUDING , 1997, ALL DEALERS EFFECTING TRANSACTIONS
IN THE COMMON STOCK, 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.
======================================================
======================================================
3,750,000 SHARES
[MPW LOGO]
COMMON STOCK
------------------------
PROSPECTUS
------------------------
RAYMOND JAMES &
ASSOCIATES, INC.
ROBERT W. BAIRD & CO.
INCORPORATED
, 1997
======================================================
<PAGE> 66
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated (except for the Securities and
Exchange Commission registration fee, the National Association of Securities
Dealers, Inc. filing fee and the Nasdaq National Market listing fee) payable by
the Company in connection with the distribution of the Common Stock:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee...................... $ 14,375
National Association of Securities Dealers, Inc. Filing Fee.............. 5,244
Nasdaq National Market Listing Fee....................................... 42,615
Printing and Engraving Costs............................................. 120,000
Accounting Fees and Expenses............................................. 125,000
Legal Fees and Expenses.................................................. 275,000
Transfer Agent Fees...................................................... 10,000
Miscellaneous Expenses................................................... 7,766
Total.......................................................... $600,000
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Division (E) of Section 1701.13 of the Ohio General Corporation Law governs
indemnification by a corporation and provides as follows:
(E) (1) A corporation may indemnify or agree to 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, trustee, officer,
employee, member, manager, or agent of another corporation, domestic or
foreign, nonprofit or for profit, a limited liability company, or a
partnership, joint venture, trust or other enterprise, against expenses,
including attorney's 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, if he
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order,
settlement, or 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 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, he had reasonable cause to believe that
his conduct was unlawful.
(2) A corporation may indemnify or agree to 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, trustee, officer,
employee, member, manager, or agent of another corporation, domestic or
foreign, nonprofit or for profit, a limited liability company, or a
partnership, joint venture, trust, or other enterprise, against expenses,
including attorney's 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, except that no
indemnification shall be made in respect of any of the following:
(a) Any claim, issue, or matter as to which such person is adjudged
to be liable for negligence or misconduct in the performance of his duty
to the corporation unless, and only to the extent that, the court of
common pleas or the court in which such action or suit was brought
determines, upon application, that, despite the adjudication of
liability, but in view of all the circumstances of the case,
II-1
<PAGE> 67
such person is fairly and reasonably entitled to indemnity for such
expenses as the court of common pleas or such other court shall deem
proper;
(b) Any action or suit in which the only liability asserted against
a director is pursuant to section 1701.95 of the Revised Code.
(3) To the extent that a director, trustee, officer, employee, member,
manager, or agent has been successful on the merits or otherwise in defense
of any action, suit, or proceeding referred to in division (E)(1) or (2) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses, including attorney's fees, actually and
reasonably incurred by him in connection with the action, suit, or
proceeding.
(4) Any indemnification under division (E)(1) or (2) 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, trustee, officer, employee, member, manager, or agent is
proper in the circumstances because he has met the applicable standard of
conduct set forth in division (E)(1) or (2) of this section. Such
determination shall be made as follows:
(a) By a majority vote of a quorum consisting of directors of the
indemnifying corporation who were not and are not parties to or
threatened by the action, suit, or proceeding referred to in division
(E)(1) or (2) of this section;
(b) If the quorum described in division (E)(4)(a) of this section
is not obtainable or if a majority vote of a quorum of disinterested
directors so directs, in a written opinion by independent legal counsel
other than an attorney, or a firm having associated with it an attorney,
who has been retained by or who has performed services for the
corporation or any person to be indemnified within the past five years;
(c) By the shareholders; or
(d) By the court of common pleas or the court in which such action,
suit, or proceeding referred to in division (E)(1) or (2) of this
section was brought.
Any determination made by the disinterested directors under division
(E)(4)(a) or by independent legal counsel under division (E)(4)(b) of this
section shall be promptly communicated to the person who threatened or brought
the action or suit by or in the right of the corporation under division (E)(2)
of this section, and, within ten days after receipt of such notification, such
person shall have the right to petition the court of common pleas or the court
in which such action or suit was brought to review the reasonableness of such
determination.
(5)(a) Unless at the time of a director's act or omission that is the
subject of an action, suit, or proceeding referred to in division (E)(1) or
(2) of this section, the articles or the regulations of a corporation
state, by specific reference to this division, that the provisions of this
division do not apply to the corporation and unless the only liability
asserted against a director in an action, suit, or proceeding referred to
in division (E)(1) or (2) of this section is pursuant to section 1701.95 of
the Revised Code, expenses, including attorney's fees, incurred by a
director in defending the action, suit, or proceeding shall be paid by the
corporation as they are incurred, in advance of the final disposition of
the action, suit, or proceeding, upon receipt of an undertaking by or on
behalf of the director in which he agrees to both of the following:
(i) Repay such amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that his action or failure
to act involved an act or omission undertaken with deliberate intent to
cause injury to the corporation or undertaken with reckless disregard
for the best interests of the corporation;
(ii) Reasonably cooperate with the corporation concerning the
action, suit, or proceeding.
(b) Expenses, including attorney's fees, incurred by a director,
trustee, officer, employee, member, manager, or agent in defending any
action, suit, or proceeding referred to in division (E)(1) or (2) of this
section, may be paid by the corporation as they are incurred, in advance of
the final disposition of the action, suit, or proceeding, as authorized by
the directors in the specific case, upon receipt of an undertaking by or on
behalf of the director, trustee, officer, employee, member, manager, or
agent to repay such amount, if it ultimately is determined that he is not
entitled to be indemnified by the corporation.
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<PAGE> 68
(6) The indemnification authorized by this section shall not be
exclusive of, and shall be in addition to, any other rights granted to
those seeking indemnification under the articles, the regulations, any
agreement, a vote of shareholders or disinterested directors, or otherwise,
both as to action in their official capacities and as to action in another
capacity while holding their offices or positions, and shall continue as to
a person who has ceased to be a director, trustee, officer, employee,
member, manager, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
(7) A corporation may purchase and maintain insurance or furnish
similar protection, including, but not limited to, trust funds, letters of
credit, or self-insurance, on behalf of or for 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, trustee, officer,
employee, member, manager, or agent of another corporation, domestic or
foreign, nonprofit or for profit, a limited liability company, or a
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.
Insurance may be purchased from or maintained with a person in which the
corporation has a financial interest.
(8) The authority of a corporation to indemnify persons pursuant to
division (E)(1) or (2) of this section does not limit the payment of
expenses as they are incurred, indemnification, insurance, or other
protection that may be provided pursuant to divisions (E)(5), (6), and (7)
of this section. Divisions (E)(1) and (2) of this section do not create any
obligation to repay or return payments made by the corporation pursuant to
division (E)(5), (6), or (7) .
(9) As used in division (E) of this section, "corporation" includes
all constituent entities in a consolidation or merger and the new or
surviving corporation, so that any person who is or was a director,
officer, employee, trustee, member, manager, or agent of such a constituent
entity, or is or was serving at the request of such constituent entity as a
director, trustee, officer, employee, member, manager, or agent of another
corporation, domestic or foreign, nonprofit or for profit, a limited
liability company, or a partnership, joint venture, trust, or other
enterprise, shall stand in the same position under this section with
respect to the new or surviving corporation as he would if he had served
the new or surviving corporation in the same capacity.
Section 29 of the Company's Code of Regulations governs indemnification by
the Company and provides as follows:
29. INDEMNIFICATION. The Corporation shall indemnify, to the full
extent then permitted by law, 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, by reason of the fact that he is or was a member of the
Board of Directors or an officer of the Corporation, or is or was serving
at the request of the Corporation as a director, trustee, officer, employee
or agent of another corporation, partnership, limited liability company,
joint venture, trust or other enterprise. The Corporation shall pay, to the
full extent then required by law, expenses, including attorney's fees,
incurred by a member of the Board of Directors in defending any such
action, suit or proceeding as they are incurred, in advance of the final
disposition thereof, and may pay, in the same manner and to the full extent
then permitted by law, such expenses incurred by any other person. The
indemnification and payment of expenses provided hereby shall not be
exclusive of, and shall be in addition to, any other rights granted to
those seeking indemnification under any law, the Articles of Incorporation,
any agreement, vote of shareholders or disinterested members of the Board
of Directors, or otherwise, both as to action in official capacities and as
to action in another capacity while he or she is a member of the Board of
Directors or an officer of the Corporation, and shall continue as to a
person who has ceased to be a member of the Board of Directors or an
officer of the Corporation or as to a person who has served at the request
of the Corporation as a director, trustee, officer, employee or agent of
another corporation, and shall inure to the benefit of the heirs,
executors, and administrators of such persons.
Reference is also made to Section 10 of the Underwriting Agreement
contained in Exhibit 1 hereto, indemnifying directors and officers of the
Company against certain liabilities.
II-3
<PAGE> 69
In addition, the Company intends to purchase insurance coverage that will
insure directors and officers against certain liabilities that might be incurred
by them in such capacity.
The Company has also entered into indemnification and severance agreements
with certain directors and executive officers that will be effective upon
consummation of the Offering.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On October 30, 1997, each of the shareholders of MPW Industrial Services,
Inc. ("Industrial"), Monte R. Black, Susan K. Black and the Monte R. Black and
Susan K. Black 1994 Irrevocable Trust contributed to the Company their shares of
Industrial for shares in the Company on a one to one basis. The shareholders of
Industrial received an aggregate of 1,550,000 shares of Common Stock of the
Company (subsequently subject to a 4 to 1 stock split) reflecting their
ownership interest in the Company. The sale of the Company's Common Stock to the
shareholders of Industrial was pursuant to Section 4(2) of the Act.
On October 31, 1997, pursuant to a Merger and Purchase Agreement dated as
of October 1, 1997 (the "Agreement") among ESI International, Inc. ("ESI"), ESI
North, Limited. ("ESIN"), the owners of ESI and ESIN, the Company and MPW
Filtration Acquisition Corp. ("Filtration"), ESI merged with and into
Filtration, and the Company and Filtration purchased membership interests of
ESI. As partial consideration for the merger (the "Merger"), the Company issued
96,000 shares of Common Stock to Messrs. Thiel, Jones, Broyles, Six and
Sullivan, certain of the owners of ESI. Each of such owners are officers and
directors of ESI and have entered into employment and non-competition Agreements
with the Company and the surviving corporation in the Merger. The number of
shares of Common Stock issued to such owners is subject to adjustment upon
completion of the Offering based on an average trading price of the Common Stock
for a period following the Offering. Pursuant to an Escrow Agreement entered
into in connection with the consummation of the transactions contemplated by the
Agreement, each of the owner's shares are held in escrow for a minimum period of
at least one year, will be subject to repurchase rights of the Company on
certain events and will be available for satisfaction of certain indemnity
claims that the Company may have against such owners. The issuance of the shares
of Common Stock pursuant to the Agreement was made pursuant to Rule 504 of
Regulation D of the Act.
The Company's Board of Directors has approved a stock exchange agreement
(the "Aquatech Agreement") with the minority shareholders of Aquatech
Environmental, Inc. ("Aquatech"), Robert C. Greenwood; the Chief Executive
Officer of Aquatech, and James A. Leonard, the President of Aquatech, who own a
aggregate of 30.1% of the outstanding capital stock of Aquatech issued to them
in connection with compensatory and incentive arrangements resulting from the
Company's purchase of Aquatech. Effective upon the consummation of the Offering,
the Aquatech Agreement provides for the exchange of an aggregate of 67,800
shares of Common Stock of the Company for all of the outstanding shares of
Aquatech held by Messrs. Greenwood and Leonard. The issuance of the Common Stock
pursuant to the Aquatech Agreement is in a transaction pursuant to Section 4(2)
of the Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. Exhibit Index
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement
3(a) Amended and Restated Articles of Incorporation of the Company effective October
30, 1997**
3(b) Amended and Restated Code of Regulations of the Company effective October 30,
1997**
4(a) Form of Stock Certificate for Common Stock of the Company**
4(b) Loan Agreement by and between MPW Industrial Services, Inc., affiliates and Bank
One, Columbus, NA*
4(c) First Amendment to Loan Agreement by and between MPW Industrial Services, Inc.,
affiliates and Bank One, Columbus, NA*
4(d) Second Amendment to Loan Agreement by and between MPW Industrial Services, Inc.
affiliates and Bank One, Columbus, NA**
</TABLE>
II-4
<PAGE> 70
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
----------------------------------------------------------------------------------
<C> <S>
5 Opinion of Jones, Day, Reavis & Pogue**
10(a) Form of 1997 Stock Option Plan**
10(b) 1994 Stock Option Plan*
10(c) 1991 Stock Option Plan*
10(d) Form of Employment Agreement by and between MPW Industrial Services Group, Inc.
and Ira O. Kane**
10(e) Form of Severance Agreement by and between MPW Industrial Services Group, Inc. and
Executive Officers*
10(f) Form of Indemnification Agreement by and between MPW Industrial Services Group,
Inc. and Directors*
10(g) Form of Indemnification Agreement by and between MPW Industrial Services Group,
Inc. and persons who are a Director and an Officer*
10(h) Form of Indemnification Agreement by and between MPW Industrial Services Group,
Inc. and Executive Officers*
10(i) Form of Lease for Hebron, Ohio facility*
10(j) Form of Lease for Newark, Ohio facility*
10(k) Lease for Chesterfield, Michigan facility*
10(l) Form of First Lease Amendment for Chesterfield, Michigan facility*
21 List of Subsidiaries**
23(a) Consent of Independent Auditors**
23(b) Consent of Counsel (included in Exhibit 5 hereto)**
23(c) Consent of Gerald Nilsson-Weiskott, director nominee*
23(d) Consent of Pete A. Klisares, director nominee**
24 Powers of Attorney*
27 Financial Data Schedule**
</TABLE>
B. Financial Statement Schedules
<TABLE>
<CAPTION>
SCHEDULE
NUMBER DESCRIPTION
----------- ----------------------------------------------------------------------
<S> <C>
Schedule II Valuation and Qualifying Accounts*
</TABLE>
- ---------------
* Previously filed
** Filed herewith
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that:
(a)(1) For the purpose 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 registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each such 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 he deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
II-5
<PAGE> 71
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) To provide to the underwriters 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.
II-6
<PAGE> 72
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HEBRON,
STATE OF OHIO, ON THIS 7TH DAY OF NOVEMBER 1997.
MPW INDUSTRIAL SERVICES GROUP, INC.
By: /s/ BRAD A. MARTYN
------------------------------------
Brad A. Martyn
Corporate Controller and
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated on November 7, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- --------------------------------------------
<C> <S>
* Chief Executive Officer and Chairman of the
- --------------------------------------------- Board of Directors (Principal Executive
Monte R. Black Officer)
* President and Chief Operating Officer;
- --------------------------------------------- Director
Ira O. Kane
* Vice President, Chief Financial Officer and
- --------------------------------------------- Secretary (Principal Financial Officer)
Daniel P. Buettin
/s/ BRAD A. MARTYN Corporate Controller and Assistant Secretary
- --------------------------------------------- (Principal Accounting Officer)
Brad A. Martyn
* Director
- ---------------------------------------------
Robert E. Oyster
* Director
- ---------------------------------------------
Timothy A. Walsh
* Director
- ---------------------------------------------
Scott N. Whitlock
</TABLE>
* This Amendment to the Registration Statement has been signed on behalf of the
above-named directors and officers of the Company by Brad A. Martyn, Corporate
Controller and Assistant Secretary of the Company, as attorney-in-fact
pursuant to a power of attorney filed with the Securities and Exchange
Commission as Exhibit 24 to this Registration Statement.
Dated: November 7, 1997
By: /s/ BRAD A. MARTYN
------------------------------------
Brad A. Martyn
Attorney-in-Fact
<PAGE> 73
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement
3 (a) Amended and Restated Articles of Incorporation of the Company effective October
30, 1997**
3 (b) Amended and Restated Code of Regulations of the Company effective October 30,
1997**
4 (a) Form of Stock Certificate for Common Stock of the Company**
4 (b) Loan Agreement by and between MPW Industrial Services, Inc., affiliates and Bank
One, Columbus, NA*
4 (c) First Amendment to Loan Agreement by and between MPW Industrial Services, Inc.,
affiliates and Bank One, Columbus, NA*
4 (d) Second Amendment to Loan Agreement by and between MPN Industrial Services, Inc.,
affiliates and Bank One, Columbus, NA**
5 Opinion of Jones, Day, Reavis & Pogue**
10 (a) Form of 1997 Stock Option Plan**
10 (b) 1994 Stock Option Plan*
10 (c) 1991 Stock Option Plan*
10 (d) Form of Employment Agreement by and between MPW Industrial Services Group, Inc.
and Ira O. Kane**
10 (e) Form of Severance Agreement by and between MPW Industrial Services Group, Inc. and
Executive Officers*
10 (f) Form of Indemnification Agreement by and between MPW Industrial Services Group,
Inc. and Directors*
10 (g) Form of Indemnification Agreement by and between MPW Industrial Services Group,
Inc. and persons who are a Director and an Officer*
10 (h) Form of Indemnification Agreement by and between MPW Industrial Services Group,
Inc. and Executive Officers*
10 (i) Form of Lease for Hebron, Ohio facility*
10 (j) Form of Lease for Newark, Ohio facility*
10 (k) Lease for Chesterfield, Michigan facility*
10 (l) Form of First Lease Amendment for Chesterfield, Michigan facility*
21 List of Subsidiaries**
23 (a) Consent of Independent Auditors**
23 (b) Consent of Counsel (included in Exhibit 5 hereto)**
23 (c) Consent of Gerald Nilsson-Weiskott, director nominee*
23 (d) Consent of Pete A. Klisares, director nominee**
24 Powers of Attorney*
27 Financial Data Schedule**
</TABLE>
- ---------------
* Previously filed
** Filed herewith
<PAGE> 1
EXHIBIT 3(A)
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
MPW INDUSTRIAL SERVICES GROUP, INC.
ARTICLE I
---------
The name of the corporation is MPW Industrial Services Group, Inc. (the
"Corporation").
ARTICLE II
----------
The place in the State of Ohio where the Corporation's principal office
is located is the City of Hebron, Licking County.
ARTICLE III
-----------
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be formed under Sections 1701.01 to 1701.98,
inclusive, of the Ohio Revised Code.
ARTICLE IV
----------
A. AUTHORIZED CAPITAL STOCK. The Corporation is authorized to issue
35,000,000 shares of capital stock, consisting of 30,000,000 shares of common
stock, without par value ("Common Stock"), and 5,000,000 shares of preferred
stock, par value $0.01 per share ("Preferred Stock").
B. PREFERRED STOCK. The Board of Directors shall have authority to
issue Preferred Stock from time to time in one or more classes or series. The
express terms of shares of a different series of any particular class shall be
identical except for such variations as may be permitted by law. Without
limiting the generality of the foregoing, the initial classes of Preferred Stock
shall be designated Class A Preferred Stock, Class B Preferred Stock and Class C
Preferred Stock. Subject to such express terms as may hereafter be adopted by
the Board of Directors, the voting rights of Class A Preferred Stock, Class B
Preferred Stock and Class C Preferred Stock shall be follows:
1. Each holder of Class A Preferred Stock shall be entitled to
100 votes per share and, except as otherwise required by law, shall
vote together with the Common Stock as a single class on all matters
properly submitted to a vote at a meeting of the shareholders.
2. Each holder of Class B Preferred Stock shall be entitled to
one vote per share and, except as otherwise required by law, shall vote
together with the
<PAGE> 2
Common Stock as a single class on all matters properly submitted to a
vote at a meeting of shareholders.
3. Holders of Class C Preferred Stock shall have no voting
rights.
ARTICLE V
---------
The Board of Directors shall be authorized hereby to exercise all
powers now or hereafter permitted by law providing rights to the Board of
Directors to adopt amendments to these Amended and Restated Articles of
Incorporation to fix or change the express terms of any unissued or treasury
shares of any class, including, without limiting the generality of the
foregoing: division of such shares into series and the designation and
authorized number of shares of each series; voting rights of such shares (to the
extent now or hereafter permitted by law); dividend or distribution rate; dates
of payment of dividends or distributions and the dates from which they are
cumulative; liquidation price; redemption rights and price; sinking fund
requirements; conversion rights; and restrictions on the issuance of shares of
the same series or any other class or series; all as may be established by
resolution of the Board of Directors from time to time (collectively, a
"Preferred Stock Designation").
ARTICLE VI
----------
Except as may be provided in any Preferred Stock Designation, holders
of shares of capital stock of the Corporation shall not be entitled to
cumulative voting rights in the election of directors.
ARTICLE VII
-----------
Except as may be provided in any Preferred Stock Designation, no holder
of any shares of capital stock of the Corporation shall have any preemptive
right to acquire any shares of unissued capital stock of any class or series,
now or hereafter authorized, or any treasury shares or securities convertible
into such shares or carrying a right to subscribe to or acquire such shares of
capital stock.
ARTICLE VIII
------------
The Corporation may from time to time, pursuant to authorization by the
Board of Directors and without action by the shareholders, purchase or otherwise
acquire capital stock of the Corporation of any class or classes in such manner,
upon such terms and in such amounts as the Board of Directors shall determine;
subject, however, to such limitation or restriction, if any, as is contained in
any Preferred Stock Designation at the time of such purchase or acquisition.
-2-
<PAGE> 3
ARTICLE IX
----------
Except as may be provided in any Preferred Stock Designation, the Board
of Directors shall be fixed from time to time in the manner provided in the
Amended Code of Regulations of the Corporation. Except as may be otherwise
provided in any Preferred Stock Designation, directors may be elected by the
shareholders only at an annual meeting of shareholders. No decrease in the
number of directors constituting the Board of Directors may shorten the term of
any incumbent director. Election of directors of the Corporation need not be by
written ballot unless requested by the presiding officer or by the holders of a
majority of the voting power of the Corporation present in person or represented
by proxy at a meeting of shareholders at which directors are to be elected. For
purposes of these Amended and Restated Articles of Incorporation, "voting power
of the Corporation" means the aggregate voting power of (1) all the outstanding
shares of Common Stock of the Corporation and (2) all the outstanding shares of
any class or series of capital stock of the Corporation that has (i) rights to
distributions senior to those of the Common Stock including, without limitation,
any relative, participating, optional, or other special rights and privileges
of, and any qualifications, limitations or restrictions on, such shares and (ii)
voting rights entitling such shares to vote generally in the election of
directors.
ARTICLE X
---------
Notwithstanding anything to the contrary contained in these Amended and
Restated Articles of Incorporation, the affirmative vote of the holders of at
least 80% of the voting power of the Corporation, voting together as a single
class, shall be required to amend or repeal, or adopt any provision inconsistent
with, Article VI, Article VII, Article VIII, Article IX or this Article X;
provided, however, that this Article X shall not alter the voting entitlement of
shares that, by virtue of any Preferred Stock Designation, are expressly
entitled to vote on any amendment to these Amended and Restated Articles of
Incorporation.
ARTICLE XI
----------
Any and every statute of the State of Ohio hereafter enacted, whereby
the rights, powers or privileges of corporations or of the shareholders of
corporations organized under the laws of the State of Ohio are increased or
diminished or in any way affected, or whereby effect is given to the action
taken by any number, less than all, of the shareholders of any such corporation,
shall apply to the Corporation and shall be binding not only upon the
Corporation but upon every shareholder of the Corporation to the same extent as
if such statute had been in force at the date of filing these Amended and
Restated Articles of Incorporation in the office of the Secretary of State of
Ohio.
ARTICLE XII
-----------
These Amended and Restated Articles of Incorporation supersede the
Corporation's existing Articles of Incorporation and all prior amendments
thereto.
-3-
<PAGE> 1
EXHIBIT 3(B)
================================================================================
MPW INDUSTRIAL SERVICES GROUP, INC.
Amended and Restated
Code of Regulations
As Adopted and in
Effect on October 30, 1997
================================================================================
<PAGE> 2
MPW INDUSTRIAL SERVICES GROUP, INC.
Amended and Restated
Code of Regulations
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SHAREHOLDER MEETINGS.......................................................................................1
1. Time and Place of Meetings......................................................................1
2. Annual Meeting..................................................................................1
3. Special Meetings................................................................................1
4. Notice of Meetings..............................................................................1
5. Quorum..........................................................................................1
6. Voting..........................................................................................2
7. Order of Business...............................................................................2
DIRECTORS..................................................................................................4
8. Function........................................................................................4
9. Number, Election and Terms of Directors.........................................................4
10. Newly Created Directorships and Vacancies.......................................................4
11. Removal.........................................................................................4
12. Nominations of Directors; Election..............................................................4
13. Resignation.....................................................................................5
14. Regular Meetings................................................................................5
15. Special Meetings................................................................................5
16. Quorum and Vote.................................................................................5
17. Participation in Meetings by Communications Equipment...........................................6
18. Committees......................................................................................6
19. Compensation....................................................................................6
20. Bylaws..........................................................................................6
OFFICERS ..................................................................................................6
21. Generally.......................................................................................6
22. Authority and Duties of Officers................................................................7
23. Compensation....................................................................................7
24. Succession......................................................................................7
STOCK ..................................................................................................7
25. Transfer and Registration of Certificates.......................................................7
26. Substituted Certificates........................................................................7
27. Voting Of Shares Held by the Corporation........................................................7
28. Record Dates and Owners.........................................................................7
INDEMNIFICATION AND INSURANCE..............................................................................8
29. Indemnification.................................................................................8
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
30. Insurance.......................................................................................8
31. Agreements......................................................................................8
GENERAL ..................................................................................................9
32. Fiscal Year.....................................................................................9
33. Seal............................................................................................9
34. Amendments......................................................................................9
</TABLE>
ii
<PAGE> 4
SHAREHOLDER MEETINGS
--------------------
1. TIME AND PLACE OF MEETINGS. All meetings of the shareholders for the
election of directors or for any other purpose will be held at such time and
place, within or without the State of Ohio, as may be designated by the Board of
Directors or, in the absence of a designation by the Board of Directors, the
Chairman of the Board of Directors, if any (the "Chairman"), the President, or
the Secretary, and stated in the notice of meeting. The Board of Directors may
postpone and reschedule any previously scheduled annual or special meeting of
the shareholders.
2. ANNUAL MEETING. An annual meeting of the shareholders will be held
at such date and time as may be designated from time to time by the Board of
Directors, at which meeting the shareholders will elect directors to succeed
those directors whose terms expire at such meeting and will transact such other
business as may be brought properly before the meeting in accordance with
Regulation 7 herein.
3. SPECIAL MEETINGS. (a) Special meetings of shareholders may be called
by (i) the Chairman (ii) the President, (iii) a majority of the Board of
Directors acting with or without a meeting, or (iv) any person or persons who
hold not less than 50% of all the shares outstanding and entitled to be voted at
such meeting. Holders of shares that are entitled to call a special meeting of
shareholders by virtue of any Preferred Stock Designation may call such meetings
in the manner and for the purposes provided in the applicable terms of such
Preferred Stock Designation. For purposes of this Amended and Restated Code of
Regulations, "Preferred Stock Designation" shall have the meaning specified in
the Amended and Restated Articles of Incorporation.
(b) Upon written request by any person or persons entitled to call a
meeting of shareholders delivered in person or by registered mail to the
Chairman, the President or the Secretary, such officer shall forthwith cause
notice of the meeting to be given to the shareholders entitled to notice of such
meeting in accordance with Regulation 4 herein. If such notice shall not be
given within 60 days after the delivery or mailing of such request, the person
or persons requesting the meeting may fix the time of the meeting and give, or
cause to be given, notice in the manner provided in Regulation 4 herein.
4. NOTICE OF MEETINGS. Written notice of every meeting of the
shareholders called in accordance with this Amended and Restated Code of
Regulations, stating the time, place and purposes for which the meeting is
called, will be given by or at the direction of the President, a Vice President,
the Secretary or an Assistant Secretary (or in case of their failure to give any
required notice, the other persons entitled to give notice under Regulation 3
herein). Such notice will be given not less than seven nor more than 60 calendar
days before the date of the meeting to each shareholder of record entitled to
notice of such meeting. If such notice is mailed, it shall be addressed to the
shareholders at their respective addresses as they appear on the records of the
Corporation, and notice shall be deemed to have been given on the day so mailed.
Notice of adjournment of a meeting need not be given if the time and place to
which it is adjourned are fixed and announced at such meeting.
5. QUORUM. To constitute a quorum at any meeting of shareholders, there
shall be present in person or by proxy shareholders of record entitled to
exercise not less than a majority of
<PAGE> 5
the voting power of the Corporation in respect of any one of the purposes for
which the meeting is called, unless a greater or lesser number is expressly
provided for in any applicable Preferred Stock Designation. Except as may be
otherwise provided in any Preferred Stock Designation, the holders of a majority
of the voting power of the Corporation represented in person or by proxy at a
meeting of shareholders, whether or not a quorum be present, may adjourn the
meeting from time to time. For purposes of this Amended and Restated Code of
Regulations, "voting power of the Corporation" shall have the meaning specified
in the Amended and Restated Articles of Incorporation.
6. VOTING. Except as otherwise expressly required by law, the Amended
and Restated Articles of Incorporation or this Amended and Restated Code of
Regulations, at any meeting of shareholders at which a quorum is present, a
majority of the votes cast, whether in person or by proxy, on any matter
properly brought before such meeting in accordance with Regulation 7 herein will
be the act of the shareholders. An abstention shall not represent a vote cast.
Every proxy must be duly executed and filed with the Secretary. A shareholder
may revoke any proxy that is not irrevocable by attending the meeting and voting
in person or by filing with the Secretary written notice of revocation or a
later appointment. The vote upon any question brought before a meeting of the
shareholders may be by voice vote, unless otherwise required by law, the Amended
and Restated Articles of Incorporation or this Amended and Restated Code of
Regulations or unless the presiding officer otherwise determines.
7. ORDER OF BUSINESS. (a) The Chairman, or such other officer of the
Corporation designated by a majority of the total number of directors that the
Corporation would have if there were no vacancies on the Board of Directors
(such number being referred to as the "Whole Board"), will call meetings of
shareholders to order and will act as presiding officer thereof. Unless
otherwise determined by the Board of Directors prior to the meeting, the
presiding officer of the meeting of shareholders will also determine the order
of business and have the authority in his or her sole discretion to regulate the
conduct of any such meeting including, without limitation, by (i) imposing
restrictions on the persons (other than shareholders of the Corporation or their
duly appointed proxies) who may attend any such shareholders' meeting, (ii)
ascertaining whether any shareholder or his proxy may be excluded from any
meeting of shareholders based upon any determination by the presiding officer,
in his sole discretion, that any such person has unduly disrupted or is likely
to disrupt the proceedings of the meeting, (iii) determining the circumstances
in which any person may make a statement or ask questions at any meeting of
shareholders and (iv) establishing such other procedures as the presiding
officer, in his sole discretion, may deem appropriate for the orderly conduct of
business.
(b) At an annual meeting of the shareholders, only such business will
be conducted or considered as is properly brought before the meeting. To be
properly brought before an annual meeting, business must be (i) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the President, a Vice President, the Secretary or an Assistant Secretary in
accordance with Regulation 4 herein, (ii) otherwise properly brought before the
meeting by the presiding officer or by or at the direction of a majority of the
Whole Board or (iii) otherwise properly requested to be brought before the
meeting by a shareholder of the Corporation in accordance with Regulation 7(c)
herein.
2
<PAGE> 6
(c) For business to be properly requested by a shareholder to be
brought before an annual meeting, the shareholder must (i) be a shareholder of
the Corporation of record at the time of the giving of the notice for such
annual meeting provided for in this Amended and Restated Code of Regulations,
(ii) be entitled to vote at such meeting and (iii) have given timely notice
thereof in writing to the Secretary. To be timely, a shareholder's notice must
be delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 nor more than 90 calendar days prior to the annual
meeting; PROVIDED, HOWEVER, that in the event public announcement of the date of
the annual meeting is not made at least 105 calendar days prior to the date of
the annual meeting, notice by the shareholder to be timely must be so received
not later than the close of business on the tenth calendar day following the day
on which public announcement is first made of the date of the annual meeting. A
shareholder's notice to the Secretary must set forth as to each matter the
shareholder proposes to bring before the annual meeting (A) a description in
reasonable detail of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (B)
the name and address, as they appear on the Corporation's books, of the
shareholder proposing such business and of the beneficial owner, if any, on
whose behalf the proposal is made, (C) the class and number of shares of the
Corporation that are owned beneficially and of record by the shareholder
proposing such business and by the beneficial owner, if any, on whose behalf the
proposal is made and (D) any material interest of such shareholder proposing
such business and the beneficial owner, if any, on whose behalf the proposal is
made in such business. Notwithstanding the foregoing provisions of this Amended
and Restated Code of Regulations, a shareholder must also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder with respect to the matters set forth in
this Regulation 7(c) herein. For purposes of this Regulation 7(c) and Regulation
12 herein, "public announcement" means disclosure in a press release reported by
the Dow Jones News Service, Associated Press, or comparable national news
service or in a document publicly filed by the Corporation with the Securities
and Exchange Commission pursuant to Sections 13, 14, or 15(d) of the Securities
Exchange Act of 1934, as amended, or publicly filed by the Corporation with any
national securities exchange or quotation service through which the
Corporation's stock is listed or traded, or furnished by the Corporation to its
shareholders. Nothing in this Regulation 7(c) will be deemed to affect any
rights of shareholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, as amended.
(d) At a special meeting of shareholders, only such business may be
conducted or considered as is properly brought before the meeting. To be
properly brought before a special meeting, business must be (i) specified in the
notice of the meeting (or any supplement thereto) given by or at the direction
of the President, a Vice President, the Secretary or an Assistant Secretary (or
in case of their failure to give any required notice, the other persons entitled
to give notice) in accordance with Regulation 4 herein or (ii) otherwise brought
before the meeting by the presiding officer or by or at the direction of a
majority of the Whole Board.
(e) The determination of whether any business sought to be brought
before any annual or special meeting of the shareholders is properly brought
before such meeting in accordance with this Regulation 7 will be made by the
presiding officer of such meeting. If the presiding officer determines that any
business is not properly brought before such meeting, he or she will so declare
to the meeting and any such business will not be conducted or considered.
3
<PAGE> 7
DIRECTORS
---------
8. FUNCTION. Except where the law, the Amended and Restated Articles of
Incorporation or this Amended and Restated Code of Regulations requires action
to be authorized or taken by the shareholders, all of the authority of the
Corporation shall be exercised by or under the direction of the Board of
Directors.
9. NUMBER, ELECTION AND TERMS OF DIRECTORS. Except as may be provided
in any Preferred Stock Designation, the size of the Board of Directors shall be
established from time to time only (i) by a vote of a majority of the Whole
Board or (ii) by the affirmative vote of the holders of at least 80% of the
voting power of the Corporation, voting together as a single class.
10. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Except as may be
otherwise provided in any Preferred Stock Designation, any vacancy (including
newly created directorships resulting from any increase in the number of
directors and any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal, or other cause) may be filled only (i)
by the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors, or by a sole remaining
director or (ii) by the affirmative vote of the shareholders after a vote to
increase the number of directors at a meeting called for that purpose in
accordance with this Amended and Restated Code of Regulations. Any director
elected in accordance with the preceding sentence will hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor has been elected.
11. REMOVAL. Except as may be otherwise provided in any Preferred Stock
Designation, directors may not be removed from the Board of Directors by the
shareholders or otherwise.
12. NOMINATIONS OF DIRECTORS; ELECTION. (a) Except as may be otherwise
provided in any Preferred Stock Designation, only persons who are nominated in
accordance with this Regulation 12 will be eligible for election at a meeting of
shareholders to be members of the Board of Directors.
(b) Nominations of persons for election as directors of the Corporation
may be made only at an annual meeting of shareholders (i) by or at the direction
of the Board of Directors or a committee thereof or (ii) by any shareholder who
is a shareholder of record at the time of giving of notice provided for in this
Regulation 12, who is entitled to vote for the election of directors at such
meeting, and who complies with the procedures set forth in this Regulation 12.
All nominations by shareholders must be made pursuant to timely notice in proper
written form to the Secretary.
(c) To be timely, a shareholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
60 nor more than 90 calendar days prior to the annual meeting of shareholders;
PROVIDED, HOWEVER, that in the event that public announcement of the date of the
annual meeting is not made at least 105 calendar days prior to the date of the
annual meeting, notice by the shareholder to be timely must be so received not
later than the close of business on the tenth calendar day following the day on
which public announcement is first made of the date of the annual meeting. To be
in proper written form, such shareholder's notice must set forth or include: (i)
the name and address, as they appear on the Corporation's books, of the
shareholder
4
<PAGE> 8
giving the notice and of the beneficial owner, if any, on whose behalf the
nomination is made; (ii) a representation that the shareholder giving the notice
is a holder of record of stock of the Corporation entitled to vote at such
annual meeting and intends to appear in person or by proxy at the annual meeting
to nominate the person or persons specified in the notice; (iii) the class and
number of shares of stock of the Corporation owned beneficially and of record by
the shareholder giving the notice and by the beneficial owner, if any, on whose
behalf the nomination is made; (iv) a description of all arrangements or
understandings between or among any of (A) the shareholder giving the notice,
(B) the beneficial owner on whose behalf the notice is given, (C) each nominee
and (D) any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the shareholder giving the
notice; (v) such other information regarding each nominee proposed by the
shareholder giving the notice as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated, or proposed to be nominated, by the
Board of Directors; and (vi) the signed consent of each nominee to serve as a
director of the Corporation if so elected. The presiding officer of any annual
meeting may, if the facts warrant, determine that a nomination was not made in
accordance with this Regulation 12, and if he or she should so determine, he or
she will so declare to the meeting, and the defective nomination will be
disregarded. Notwithstanding the foregoing provisions of this Regulation 12, a
shareholder must also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this Regulation 12.
13. RESIGNATION. Any director may resign at any time by giving written
notice of his or her resignation to the Chairman or the Secretary. Any
resignation will be effective upon actual receipt by any such person or, if
later, as of the date and time and upon occurrence of the conditions specified
in such written notice.
14. REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held immediately after the annual meeting of the shareholders and at such other
time and place either within or without the State of Ohio as may from time to
time be determined by a majority of the Whole Board. Notice of regular meetings
of the Board of Directors need not be given.
15. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by the Chairman or the President on one day's notice to each director by
whom such notice is not waived, given either personally or by mail, telephone,
telegram, telex, facsimile, or similar medium of communication, and will be
called by the Chairman or the President, in like manner and on like notice, on
the written request of not less than one-third of the Whole Board. Special
meetings of the Board of Directors may be held at such time and place either
within or without the State of Ohio as is determined by a majority of the Whole
Board or specified in the notice of any such meeting.
16. QUORUM AND VOTE. At all meetings of the Board of Directors, a
majority of the total number of directors then in office will constitute a
quorum for the transaction of business. Except for the designation of committees
as hereinafter provided and except for actions required by this Amended and
Restated Code of Regulations to be taken by a majority of the Whole Board, the
act of a majority of the directors present at any meeting at which a quorum is
present will be the act of the Board of Directors. If a quorum is not present at
any meeting of the Board of Directors, the
5
<PAGE> 9
directors present thereat may adjourn the meeting from time to time to another
time or place, without notice other than announcement at the meeting, until a
quorum is present.
17. PARTICIPATION IN MEETINGS BY COMMUNICATIONS EQUIPMENT. Meetings of
the Board of Directors or of any committee of the Board of Directors may be held
through any means of communications equipment if all persons participating can
hear each other, and such participation will constitute presence in person at
such meeting.
18. COMMITTEES. The Board of Directors may from time to time create an
executive committee or any other committee or committees of directors to act in
the intervals between meetings of the Board of Directors and may delegate to
such committee or committees any of its authority other than that of filling
vacancies among the Board of Directors or in any committee of the Board of
Directors. No committee shall consist of less than three directors. The Board of
Directors may appoint one or more directors as alternate members of any such
committee to take the place of absent committee members at meetings of such
committee. Unless otherwise ordered by the Board of Directors, a majority of the
members of any committee appointed by the Board of Directors pursuant to this
Regulation 18 shall constitute a quorum at any meeting thereof, and the act of a
majority of the members present at a meeting at which a quorum is present shall
be the act of such committee. Action may be taken by any such committee without
a meeting by a writing or writings signed by all of its members. Any such
committee shall prescribe its own rules for calling and holding meetings and its
own procedures, subject to any rules prescribed by the Board of Directors, and
will keep a written record of all action taken by it.
19. COMPENSATION. The Board of Directors may establish the compensation
and expense reimbursement policies for directors in exchange for membership on
the Board of Directors and on committees of the Board of Directors, attendance
at meetings of the Board of Directors or committees of the Board of Directors,
and for other services by directors to the Corporation or any of its
subsidiaries.
20. BYLAWS. The Board of Directors may adopt Bylaws for the conduct of
its meetings and those of any committees of the Board of Directors that are not
inconsistent with the Amended and Restated Articles of Incorporation or this
Amended and Restated Code of Regulations.
OFFICERS
--------
21. GENERALLY. The Corporation may have a Chairman, who shall be
elected by the directors from among their number, and shall have a President, a
Secretary and a Treasurer. The Corporation may also have one or more Vice
Presidents and such other officers and assistant officers as the Board of
Directors may deem appropriate. If the Board of Directors so desires, it may
elect a Chief Executive Officer to manage the affairs of the Corporation,
subject to the direction and control of the Board of Directors. All of the
officers shall be elected by the Board of Directors. Notwithstanding the
foregoing, by specific action, the Board of Directors may authorize the
Chairman, the Chief Executive Officer or the President to appoint any person to
any office other than Chairman, President, Secretary or Treasurer. Any number of
offices may be held by the same person, and no two offices must be held by the
same person. Any of the offices may be left vacant from time
6
<PAGE> 10
to time as the Board of Directors may determine. In case of the absence or
disability of any officer of the Corporation or for any other reason deemed
sufficient by a majority of the Board of Directors, the Board of Directors may
delegate the absent or disabled officer's powers or duties to any other officer
or to any director.
22. AUTHORITY AND DUTIES OF OFFICERS. The officers of the Corporation
shall have such authority and shall perform such duties as are customarily
incident to their respective offices, or as may be specified from time to time
by the Board of Directors regardless of whether such authority and duties are
customarily incident to such office.
23. COMPENSATION. The compensation of all officers and agents of the
Corporation who are also members of the Board of Directors of the Corporation
will be fixed by the Board of Directors or by a committee of the Board of
Directors. The Board of Directors may fix, or delegate the power to fix, the
compensation of the other officers and agents of the Corporation to the Chief
Executive Officer or any other officer of the Corporation.
24. SUCCESSION. The officers of the Corporation will hold office until
their successors are elected. Any officer may be removed at any time by the
affirmative vote of a majority of the Whole Board. Any vacancy occurring in any
office of the Corporation may be filled by the Board of Directors or by the
Chairman or President as provided in Regulation 21.
STOCK
-----
25. TRANSFER AND REGISTRATION OF CERTIFICATES. The Board of Directors
shall have authority to make such rules and regulations as they deem expedient
concerning the issuance, transfer and registration of certificates for shares
and the shares represented thereby and may appoint transfer agents and
registrars thereof.
26. SUBSTITUTED CERTIFICATES. Any person claiming a certificate for
shares to have been lost, stolen or destroyed shall make an affidavit or
affirmation of that fact, shall give the Corporation and its registrar or
registrars and its transfer agent or agents a bond of indemnity satisfactory to
the Board of Directors or a committee thereof or to the Chief Executive Officer,
the President or a Vice President and the Secretary or the Treasurer, whereupon
a new certificate may be executed and delivered of the same tenor and for the
same number of shares as the one alleged to have been lost, stolen or destroyed.
27. VOTING OF SHARES HELD BY THE CORPORATION. Unless otherwise ordered
by the Board of Directors, the Chief Executive Officer, the President in person
or by proxy or proxies appointed by either of them shall have full power and
authority on behalf of the Corporation to vote, act and consent with respect to
any shares issued by other corporations which the Corporation may own.
28. RECORD DATES AND OWNERS. (a) In order that the Corporation may
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, the Board of Directors may fix a record
date, which will not be less than seven nor more than 60 calendar days before
the date of such meeting. If no record date is fixed by the Board of
7
<PAGE> 11
Directors, the record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders will be the date next preceding the day on
which notice is given, or, if notice is waived, at the date next preceding the
day on which the meeting is held.
(b) The Corporation will be entitled to treat the person in whose name
shares are registered on the books of the Corporation as the absolute owner
thereof and will not be bound to recognize any equitable or other claim to, or
interest in, such share on the part of any other person, whether or not the
Corporation has knowledge or notice thereof, except as expressly provided by
applicable law.
INDEMNIFICATION AND INSURANCE
-----------------------------
29. INDEMNIFICATION. The Corporation shall indemnify, to the full
extent then permitted by law, 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, by reason
of the fact that he or she is or was a member of the Board of Directors or an
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, trustee, officer, employee or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise. The Corporation shall pay, to the full extent then required by
law, expenses, including attorney's fees, incurred by a member of the Board of
Directors in defending any such action, suit or proceeding as they are incurred,
in advance of the final disposition thereof, and may pay, in the same manner and
to the full extent then permitted by law, such expenses incurred by any other
person. The indemnification and payment of expenses provided hereby shall not be
exclusive of, and shall be in addition to, any other rights granted to those
seeking indemnification under any law, the Amended and Restated Articles of
Incorporation, any agreement, vote of shareholders or disinterested members of
the Board of Directors, or otherwise, both as to action in official capacities
and as to action in another capacity while he or she is a member of the Board of
Directors or an officer of the Corporation, and shall continue as to a person
who has ceased to be a member of the Board of Directors or an officer of the
Corporation or as to a person who has served at the request of the Corporation
as a director, trustee, officer, employee or agent of another corporation, and
shall inure to the benefit of the heirs, executors and administrators of such
persons.
30. INSURANCE. The Corporation may, to the full extent then permitted
by law and authorized by the Board of Directors, purchase and maintain insurance
or furnish similar protection, including but not limited to trust funds, letters
of credit or self-insurance, on behalf of or for any persons described in
Regulation 29 herein against any liability asserted against and incurred by any
such person in any such capacity, or arising out of his status as such, whether
or not the Corporation would have the power to indemnify such person against
such liability. Insurance may be purchased from or maintained with a person in
which the Corporation has a financial interest.
31. AGREEMENTS. The Corporation, upon approval by the Board of
Directors, may enter into agreements with any persons whom the Corporation may
indemnify under this Amended and Restated Code of Regulations or under law and
undertake thereby to indemnify such persons and to pay the expenses incurred by
them in defending any action, suit or proceeding against them, whether
8
<PAGE> 12
or not the Corporation would have the power under law or this Amended and
Restated Code of Regulations to indemnify any such person.
GENERAL
-------
32. FISCAL YEAR. The fiscal year of the Corporation will end on the
last day of June (and whether before or after such date) in each calendar year
or such other date as may be fixed from time to time by the Board of Directors.
33. SEAL. The Board of Directors may adopt a corporate seal and use the
same by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
34. AMENDMENTS. Except as otherwise provided by law, the Amended and
Restated Articles of Incorporation or herein, this Amended and Restated Code of
Regulations or any Regulations may be amended in any respect or repealed at any
time at any meeting of shareholders, provided that any amendment or supplement
proposed to be acted upon at any such meeting has been described or referred to
in the notice of such meeting. Except as otherwise provided by law, the Amended
and Restated Articles of Incorporation or herein, the shareholders shall not
take any action without a meeting to alter or amend this Amended and Restated
Code of Regulations. Notwithstanding the first sentence of this Regulation 34 or
anything to the contrary contained in the Amended and Restated Articles of
Incorporation or this Amended and Restated Code of Regulations, Regulations 1,
3(a), 7, 10, 11, 12 and 34 may not be amended or repealed by the shareholders,
and no provision inconsistent therewith may be adopted by the shareholders,
without the affirmative vote of the holders of at least 80% of the voting power
of the Corporation, voting together as a single class. Notwithstanding the
foregoing provisions of this Regulation 34, no amendment to Regulations 29, 30
or 31 will be effective to eliminate or diminish the rights of persons specified
in those Regulations existing at the time immediately preceding such amendment.
9
<PAGE> 1
EXHIBIT 4(A)
NARRATIVE DESCRIPTION OF FORM OF
MPW INDUSTRIAL SERVICES GROUP, INC.
COMMON STOCK SHARE CERTIFICATE
Decorative engraving covers approximately 3" from the entire left edge
of the share certificate (the "Certificate"). Centered in the top third of the
engraved box is a smaller box with the word "NUMBER" on the top edge of the
smaller box.
Centered in the top of the Certificate is the logo of MPW Industrial
Services Group, Inc. (the "Company"). Below the Company logo is the text "MPW
INDUSTRIAL SERVICES GROUP, INC." To the left of the Company logo in the upper
left corner of the Certificate is the text "COMMON STOCK" and "WITHOUT PAR
VALUE." Approximately 1/4" below this text is the text "This certificate is
transferable in New York, New York or Cleveland, Ohio" and approximately 1/4"
below this text is the text "Incorporated under the laws of the State of Ohio."
To the right of the Company logo in the upper right corner of the
Certificate is a rectangular shaded box (approximately 3/4" x 1 1/2") with the
word "SHARES" on the top edge of the box. Approximately 1/2" below this box is
the text "CUSIP 553444 10 0" and in small capital letters "SEE REVERSE FOR
CERTAIN DEFINITIONS."
Centered in the middle of the Certificate is a larger shaded box
(approximately 2 1/4" x 8 1/2") and the text "THIS CERTIFIES THAT" in the top
left hand corner of the shaded box and the text "IS THE OWNER OF" in the bottom
left hand corner of the shaded box.
Below the large shaded box is the following text:
fully paid and non-assessable common shares, without par value, of MPW
Industrial Services Group, Inc. transferable only on the books of the
Corporation by the holder hereof in person or by duly authorized Attorney upon
surrender of this Certificate properly endorsed. This Certificate is not valid
unless countersigned by the Transfer Agent and registered by the Registrant.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its authorized officers.
Dated: [blank]
CHAIRMAN AND VICE PRESIDENT,
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL
OFFICER AND SECRETARY
On the lower left hand side of the Certificate in small capital letters
the following words appear: "Countersigned and Registered," "National City Bank
(Cleveland, Ohio)" "Transfer Agent and Registrar" and "Authorized Signature."
<PAGE> 2
The back of the Certificate contains the following text:
MPW INDUSTRIAL SERVICES GROUP, 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>
<CAPTION>
<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 under Uniform Gifts to Minors
of survivorship and not as Act ____________________.
tenants in common (state)
</TABLE>
Additional abbreviations may also be used though not in the above list.
The Corporation will furnish to any shareholder without charge within
five days after receipt of written request therefor a copy of the express terms
of the shares represented by this certificate and of the other class or classes
and series of shares the Corporation is authorized to issue.
The Corporation will furnish without charge to each shareholder who so
requests a statement of the powers, designation, preferences and relative,
participating, optional or other special rights of each class of shares or
series thereof of the Corporation and the qualifications, limitations or
restrictions of such preferences and/or rights. Any such request should be made
to the Secretary of the Corporation at its principal place of business.
For Value Received, _________________________ hereby sell, assign and
transfer unto __________________________________________________________________
(PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFICATION
NUMBER OF ASSIGNEE)
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE,
OF ASSIGNEE)
________________________________________________________________________________
shares of common 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.
<PAGE> 3
Date __________________
x ______________________________________
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.
SIGNATURE(S) GUARANTEED:
By:____________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4(d)
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT ("Amendment") is made as of
October 31, 1997 by and between MPW Industrial Services, Inc. ("MPW, Inc."), MPW
Industrial Services, Ltd. ("MPW, Ltd."), MPW Management Services Corp. ("MPW
Corp."), Weston Engineering, Inc. ("Weston"), Pro Kleen Industrial Services,
Inc. ("Pro Kleen"), Aquatech Environmental, Inc. ("Aquatech", which, together
with the foregoing parties, being referred to herein collectively as the
"Original Borrowers", and individually as an "Original Borrower"), MPW
Industrial Services Group, Inc. ("MPW Group"), ESI International, Inc.,
successor in interest to MPW Filtration Acquisition Corp. by virtue of name
change ("ESII"), ESI North, Limited ("ESI") and Bank One, NA, successor by
merger to Bank One, Columbus, NA, 100 East Broad Street, Columbus, Ohio 43271
("Bank One").
WHEREAS, MPW, Inc., MPW, Ltd., MPW Corp., Weston and Aquatech are
hereinafter referred to collectively as the "Original Companies" and
individually as an "Original Company"; each of the Original Companies, MPW
Group, ESII and ESI are hereinafter collectively referred to as the "Companies"
and individually as a "Company"; and the Original Borrowers, MPW Group, ESII and
ESI are hereinafter collectively referred to as the "Borrowers" and individually
as a "Borrower"; and
WHEREAS, the Original Borrowers and Bank One entered into a loan
agreement dated as of June 30, 1996 (the "Loan Agreement"); and
WHEREAS, the Original Borrowers and Bank One entered into that certain
First Amendment to Loan Agreement dated as of September 26, 1997 (the "First
Amendment"); and
WHEREAS, the Loan Agreement as previously amended by the First
Amendment is hereinafter referred to as the "Credit Agreement"; and
WHEREAS, the parties to the Credit Agreement desire to have MPW Group,
ESII and ESI become parties (as both Companies and Borrowers) to the Credit
Agreement by this Amendment; and
WHEREAS, the parties hereto desire to further amend the Credit
Agreement as set forth below.
NOW, THEREFORE, the parties hereto agree as follows:
1. The capitalized terms not defined herein shall have the
meaning ascribed in the Credit Agreement.
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<PAGE> 2
2. The Credit Agreement is hereby amended by inserting a new
Section 3.6 which shall read as follows:
3.6 ESI ACQUISITION LOAN.
3.6.1 LOAN. Bank One agrees to lend to Borrowers the sum of Three
Million Dollars ($3,000,000) (the "ESI Loan").
3.6.2 ESI ACQUISITION NOTE. Borrowers shall execute and deliver to
Bank One the promissory note executed by duly authorized
officers thereof in the form of Exhibit 3.6 attached hereto
(the "ESI Acquisition Note").
3. The Credit Agreement is hereby amended by deleting Section 6.1
in its entirety and inserting in lieu thereof and instead therefor the
following:
6.1 ORGANIZATION & AUTHORITY TO EXECUTE LOAN DOCUMENTS.
6.1.1 BORROWERS, OTHER THAN ESI. Borrowers, other than ESI, are duly
organized and existing corporations under the laws of the
jurisdictions of their incorporation and are qualified to do
business in all states where such qualification is necessary,
except such jurisdiction, if any, where failure to be
qualified will not have a material adverse effect on the
Borrowers taken as a whole; the execution hereof by the
Borrowers, other than ESI, has been duly authorized by all
necessary corporate action; there is no prohibition, either by
law, in their articles of incorporation, code of regulations,
by-laws or in any agreement to which the Borrowers, other than
ESI, are a party, which in any way prohibits or would be
violated by the execution and carrying out of this Agreement
in any respect; this Agreement has been duly executed and is
the valid and binding obligation of the Borrowers jointly and
severally; and, the Notes issued and delivered to Bank One as
payee pursuant to the provisions hereof will also be valid and
binding obligations of Borrowers, jointly and severally.
6.1.2 ESI. ESI is a duly organized and existing limited liability
company under the laws of the jurisdiction of its organization
and is qualified to do business in all states where such
qualification is necessary, except such jurisdiction, if any,
where failure to be qualified will not have a material adverse
affect on the Borrowers taken as a whole; the execution hereof
by ESI has been duly authorized by all necessary action; there
is no prohibition, either by law, in its certificate of
formation, limited liability company agreement, operating
agreement, by-laws or other governing instruments which in any
way
- 2 -
<PAGE> 3
prohibits or would be violated by the execution and carrying
out of this Agreement in any respect; this Agreement has been
duly executed and is the valid and binding obligation of ESI;
and, the Notes issued and delivered to Bank One as payee
pursuant to the provisions hereof will also be valid and
binding obligations of ESI.
4. The Credit Agreement is hereby amended by deleting Section 6.3
in its entirety and inserting in lieu thereof and instead therefor the
following:
6.3 NO GUARANTIES OF OTHERS' OBLIGATIONS. None of the Borrowers
have made material investments in, advances to or guaranties
of the obligations of any Person except as disclosed in the
Financial Statements described in Sections 7.1 and 7.2, or as
set forth in Sections 3.3, 3.5 and 3.6, or as disclosed in
Article II of Schedule A attached hereto.
5. The Credit Agreement is hereby amended by deleting Section 6.5
in its entirety and inserting in lieu thereof and instead therefor the
following:
6.5 NO UNDISCLOSED LIABILITIES. Borrowers have no material
liabilities, direct or contingent, except as disclosed in the
Financial Statements described in Sections 7.1 and 7.2 or
disclosed on Schedule A attached hereto.
6. The Credit Agreement is hereby amended by deleting Section 6.7
in its entirety and inserting in lieu thereof and instead therefor the
following:
6.7 GOOD TITLE TO ASSETS AND NO UNDISCLOSED LIENS. Borrowers have
good and marketable title to all the property and assets
reflected as being owned by them in the Financial Statements
described in Sections 7.1 and 7.2, subject to no liens, other
than liens reflected on either Schedule A attached hereto or
on said Financial Statements or Permitted Liens, except
property and assets disposed of since such date in the
ordinary course of business.
- 3 -
<PAGE> 4
7. The Credit Agreement is hereby amended by deleting Section 7.7
in its entirety and inserting in lieu thereof and instead therefor the
following:
7.7 CHANGES IN ORGANIZATION DOCUMENTS. Borrowers shall promptly
provide Bank One with written notice after changes are made of
any amendments to or changes in their articles/certificate of
incorporation, charter, articles of organization, certificate
of formation, limited liability company agreement, operating
agreement, code of regulations, by-laws and/or other governing
instruments, including such changes as might affect the
structure, condition, operation or management of Borrowers and
Borrowers' obligations to Bank One under the terms of this
Agreement and shall make such amended articles of
incorporation, charter, articles of organization, certificate
of formation, limited liability company agreement, operating
agreement, code of regulations, by-laws and/or other governing
instruments available for inspection by Bank One upon demand.
8. The Credit Agreement is hereby amended by deleting Section
7.13 in its entirety and inserting in lieu thereof and instead therefor the
following:
7.13 MAINTAIN AND PRESERVE ASSETS AND MANAGEMENT. Borrowers shall
use reasonable efforts in good faith to maintain and preserve
in good working order and condition, ordinary wear and tear
excepted, all of Borrowers' properties necessary for the
conduct of their business, if failure to maintain and preserve
such properties would over a substantial period of time
materially and adversely affect the Borrowers taken as a
whole. In addition, MPW Group shall maintain a management team
for the management of the Borrowers which is reasonably
similar, in terms of collective expertise and experience, as
is existing at the time of the execution of this Agreement.
9. The Credit Agreement is hereby amended by deleting Section
7.19, in its entirety and inserting in lieu thereof and instead therefor the
following:
7.19 PAYMENT IN FULL UPON TRANSFER OF CERTAIN STOCK. In the event
all or any part of the shares or other interests in any
Borrower owned of record or beneficially by Monte R. Black are
sold, assigned, transferred in trust, pledged, mortgaged,
disposed of, or otherwise encumbered or transferred other than
as described in Schedule A without the prior written consent
of Bank One, Borrowers shall within ten (10) calendar days of
such event, pay to Bank One all amounts due and owing from
Borrowers to Bank One under this Agreement
- 4 -
<PAGE> 5
and the Notes and depositing in cash with Bank One a sum equal
to aggregate stated amounts of any then outstanding Letter(s)
of Credit.
10. The Credit Agreement is hereby amended by deleting Section 8.1
in its entirety and inserting in lieu thereof and instead therefor the
following:
8.1 ENCUMBERING ASSETS. Create, incur, assume or permit to
continue any mortgage, pledge, encumbrance, lien or charge of
any kind upon or security interest in any of its property or
assets, whether now owned or hereafter acquired, except for
(i) a mortgage on the principal facility of ESI in Nashville,
Tennessee securing a promissory note of ESI with a current
outstanding balance as of October 31, 1997 of not more than
$480,000 and (ii) Permitted Liens.
11. The Credit Agreement is hereby amended by deleting Section 8.2
in its entirety and inserting in lieu thereof and instead therefor the
following:
8.2 INCURRING OTHER DEBT. Create, incur, assume or suffer to exist
any Funded Debt or Current Debt except (i) debt represented by
the Notes issued hereunder; (ii) other indebtedness to Bank
One; (iii) Funded Debt which, in the sole opinion of counsel
for Bank One, is satisfactorily subordinated to all
indebtedness owing Bank One; (iv) unsecured indebtedness to
trade creditors arising out of the ordinary course of each
Borrower's business; (v) an aggregate amount not to exceed
$500,000 for purchase money debt, project financing and
assumed liabilities of any acquired business; (vi) any
intercompany debt; and (vii) existing and currently
anticipated capitalized leases between Borrowers and Monte R.
Black or the Black Family Limited Partnership as shown on the
Combined Financial Statements dated as of, and for the period
ended on, June 30, 1997; (viii) Executive Option Liabilities;
and (ix) existing Funded Debt set forth on Schedule A attached
hereto.
12. The Credit Agreement is hereby amended by deleting Section 8.3
in its entirety and inserting in lieu thereof and instead therefor the
following:
8.3 GUARANTY OF OTHERS' DEBTS. Assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable upon
the obligation of any Person (except intercompany guarantees
or guarantees existing on the date of this agreement, and the
assumption of the Funded Debt listed and delineated on
Schedule A attached hereto) in an amount in excess of
$500,000.
- 5 -
<PAGE> 6
13. The Credit Agreement is hereby amended by deleting Section 8.4
in its entirety and inserting in lieu thereof and instead therefor the
following:
8.4 MERGER OF CONSOLIDATION. Except as described on Schedule A,
merge or consolidate with any other corporation or any other
business entity except that Borrowers may merge or consolidate
with each other.
14. The Credit Agreement is hereby amended by deleting Section 8.5
in its entirety and inserting in lieu thereof and instead therefor the
following:
8.5 TRANSFER OF SUBSTANTIAL PORTION OF ASSETS. Liquidate or sell,
lease, transfer or otherwise dispose of (except intercompany
transactions) all or any substantial part of its assets other
than (i) in the ordinary course of business without the prior
written approval of Bank One, which shall not be unreasonably
withheld, and (ii) upon the payment in full of the Airplane
Loan, the sale of the airplane owned by MPW, Inc. to Monte R.
Black at a price of $3,600,000. All cash proceeds from any
such sale, lease or transfer (other than intercompany
transactions) shall be remitted by Borrowers to Bank One to be
applied to the Notes.
15. The Credit Agreement is hereby amended by deleting Section 8.6
in its entirety and inserting in lieu thereof and instead therefor the
following:
8.6 DISPOSING OF NOTES/ACCOUNTS RECEIVABLE. Discount or sell
(except through intercompany transactions) any of its notes or
accounts receivable.
16. The Credit Agreement is hereby amended by deleting Section
8.11 in its entirety and inserting in lieu thereof and instead therefor the
following:
8.11 DISTRIBUTIONS. Declare or pay any dividends, purchase, redeem,
retire or otherwise acquire for value any of their capital
stock now or hereafter outstanding including return of any
capital to their shareholders or interest holders or make any
distribution of assets to their shareholders or interest
holders, otherwise than (i) pursuant to MPW, Inc.'s 1994 Stock
Option Plan and 1991 Stock Option Plan, and (ii) as described
on Schedule A attached hereto.
17. The Credit Agreement is hereby amended by inserting a new
Section 8.13 which shall read as follows:
- 6 -
<PAGE> 7
8.13 Prepay, anticipate, collateralize or secure, directly or
indirectly, any obligation of any Borrower (i) to any Payee
(as defined in subpart (b) of Article II of Schedule A
attached hereto),or (ii) to any other Person with respect to
obligations the payment of which is subordinated to the
payment of obligations of any Borrower to Bank One, without
the express prior written consent of Bank One, or as permitted
by the terms of the Subordination Agreement referenced in
subpart (b) of Article II of Schedule A attached hereto.
18. The Credit Agreement is hereby amended by inserting a new
paragraph 9.10 which shall read as follows:
9.10 Any Payee shall fail to observe or perform any covenant,
condition or agreement to be observed or performed pursuant to
the terms of the Subordination Agreement dated October 29,
1997 referred to at Article II of Schedule A attached hereto.
19. The definition of the term "Combined" in Section 10.1 of the
Credit Agreement is hereby amended and restated to read as follows:
"Combined" shall include all Companies and all Subsidiaries
and shall mean, in reference to financial statements and
reports, any covenants, representations, warranties, or
agreements of Companies under this Agreement, or Definitions
in this section, that the same are prepared or determined on a
consolidated basis in accordance with generally accepted
accounting principles applied on a consistent basis; provided,
however, that the interim financial statements and reports
referred to in Section 7.2 shall (i) not require footnotes,
and (ii) be subject to year end audit adjustments.
20. The definition of the term "Combined Tangible Net Worth" in
Section 10.1 of the Credit Agreement is hereby amended and restated to read as
follows:
"Combined Tangible Net Worth" shall mean the Combined net
worth of Borrowers (after eliminating all intercompany
accounts and all effects of the Executive Option Noncash
Expense), (i) less all combined Intangible Assets of
Borrowers, and (ii) plus, for the period from October 29, 1997
through and including December 30, 1997, the outstanding
principal amount of the subordinated notes payable to the
Payees as referred to at subpart (b) of Article II of Schedule
A attached hereto. Net worth and Intangible Assets shall be
determined in accordance with generally accepted accounting
principles applied
- 7 -
<PAGE> 8
on a consistent basis provided, however, that Combined
Tangible Net Worth shall include no appraisal surplus of any
type or description.
21. The definition of the term "Loans" in Section 10.1 of the
Credit Agreement is hereby amended and restated to read as follows:
"Loans" means, jointly and severally, the Airplane Loan, the
Conversion Option Loan, the Equipment Loan, the Revolving
Credit Loan, the Weston Acquisition Loan and the ESI
Acquisition Loan.
22. The definition of the term "Notes" in Section 10.1 of the
Credit Agreement is hereby amended and restated to read as follows:
"Notes" means, jointly and severally, the Aircraft Note, the
Conversion Option Note, the Equipment Note, the Revolving
Credit Note, the Weston Acquisition Note and the ESI Note.
23. The definition of the term "Term Loan" in Section 10.1 of the
Credit Agreement is hereby amended and restated to read as follows:
"Term Loan" means, jointly and severally, the Airplane Loan,
the Conversion Option Loan, the Equipment Loan, the Weston
Acquisition Loan and the ESI Acquisition Loan.
24. The definition of the term "Term Note" in Section 10.1 of the
Credit Agreement is hereby amended and restated to read as follows:
"Term Note" means, jointly and severally, the Aircraft Note,
the Conversion Option Note, the Equipment Note, the Weston
Acquisition Note and the ESI Acquisition Note.
25. MPW Group, ESII and ESI are hereby made parties, both as
Companies and Borrowers, to the Credit Agreement, and all references to the
terms "Company", "Companies", "Borrower" and "Borrowers," respectively, in the
Credit Agreement shall include MPW Group, ESII and ESI.
26. Exhibits 2.1.3A, 2.3.2A, 3.1, 3.2 and 3.3 of the Credit
Agreement are hereby amended and restated to read as set forth in Exhibits
2.1.3B, 2.3.2B, 3.1A, 3.2A and 3.3A attached to this Amendment, and Schedule A
and Exhibit 3.6 attached to this Amendment shall be added to the Credit
Agreement as Schedule A and Exhibit 3.6 thereto. Borrowers shall execute and
deliver to Bank One promissory notes in the form of Exhibits 2.1.3B, 3.1A, 3.2A,
3.3A and 3.6 attached to this Amendment.
- 8 -
<PAGE> 9
27. Conditions to Bank One's Obligations. The obligations of Bank
One to enter into this Amendment and be bound by the terms hereof are subject to
Bank One receiving the following, each in form and substance satisfactory to
Bank One and its counsel:
(a) Documents. All documents and instruments referenced in
this Amendment, duly executed by the parties thereto.
(b) Certified Resolutions. Certified copies of resolutions
duly adopted by the governing body of each Borrower, authorizing the
execution and delivery of this Amendment and all documents and
instruments referred to herein to which each is a party.
(c) Secretary's Certificate. Signed copy of a certificate of
the secretary, assistant secretary or other appropriate officer/member
of each Borrower, which shall certify the names of the officers of the
such Borrower authorized to sign this Amendment and the other documents
or certificates of the Borrower to be executed and delivered pursuant
hereto. Bank One may conclusively rely upon such certificate until it
shall receive a further certificate of such respective secretary,
assistant secretary or other appropriate officer/member (A) cancelling
or amending the prior certificate, and (B) submitting the signatures of
the officers named in such further certificate.
(d) Opinions. Opinions of legal counsel to the Borrowers
covering such matters and in form and substance satisfactory to Bank
One.
(e) Other Requirements. Such other certificates, documents and
other items as Bank One, in its reasonable discretion, deems necessary
or desirable.
28. Borrowers represent and warrant that (a) the representations
and warranties contained in the Credit Agreement are true and correct in all
material respects as of the date of this Amendment, (b) no condition, act or
event could constitute an Event of Default under the Credit Agreement exists,
and (c) no condition, event, act or omission has occurred, which, with the
giving of notice or passage of time, would constitute an Event of Default under
the Credit Agreement.
29. Borrowers agree to pay (i) all fees and out-of-pocket
disbursements incurred by Bank One in connection with this Amendment, including
legal fees incurred by Bank One in the preparation, consummation, administration
and enforcement of this Amendment, and (ii) a fee to Bank One in the amount of
$5,000 in connection with this Amendment and the transactions contemplated
thereby.
- 9 -
<PAGE> 10
30. This Amendment shall become effective only after it is fully
executed by the Borrowers and Bank One. Except as modified by this Amendment,
the Credit Agreement shall remain in full force and effect in accordance with
its terms.
31. This Amendment is a modification only and not a novation.
Except for the above-quoted modification(s), the Credit Agreement, any agreement
or security document, and all the terms and conditions thereof, shall be and
remain in full force and effect with the changes herein deemed to be
incorporated therein. This Amendment is to be considered attached to the Credit
Agreement and made a part thereof. This Amendment shall not release or affect
the liability of any guarantor, surety or endorser of the Credit Agreement or
release any owner of collateral securing the Credit Agreement. The validity,
priority and enforceability of the Credit Agreement shall not be impaired
hereby. To the extent that any provision of this Amendment conflicts with any
term or condition set forth in the Credit Agreement, or any agreement or
security document executed in conjunction therewith, the provisions of this
Amendment shall supersede and control.
32. Borrowers acknowledge and agree that this Amendment is limited
to the terms outlined above, and shall not be construed as an amendment of any
other terms or provisions of the Credit Agreement; Borrowers hereby specifically
ratify and affirm the terms and provisions of the Credit Agreement. This
Amendment shall not establish a course of dealing or be construed as evidence of
any willingness on Bank One's part to grant other or future amendments, should
any be requested.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the day and year first above written.
Bank One, NA MPW Industrial Services, Inc.
By: /s/ Thomas E. Redmond By: /s/ Brad A. Martyn
------------------------------ ---------------------------
Its: Vice President Its: Controller
----------------------------- --------------------------
Date: October 31, 1997 Date: October 31, 1997
---------------------------- -------------------------
- 10 -
<PAGE> 11
MPW Industrial Services, Ltd. MPW Management Services Corp.
By: /s/ Brad A. Martyn By: /s/ Brad A. Martyn
------------------------------ ---------------------------
Its: Controller Its: Controller
----------------------------- --------------------------
Date: October 31, 1997 Date: October 31, 1997
---------------------------- -------------------------
Weston Engineering, Inc. Pro Kleen Industrial Services,
Inc.
By: /s/ Brad A. Martyn By: /s/ Daniel P. Buettin
------------------------------ ---------------------------
Its: Controller Its: Vice President & CFO
----------------------------- --------------------------
Date: October 31, 1997 Date: October 31, 1997
---------------------------- -------------------------
Aquatech Environmental Services, Inc. MPW Industrial Services Group,
Inc.
By: /s/ Peter G. Schumacher By: /s/ Brad A. Martyn
------------------------------ ---------------------------
Its: Vice President & Treasurer Its: Controller
----------------------------- --------------------------
Date: October 31, 1997 Date: October 31, 1997
---------------------------- -------------------------
ESI International, Inc. ESI North, Limited
By: /s/ Brad A. Martyn By: /s/ Brad A. Martyn
------------------------------ ---------------------------
Its: Controller Its: Controller
----------------------------- --------------------------
Date: October 31, 1997 Date: October 31, 1997
---------------------------- -------------------------
- 11 -
<PAGE> 1
EXHIBIT 5
[Letterhead of Jones, Day, Reavis & Pogue]
November , 1997
MPW Industrial Services Group, Inc.
9711 Lancaster Road, S.E.
P.O. Box 838
Hebron, Ohio 43025
RE: REGISTRATION OF UP TO 3,750,000 SHARES OF COMMON STOCK,
WITHOUT PAR VALUE, OF MPW INDUSTRIAL SERVICES GROUP, INC.
Ladies and Gentlemen:
We are acting as counsel to MPW Industrial Services Group, Inc., an
Ohio corporation (the "Company"), in connection with the offering of up to
3,750,000 shares (the "Shares") of common stock (the "Common Stock") of the
Company.
We have examined such documents, records, and matters of law as we have
deemed necessary for purposes of this opinion. Based on such examination and on
the assumptions set forth below, we are of the opinion that the Shares are duly
authorized, validly issued, fully paid and nonassessable.
In rendering the foregoing opinion, we have relied as to certain
factual matters upon certificates of officers of the Company and public
officials, and we have not independently checked or verified the accuracy of the
statements contained therein. In addition, our examination of matters of law has
been limited to the General Corporation Law of the State of Ohio and the federal
laws of the United States of America, in each case as in effect on the date
hereof.
We hereby consent to the filing of this opinion as Exhibit 5 and
Exhibit 23(b) to the Registration Statement on Form S-1 (the "Registration
Statement") filed by the Company to effect registration of the Shares under the
Securities Act of 1933, as amended, and to the reference to us under the caption
"Legal Matters" in the Prospectus constituting a part of the Registration
Statement.
Very truly yours,
Jones, Day, Reavis & Pogue
<PAGE> 1
EXHIBIT 10(a)
FORM OF
MPW INDUSTRIAL SERVICES GROUP, INC.
1997 STOCK OPTION PLAN
1. PURPOSE. The purpose of this Plan is to attract and retain
officers and key employees and consultants for MPW Industrial Services Group,
Inc., an Ohio corporation (the "Corporation"), and its Subsidiaries and to
provide such persons with incentives and rewards for superior performance.
2. DEFINITIONS. As used in this Plan,
"BOARD" means the Board of Directors of the Corporation.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
"COMMITTEE" means the committee described in Section 11(a) of
this Plan; provided, however, that until the Corporation shall have a class of
equity securities registered pursuant to Section 12 of the Exchange Act of 1934,
as amended, the "Committee" shall mean the Board, as defined herein.
"COMMON SHARES" means (i) shares of the common stock of the
Corporation, no par value, and (ii) any security into which Common Shares may be
converted by reason of any transaction or event of the type referred to in
Section 6 of this Plan.
"DATE OF GRANT" means the date specified by the Committee on
which a grant of Option Rights shall become effective, which shall not be
earlier than the date on which the Committee takes action with respect thereto.
"INCENTIVE STOCK OPTIONS" means Option Rights that are
intended to qualify as "incentive stock options" under Section 422 of the Code
or any successor provision.
"LESS-THAN-80-PERCENT SUBSIDIARY" means a Subsidiary with
respect to which the Corporation directly or indirectly owns or controls less
than 80 percent of the total combined voting or other decision-making power.
"MARKET VALUE PER SHARE" means, at any date, (i) the closing
sales price for the Common Shares on that date, if available, or, if there are
no sales on that date or if a closing sales price is not available, (ii) the
average of the "bid" and "asked" prices of the Common Shares on that date, in
each case as reported by the National Association of Securities Dealers
Automated Quotation System or any national securities exchange on which the
Common Shares are then
-1-
<PAGE> 2
traded, or, if (i) or (ii) are not available, the fair market value of the
Common Shares as determined by the Committee from time to time.
"OPTIONEE" means the person so designated in an agreement
evidencing an outstanding Option Right.
"OPTION PRICE" means the purchase price payable upon the
exercise of an Option Right.
"OPTION RIGHT" means the right to purchase Common Shares upon
exercise of an option granted pursuant to Section 4 of this Plan.
"PARTICIPANT" means a person who is selected by the Committee
to receive benefits under this Plan and who is at that time an officer,
including without limitation an officer who may also be a member of the Board,
any other key employee of, or a consultant to, the Corporation or any
Subsidiary, or who has agreed to commence serving in any such capacity.
"RELOAD OPTION RIGHTS" means additional Option Rights granted
automatically to an Optionee upon the exercise of Option Rights pursuant to
Section 4(f) of this Plan.
"RULE 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission (or any successor rule to the same effect), as in effect from time to
time.
"SUBSIDIARY" means a corporation, partnership, joint venture,
unincorporated association or other entity in which the Corporation has a direct
or indirect ownership or other equity interest; provided, however, for purposes
of determining whether any person may be a Participant for purposes of any grant
of Incentive Stock Options, "Subsidiary" means any corporation in which the
Corporation owns or controls directly or indirectly more than 50 percent of the
total combined voting power represented by all classes of stock issued by such
corporation at the time of such grant.
3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as
provided in Section 6 of this Plan, the number of Common Shares issued or
transferred upon the exercise of Option Rights shall not in the aggregate exceed
700,000 Common Shares, which may be Common Shares of original issuance or Common
Shares held in treasury or a combination thereof. If any award terminates,
expires or is canceled with respect to any Common Shares, new awards may
thereafter be granted covering such Common Shares.
(b) Upon the full or partial payment of any Option Price by
the transfer to the Corporation of Common Shares or upon satisfaction of tax
withholding provisions in connection with any such exercise or any other payment
made or benefit realized under this Plan by the transfer or relinquishment of
Common Shares, there shall be deemed to have been issued or transferred under
this plan only the net number of Common Shares actually issued or transferred by
the Corporation.
-2-
<PAGE> 3
4. OPTION RIGHTS. The Committee may from time to time authorize
grants to Participants of options to purchase Common Shares upon such terms and
conditions as the Committee may determine in accordance with the following
provisions:
(a) Each grant shall specify the number of Common Shares to
which it pertains.
(b) Each grant shall specify an Option Price per Common Share,
which in the case of Incentive Options, shall be equal to or greater than the
Market Value per Share on the Date of Grant and, in the case of other options,
shall not be less than eighty-five percent (85%) of the Market Value per Share
on the Date of Grant.
(c) Each grant shall specify the form of consideration to be
paid in satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check or
other cash equivalent acceptable to the Corporation, (ii) nonforfeitable,
unrestricted Common Shares, which are already owned by the Optionee and have a
value at the time of exercise that is equal to the Option Price, (iii) any other
legal consideration, including, without limitation, promissory notes, that the
Committee may deem appropriate, including without limitation any form of
consideration authorized under Section 4(d) below, on such basis as the
Committee may determine in accordance with this Plan and (iv) any combination of
the foregoing.
(d) Any grant may provide for deferred payment of the Option
Price from the proceeds of sale through a bank or broker on the date of exercise
of some or all of the Common Shares to which the exercise relates.
(e) Any grant may provide for the automatic grant to the
Optionee of Reload Option Rights upon the exercise of Option Rights, including
Reload Option Rights, for Common Shares or any other noncash consideration
authorized under Sections 4(c) above.
(f) Successive grants may be made to the same Participant
regardless of whether any Option Rights previously granted to such Participant
remain unexercised.
(g) Each grant shall specify the period or periods of
continuous employment of the Optionee by the Corporation or any Subsidiary that
are necessary before the Option Rights or installments thereof shall become
exercisable, and any grant may provide for the earlier exercisability of such
rights in the event of retirement, death or disability of the Participant or a
change in control of the Corporation or other similar transaction or event.
(h) Option Rights granted under this Plan may be (i) options
that are intended to qualify under particular provisions of the Code, including
without limitation Incentive Stock Options, (ii) options that are not intended
to so qualify or (iii) combinations of the foregoing.
(i) No Option Right granted under this Plan may be exercised
more than 10 years from the Date of Grant.
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<PAGE> 4
(j) Each grant shall be evidenced by an agreement, which shall
be executed on behalf of the Corporation by any officer thereof and delivered to
and accepted by the Optionee and shall contain such terms and provisions as the
Committee may determine consistent with this Plan.
(k) Notwithstanding the above, each director who is not
directly or indirectly employed by the Company, or the owner of 10% of the
outstanding Common Stock of the Company, is hereby granted, effective on the
business day after the date of the first annual meeting of Shareholders
occurring after the date of this Plan, an option to purchase 2,000 Common
Shares, and at each annual meeting of shareholders thereafter in which he or she
has been elected, an option to purchase 1,000 Common Shares, in each case as
determined by the Committee.
5. TRANSFERABILITY. (a) No Option Right or other derivative
security (as that term is used in Rule 16b-3) awarded under this Plan shall be
transferable by a Participant other than by will or the laws of descent and
distribution or, other than with respect to an Incentive Stock Option, a
qualified domestic relations order, as defined in the Code. Option Rights shall
be exercisable during a Participant's lifetime only by the Participant or, in
the event of the Participant's legal incapacity, by his guardian or legal
representative acting in a fiduciary capacity on behalf of the Participant under
state law and court supervision. Notwithstanding the foregoing, the Committee,
in its sole discretion, may provide for transferability of particular awards
under this Plan so long as such provisions will not disqualify the exemption for
other awards under Rule 16b-3.
(b) Any award made under this Plan may provide that all or any
part of the Common Shares that are to be issued or transferred by the
Corporation upon the exercise of Option Rights shall be subject to further
restrictions upon transfer.
6. ADJUSTMENTS. The Committee may make or provide for such
adjustments in the (a) number of Common Shares covered by outstanding Option
Rights, (b) prices per share applicable to such Option Rights, and (c) kind of
shares (including shares of another issuer) covered thereby, as the Committee in
its sole discretion may in good faith determine to be equitably required in
order to prevent dilution or enlargement of the rights of Participants that
otherwise would result from (x) any stock dividend, stock split, combination of
shares, recapitalization or other change in the capital structure of the
Corporation, (y) any merger, consolidation, spin-off, spin-out, split-off,
split-up, reorganization, partial or complete liquidation or other distribution
of assets, issuance of rights or warrants to purchase securities or (z) any
other corporate transaction or event having an effect similar to any of the
foregoing. In the event of any such transaction or event, the Committee may
provide in substitution for any or all outstanding awards under this Plan such
alternative consideration as it may in good faith determine to be equitable
under the circumstances and may require in connection therewith the surrender of
all awards so replaced. Moreover, the Committee may on or after the Date of
Grant provide in the agreement evidencing any award under this Plan that the
holder of the award may elect to receive an equivalent award in respect of
securities of the surviving entity of any merger, consolidation or other
transaction or event having a similar effect, or the Committee may provide that
the holder will automatically be entitled to receive such an equivalent award.
In any case, such substitution of securities shall not require the consent of
any person who is granted awards pursuant to this Plan.
7. FRACTIONAL SHARES. The Corporation shall not be required to
issue any fractional Common Shares pursuant to this Plan. The Committee may
provide for the elimination of fractions or for the settlement thereof in cash.
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<PAGE> 5
8. WITHHOLDING TAXES. To the extent that the Corporation is
required to withhold federal, state, local or foreign taxes in connection with
any payment made or benefit realized by a Participant or other person under this
Plan, and the amounts available to the Corporation for such withholding are
insufficient, it shall be a condition to the receipt of such payment or the
realization of such benefit that the Participant or such other person make
arrangements satisfactory to the Corporation for payment of the balance of such
taxes required to be withheld. At the discretion of the Committee, such
arrangements may include relinquishment of a portion of such benefit. The
Corporation and any Participant or such other person may also make similar
arrangements with respect to the payment of any taxes with respect to which
withholding is not required.
9. PARTICIPATION BY EMPLOYEES OF A LESS-THAN-80-PERCENT
SUBSIDIARY. As a condition to the effectiveness of any grant or award to be made
hereunder to a Participant who is an employee of a Less-Than-80-Percent
Subsidiary, regardless whether such Participant is also employed by the
Corporation or another Subsidiary, the Committee may require the Less-Than-
80-Percent Subsidiary to agree to transfer to the Participant (as, if and when
provided for under this Plan and any applicable agreement entered into between
the Participant and the Less-Than-80-Percent Subsidiary pursuant to this Plan)
the Common Shares that would otherwise be delivered by the Corporation upon
receipt by the Less-Than-80-Percent Subsidiary of any consideration then
otherwise payable by the Participant to the Corporation. Any such award may be
evidenced by an agreement between the Participant and the Less-Than-80-Percent
Subsidiary, in lieu of the Corporation, on terms consistent with this Plan and
approved by the Committee and the Less-Than-80-Percent Subsidiary. All Common
Shares so delivered by or to a Less-Than-80-Percent Subsidiary will be treated
as if they had been delivered by or to the Corporation for purposes of Section 3
of this Plan, and all references to the Corporation in this Plan shall be deemed
to refer to the Less-Than-80-Percent Subsidiary except with respect to the
definitions of the Board and the Committee and in other cases where the context
otherwise requires.
10. CERTAIN TERMINATIONS OF EMPLOYMENT, HARDSHIP AND APPROVED
LEAVES OF ABSENCE. Notwithstanding any other provision of this Plan to the
contrary, in the event of termination of employment by reason of death,
disability, normal retirement, early retirement with the consent of the
Corporation, termination of employment to enter public service with the consent
of the Corporation or leave of absence approved by the Corporation, or in the
event of hardship or other special circumstances, of a Participant who holds an
Option Right that is not immediately and fully exercisable, the Committee may in
its sole discretion take any action that it deems to be equitable under the
circumstances or in the best interests of the Corporation, including without
limitation waiving or modifying any limitation or requirement with respect to
any award under this Plan.
11. ADMINISTRATION OF THE PLAN. (a) This Plan shall be
administered by the Compensation Committee of the Board appointed from time to
time by the Board of Directors of the Corporation. The Committee shall be
composed of not less than two members of the Board, each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3 and an "outside
director" within the meaning of Section 162(m) of the Code. A majority of the
Committee shall constitute a quorum, and the acts of the members of the
Committee who are present at any
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<PAGE> 6
meeting thereof at which a quorum is present, or acts unanimously approved by
the members of the Committee in writing, shall be the acts of the Committee.
(b) The interpretation and construction by the Committee of
any provision of this Plan or of any agreement, notification or document
evidencing the grant of Option Rights, and any determination by the Committee
pursuant to any provision of this Plan or any such agreement, notification or
document, shall be final and conclusive. No member of the Committee shall be
liable for any such action taken or determination made in good faith.
12. AMENDMENTS AND OTHER MATTERS. (a) This Plan may be amended
from time to time by the Committee, but except as expressly authorized by this
Plan no such amendment shall increase the maximum number of shares specified in
Section 3(a) of this Plan (except that adjustments authorized by Section 6 of
this Plan shall not be limited by this provision), or cause Rule 16b-3 to become
inapplicable to this Plan, without the further approval of the shareholders of
the Corporation, unless permitted by Rule 16b-3. Without limiting the generality
of the foregoing, the Committee may amend this Plan to eliminate provisions
which are no longer necessary as a result of changes in tax or securities laws
or regulations, or in the interpretation thereof.
(b) With the concurrence of the affected Optionee, the
Committee may cancel any agreement evidencing Option Rights or any other award
granted under this Plan. In the event of such cancellation, the Committee may
authorize the granting of new Option Rights or other awards hereunder, which may
or may not cover the same number of Common Shares that had been the subject of
the prior award, at such Option Price and subject to such other terms,
conditions and discretions as would have been applicable under this Plan had the
canceled Option Rights or other awards been granted.
(c) The Committee may, in its sole discretion, accelerate the
time at which any Option Right may be exercised. The Committee also may permit
Participants to elect to defer the issuance of Common Shares pursuant to such
rules, procedures or programs as it may establish for purposes of this Plan. The
Committee also may provide that deferred settlements include the payment or
crediting of interest on the deferral amounts, or the payment or crediting of
dividend equivalents where the deferral amounts are denominated in Common
Shares.
(d) This Plan shall not confer upon any Participant any right
with respect to continuance of employment or other service with the Corporation
or any Subsidiary and shall not interfere in any way with any right that the
Corporation or any Subsidiary would otherwise have to terminate any
Participant's employment or other service at any time.
(e) To the extent that any provision of this Plan would
prevent any Option Right that was intended to qualify under particular
provisions of the Code from so qualifying, such provision of this Plan shall be
null and void with respect to such Option Right; provided, however, that such
provision shall remain in effect with respect to other Option Rights, and there
shall be no further effect on any provision of this Plan.
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EXHIBIT 10(d)
MPW INDUSTRIAL SERVICES GROUP, INC.
FORM OF EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
as of ____________, 1997, by and between Ira O. Kane, an individual (the
"Executive"), and MPW Industrial Services Group, Inc., an Ohio corporation (the
"Company").
RECITALS:
WHEREAS, the Company wishes to retain Executive's skills, knowledge
and experience in the leadership of the Company; and
WHEREAS, Executive wishes to make such skills, knowledge and
experience available to the Company and is willing to serve in the employ of
the Company on a full-time basis for the employment term, and upon the other
terms and conditions hereinafter provided;
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, and upon the terms and subject to the conditions
contained herein, the Executive and the Company hereby agree as follows:
SECTION 1: EMPLOYMENT
The Company agrees to employ the Executive, and the Executive agrees
to enter into the employ of the Company for the period stated in Section 3 of
this Agreement and upon the other terms and conditions hereinafter provided.
SECTION 2: POSITIONS AND RESPONSIBILITIES
During the period of his employment hereunder, the Executive agrees to
serve as President and Chief Operating Officer of the Company and its
Subsidiaries, and to be responsible for the general management of the affairs
and day-to-day operations of the Company and the general management of its
Subsidiaries. During such period, the Executive shall serve as a member of the
Company's Board of Directors and such of its Subsidiaries as may be requested
by the Chairman and Chief Executive Officer of the Company. For purposes of
this Agreement, "Subsidiary" shall mean any corporation, partnership, joint
venture or other business entity in which the Company, directly or indirectly,
beneficially owns 50% or more of the securities entitled to vote generally in
the election of directors.
<PAGE> 2
SECTION 3: TERM AND DUTIES
3.1 Employment Term. The period of the Executive's employment
under this Agreement (the "Term") shall commence on _________, 1997, and shall
continue until the close of business on _______________, 1999.
3.2 Duties. During the period of his employment hereunder and
except for illness, reasonable vacation periods, and reasonable leaves of
absence, the Executive shall devote all his business time, attention, skill, and
efforts to the faithful performance of his duties hereunder. However, the
Executive may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions with or in, companies or organizations,
which will not present any conflict of interest with the Company or any of its
subsidiaries or affiliates, or materially affect the performance of the
Executive's duties pursuant to this Agreement.
SECTION 4: COMPENSATION AND REIMBURSEMENT OF EXPENSES
4.1 Compensation. As compensation for the services to be rendered
during the Executive's term of employment hereunder and as compensation for the
other obligations being undertaken by the Executive hereunder, the Executive
shall be entitled to the compensation hereinafter set forth:
4.2 Base Salary. The Company shall pay to the Executive an annual
base salary (the "Base Salary") of not less than $300,000 per year, or such
greater amount as may be determined by the Board of Directors, upon a review of
the Executive's performance. The Executive's Base Salary shall be reviewed at
least annually, with the first such review to be completed no later than June
30, 1998. During the term of employment, Executive's Base Salary shall be
payable consistent with the Company's normal practice, but not less frequently
than in equal monthly installments on the last business day of each month
throughout the term of this Agreement.
4.3 Incentive Compensation. In addition to his Base Salary, the
Executive shall be entitled, commencing with the fiscal year ended June 30,
1998, to Incentive Compensation, on a percentage of salary basis, not less than
that of other senior executives of the Company, in accordance with the Company's
incentive compensation plan in effect at such time. Executive's incentive
compensation shall be paid at the same time and in the same manner as the
Company pays other executive's their bonuses.
4.4 Reimbursement of Expenses. The Company shall pay or reimburse
Executive for all reasonable travel, entertainment, and other expenses incurred
by the Executive in performing his obligations under this Agreement, such
reimbursement to include, but not be limited to, reimbursement for country club
dues at a country club of the Executive's choice, membership in the Columbus Bar
Association, the Ohio State Bar Association, and the American Bar Association,
continuing legal education requirements necessary for the Executive to maintain
his active status to practice law in the State of Ohio, appropriate
industry-related seminars and conventions, and dues and expenses associated with
the Executive's membership in the World President's Organization and/or any
successor organization, including expenses related to attendance at seminars and
conferences of such organization.
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<PAGE> 3
4.5 Company Car. The Company will provide the Executive with a
company car at least equal in value to the car given to Executive on the date
hereof, and the Company will reimburse the Executive for, and/or assume, all
costs associated with maintaining and operating the Company car. The Executive
agrees to follow normal Company policies with respect to tax reporting for the
Executive's personal, nonbusiness use of the company car.
4.6 Vacations, Holidays, Etc. The Executive shall be entitled in
each year during the term of his employment to a minimum vacation of four weeks
(20 business days), during which time his compensation shall be paid in full,
and such holidays and other nonworking days as are consistent with the policies
of the Company for key executives generally.
4.7 Death Benefits; Life Insurance. In the event of the death of
the Executive during the term of this Agreement, the Company shall pay, or cause
to be paid, to the Executive's designated beneficiary or beneficiaries or legal
representatives a death benefit in an amount equal to three times the sum of (i)
Executive's Base Salary plus (ii) the amount of the highest annual bonus paid to
Executive in the prior three fiscal years. Such death benefit shall be paid in a
lump sum within 90 days of the Executive's death unless the Executive prior to
his death, or his beneficiaries within such 90-day period, shall have executed a
writing directing the Company to pay such death benefit in several installments,
in which case the death benefit shall be paid in such installments. The Company
may purchase one or more term or other life insurance policies in amounts
necessary to provide for its obligations under this section, and upon
termination of Executive's employment hereunder, other than for Cause, if
requested by Executive, the Company shall use its reasonable efforts to assign
to Executive the right to receive, upon Executive's death, under such policies
an amount equal to the death benefit hereunder; provided that Executive agrees
to be solely responsible for any proportionate payments attributable to such
amounts due on such policies after such assignment.
4.8 Other Benefits. The Executive shall be entitled to participate
in all group hospitalization, health, dental care, or sick-leave plan, travel or
accident insurance, or executive contingent compensation plan, 401(k) plan,
retirement income plan, qualified or nonqualified pension or profit-sharing
plan, or other present or future group employee benefit plan or program of the
Company for which key executives are or shall become eligible. Except as
otherwise expressly contemplated hereby, the benefits referred to in this
Section 4.8 are in addition to the Compensation and other benefits referred to
in other provisions of this Section 4.
SECTION 5: TERMINATION OF AGREEMENT
5.1 Right to Terminate.
(a) Death. Except for payment of the death benefit
contemplated by Section 4.7 hereof, this Agreement shall terminate upon
Executive's death.
(b) Disability. In the event that the Executive becomes
disabled, due to any physical or mental illness which renders the Executive
incapable of performing his duties hereunder, the Company shall have the right
to terminate Executive's employment hereunder. For purposes of this Section
5.1(b), Executive shall be deemed to have become disabled in accordance
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<PAGE> 4
with the Company's current disability policy which the Company agrees to
maintain during the term of this Agreement. Upon any termination of employment
under this Section 5.1(b), the Company shall pay Executive in accordance with
the Company's normal payroll procedures an amount equal to Executive's Base
Salary in effect at the date of termination (reduced by the proceeds of any
short or long-term disability payments to which Executive may be entitled
during such period under any short or long-term disability plan or insurance
policy maintained by the Company) for 60 months following the date he last
worked and any other benefits to which Executive may be entitled as provided in
this Agreement.
(c) Cause. The Company shall have the right to terminate
Executive's employment hereunder for "Cause." "Cause" shall mean that, prior to
any termination pursuant to this Section 5.1(c), the Executive shall have
committed:
(i) an intentional act of fraud, embezzlement
or theft in connection with his duties or in the course of
his employment with the Company or its Subsidiaries;
(ii) intentional wrongful damage to property of
the Company or its Subsidiaries;
(iii) intentional wrongful disclosure of secret
processes or confidential information of the Company or its
Subsidiaries; or
(iv) intentional wrongful breach of Section 6
hereof.
and any such act shall have been materially harmful to the Company and its
Subsidiaries on a consolidated basis. For purposes of this Agreement, no act,
or failure to act, on the part of the Executive shall be deemed "intentional"
if it was due primarily to an error in judgment or negligence, but shall be
deemed "intentional" only if done, or omitted to be done, by the Executive not
in good faith and without reasonable belief that his action or omission was in
the best interest of the Company and its Subsidiaries. Notwithstanding the
foregoing, the Executive shall not be deemed to have been terminated for
"Cause" hereunder unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three quarters of the Board then in office at a meeting of the Board
called and held for such purpose, after reasonable notice to the Executive and
an opportunity for the Executive, together with his counsel (if the Executive
chooses to have counsel present at such meeting), to be heard before the Board,
finding that, in the good faith opinion of the Board, the Executive had
committed an act constituting "Cause" as herein defined and specifying the
particulars thereof in detail. Nothing herein will limit the right of the
Executive or his beneficiaries to contest the validity or propriety of any such
determination.
(d) Other. The Company shall have the right to terminate
Executive's employment hereunder for any other reason not specified in this
Section 5.1 upon 30 days' prior written notice to Executive; provided that in
the event of any such termination, the Company shall make a severance payment
to Executive on the date of such termination as determined pursuant to Section
5.2(b).
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<PAGE> 5
5.2 Rights and Obligations of Executive Upon Termination.
(a) Company Obligations at Termination. Except as otherwise
provided by Sections 4.7 and 5.2(b) hereof, upon the termination of Executive's
employment pursuant to Section 5.1(a), (b) or (c) of this Agreement, the
Company shall not have any further obligation to Executive under this Agreement
except (i) to distribute to Executive his Base Salary due pursuant to this
Agreement (plus accrued vacation pay) up to the date of termination, and, (ii)
if Executive is terminated for any reason other than for "cause" as defined in
Section 5.1(c) hereof, to pay to Executive or his estate any incentive
compensation earned up to the date of termination (pro rata, based on the
performance of the Company as of the date of termination and the number of
complete months for which Executive was employed in that year prior to his
termination) in accordance with the terms and conditions of this Agreement.
(b) Severance Pay at Termination. If the Company terminates
the Executive's employment pursuant to Section 5.1(d) hereof, or after the
expiration of the Term (other than for "Cause" as defined herein), then the
Company shall, as severance, pay to the Executive in a lump sum with 90 days of
such termination, an amount equal to the sum of (i) the Executive's Base Salary
in effect at the date of termination for the greater of (A) the remainder of
the Term or (B) one year following the date of termination (the "Severance
Period"), plus (ii) the amount of Executive's bonus paid or payable for the
prior fiscal year.
5.3 Legal Fees and Expenses. The Company agrees to pay promptly as
incurred, to the full extent permitted by law, all legal fees and expenses which
Executive may reasonably incur as a result of any contest by the Company,
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including any contest by Executive about the amount of any payment pursuant to
this Agreement), plus in each case interest on any delayed payment at the rate
of 1% above the Prime Rate posted from time to time by Bank One of Columbus,
N.A.
5.4 Continuation of Benefits. For any termination for which
severance is payable under Section 5.2(b), the Company shall, during the
Severance Period, (A) arrange to provide the Executive with benefits (other than
salary and incentive compensation) substantially similar to those which the
Executive was receiving or entitled to receive immediately prior to the
termination of employment, except that the level of any such employee benefits
to be provided may be reduced in the event of a corresponding reduction
generally applicable to all recipients of or participants in such employee
benefits, and (B) such Severance Period will be considered service with the
Company for the purpose of determining service credits and benefits due and
payable to the Executive under the retirement income, supplemental executive
retirement and other benefit plans of the Company or its Subsidiaries applicable
to Executive, his dependents or his beneficiaries immediately prior to his
termination. If and to the extent that such benefits shall not or cannot be paid
or provided under policy, plan, program, or arrangement of the Company solely
because the Executive is no longer an officer, director, or employee of the
Company, then the Company shall itself pay or provide for the payment to the
Executive, his dependents and beneficiaries, along with, in the case of any
benefit described in subsection (A) of this Section 5.4 which is subject to tax
because it is not or cannot be paid or provided under such policy, plan, program
or arrangement of the Company or any Subsidiary, an additional amount such that
after
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<PAGE> 6
payment by the Executive, or his dependent or beneficiaries, as the case may
be, of all taxes so imposed, the recipient retains an amount equal to such
taxes. Without limiting the purposes or effect of Section 5.4, employee
benefits otherwise receivable by the Executive pursuant to this Section 5.4
will be reduced to the extent comparable welfare benefits are actually received
by the Executive from another employer following Executive's termination of
employment, and any such benefits actually received by the Executive shall be
reported by the Executive to the Company.
5.5 No Mitigation Obligation. The Company hereby acknowledges that
it will be difficult, and may be impossible, for the Executive to find
reasonably comparable employment following any termination for which severance
benefits are available under Section 5.2(b). In addition, the Company
acknowledges that its severance pay plans applicable in general to its salaried
employees do not provide for mitigation, offset or reduction of any severance
payment received thereunder. Accordingly, the parties hereto expressly agree
that the payment of the severance compensation by the Company to the Executive
in accordance with the terms of this Agreement will be liquidated damages, and
that the Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall any profits, income, earnings or other benefits from any source whatsoever
create any mitigation, offset, reduction or any other obligation on the part of
the Executive hereunder or otherwise.
SECTION 6: NON-COMPETITION; CONFIDENTIAL INFORMATION
6.1 Period and Conduct. During the period commencing on the date
hereof and ending at the end of the Severance Period, Executive shall not:
(a) engage, without the prior written consent of the
Company, in any Competitive Activity; or
(b) solicit any employee of the Company to terminate his
or her employment with the Company.
Except as provided in this Section 6.1, Executive shall not
be subject to any obligation, express or implied, not to compete with the
Company or its affiliates.
6.2 Territory. Executive shall refrain from engaging in the
activities described in this Section 6 during the period specified in Section
6.1 hereof in any state in which the Company conducts business at any time
during the term of this Agreement.
6.3 Definition. "Competitive Activity" means the Executive's
participation, without the written consent of an officer of the Company, in the
management of any business enterprise if such enterprise engages in substantial
and direct competition with the Company and such enterprise's sales of any
product or service competitive with any product or service of the Company
amounted to 10% or more of such enterprise's net sales for its most recently
completed fiscal year and if the Company's net sales of said product or service
amounted to 10% or more of the Company's net sales for its most recently
completed fiscal year. "Competitive Activity" will not include (i) the mere
ownership of securities in any such enterprise and the exercise of rights
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<PAGE> 7
appurtenant thereto or (ii) participation in the management of any such
enterprise other than in connection with the competitive operations of such
enterprise; provided, however, that notwithstanding the foregoing, Executive
may not directly participate in the portion of such enterprise's business which
is in substantial and direct competition with the Company even if such portion
constitutes less than 10% of the net sales for such enterprise.
6.4 Confidentiality. Executive recognizes the interest of the
Company in maintaining the confidential matters relating to its business, and
agrees that he will not willfully, directly or indirectly, disclose or use,
except as required in the course of his employment with the Company, any
confidential information of the Company or any of its Subsidiaries, including,
without limitation, any records, files, data, methods, formulae, products,
apparatuses, customer lists, activity reports, plans, specifications, price
lists, notebooks or similar information received by or prepared for the Company,
which is in fact proprietary to the Company or any of its Subsidiaries. The
parties hereto recognize that it is not the intent of this Section to include
within the subject matter of the preceding sentence any of the following: (i)
information, data or methods of information not proprietary to the Company or
its Subsidiaries, (ii) information, data or methods of operation which are in
the public domain, or (iii) information, data or methods of operations possessed
by Executive and in which the Company has no proprietary interest. All records,
files, data drawings, documents, equipment and the like relating to costs, uses,
applications or purchases of products and services made or sold by the Company
or any of its Subsidiaries or otherwise relating to the Company's business or
the business of any of its Subsidiaries, or compiled by or delivered to
Executive during the course of his performance of his duties hereunder, shall be
and remain at all times the sole property of the Company or its Subsidiaries (as
the case may be).
6.5 Nondisparagement. Each of the Company and the Executive agree
that, following termination of the Executive's employment with the Company, they
shall not engage in activities, or publicly make any statements that disparage,
or otherwise impair the reputation, goodwill or business interests of the other
party in such a manner that might result in injury to the other party.
6.6 Remedies. Each of the Company and its Subsidiaries and the
Executive acknowledges that the covenants made by them in this Section 6 are of
value to the other party only if performed fully by such party, and, therefore,
that it would not be possible to compensate the other party in monetary damages
for such party's failure to perform his or its obligations hereunder. As a
consequence, in the event of any breach by a party hereunder, the other party
shall be entitled to injunctive relief and such other full and complete relief
as a court of equity would then afford, in addition to all other relief and
remedies available to the other party without the necessity of proving damages
or posting a bond.
6.7 Change-in-Control. The Company and the Executive are parties
to a Change-in-Control Severance Agreement, dated the date hereof (as such
agreement may be amended from time to time, the "Change-in-Control Agreement").
Notwithstanding anything contained in this Agreement to the contrary, in the
event the Termination of employment occurs under circumstances in which the
Executive would otherwise be entitled to receive payments and benefits under
both this Agreement and the Change-in-Control Agreement, the Executive shall
have the right to elect to receive payments and benefits under either this
Agreement or the
-7-
<PAGE> 8
Change-in-Control Agreement, but not both. Within five business days following
the Termination of employment under circumstances in which this Section 6.7
would apply, the Company shall provide the Executive, in writing, a reasonably
detailed determination of the payments and other benefits under each of this
Agreement and the Change-in-Control Agreement. The Executive shall make the
election provided for in this Section 6.7 within thirty calendar days after
Executive's receipt of the written determination referred to in the preceding
sentence; provided, however, that if such election is not so made within such
30-day period, the Executive shall be irrevocably deemed to have elected to
receive payments and benefits under the Change-in-Control Agreement. Prior to
the date on which Executive makes or is deemed to have made the election
referred to above, he shall receive all benefits under this Agreement as if the
Executive had made the election to receive benefits and payments under this
Agreement.
SECTION 7: DEFINITIONS AND MISCELLANEOUS PROVISIONS
7.1. Defined Terms. Certain capitalized terms used in this
Agreement are specifically defined in the various sections and subsections of
this Agreement, and shall have the meanings set forth therein. All terms not
specifically defined in this Agreement shall have the meanings set forth in the
laws of the State of Ohio with respect to corporations, and if not defined
therein, all terms shall be read in context and construed according to the rules
of grammar and common usage.
7.2 Notices. For all purposes of this Agreement, all
communications including without limitation notices, consents, requests or
approvals, provided for herein shall be in writing and shall be deemed to have
been duly given when delivered or five business days after having been mailed by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed to the Company (to the attention of the Secretary of the
Company) at its principal executive office and to the Executive at his principal
residence, or to such other address as any party may have furnished to the other
in writing and in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
7.3 Construction of Agreement. The captions at the beginning of
the sections and subsections of this Agreement are for convenience only and
shall be ignored in construing this document. This Agreement, and any exhibit or
amendment to it, may be executed in several counterparts, and each executed
counterpart shall be considered as an original. All questions concerning the
intention, validity, and meaning of this Agreement or relating to the rights and
obligations of the parties hereto with respect to performance under this
Agreement shall be construed and resolved in accordance with the laws of Ohio.
If any court of competent jurisdiction holds any provision of this Agreement to
be invalid, the holding shall not affect the validity of the remainder of this
Agreement. In the event that the provisions of Section 6 should ever be deemed
to exceed the time or geographic limitations permitted by applicable law, then
such provisions shall be deemed reformed to the maximum time or geographic
limitations permitted by applicable law.
7.4 Entire Agreement. This document (including any exhibits or
valid written amendments) contains the entire agreement among the parties and
supersedes any prior understandings or agreements among them respecting its
subject matter. All exhibits are
-8-
<PAGE> 9
expressly made a part of this Agreement. There are no representations,
arrangements, understandings, or agreements, oral or written, among the parties
relating to the subject matter of this Agreement, except as fully expressed in
this document.
7.5 Amendments. No amendments, changes, alterations,
modifications, additions, or qualifications to the terms of this Agreement may
be made or be binding unless they are made in writing and are agreed to by all
of the parties to this Agreement.
7.6 Successors in Interest. Except as otherwise provided in this
Agreement, all provisions of this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by and against the respective heirs, executors,
administrators, personal representatives, successors and assigns of each party.
Each party agrees for himself and his heirs, executors, administrators, personal
representatives, successors and assigns to execute any instruments in writing
which may be necessary or proper in carrying out the purposes of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
MPW INDUSTRIAL SERVICES GROUP, INC.
By:
- ----------------------------- --------------------------------
Ira O. Kane (Name) (Title)
-9-
<PAGE> 1
EXHIBIT 21
MPW INDUSTRIAL SERVICES GROUP, INC.
LIST OF SUBSIDIARIES(1)
-----------------------
JURISDICTION OF
NAME ORGANIZATION
---- ------------
Aquatech Environmental, Inc. Michigan
ESI International, Inc. Ohio
ESI North, Limited Ohio
MPW Industrial Services, Inc. Ohio
MPW Management Services Corp. Ohio
MPW Industrial Services, Ltd. Canada
MPW Industrial, L.L.C. of V.C. Mexico
Weston Engineering, Inc. Ohio
- -------------------
1 This Exhibit 21 to the Registration Statement sets forth the names of
all of the entities expected to be subsidiaries of MPW Industrial
Services Group, Inc. at the time such Registration Statement becomes
effective.
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated
September 30, 1997 (except for Note 14 as to which the date is October 31, 1997)
in Amendment No. 2 to the Registration Statement (Form S-1 No. 333-36887) and
related Prospectus of MPW Industrial Services Group, Inc. for the registration
of 4,312,500 shares of its common stock.
Our audit also included the financial statement schedule of MPW Industrial
Services Group, Inc. listed in Item 16(b). This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. 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 set forth
therein.
ERNST & YOUNG LLP
Columbus, Ohio
November 7, 1997
<PAGE> 1
EXHIBIT 23(d)
CONSENT OF PETE A. KLISARES
In reference to the Registration Statement on Form S-1 and the related
Prospectus of MPW Industrial Services Group, Inc. (File No. 333-36887), I hereby
consent to the reference to me under the caption "MANAGEMENT -- Directors and
Executive Officers" of such Registration Statement and confirm that I have
agreed to join the Board of Directors of MPW Industrial Services Group, Inc.
upon the consummation of the offering contemplated by such Registration
Statement.
/s/ Pete A. Klisares
------------------------------------
Pete A. Klisares
Columbus, Ohio
November 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MPW
INDUSTRIAL SERVICES GROUP, INC. FORM S-1 FOR THE THREE MONTHS ENDED SEPTEMBER
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 532
<SECURITIES> 0
<RECEIVABLES> 15,789
<ALLOWANCES> 715
<INVENTORY> 3,353
<CURRENT-ASSETS> 20,458
<PP&E> 51,412
<DEPRECIATION> 28,293
<TOTAL-ASSETS> 46,438
<CURRENT-LIABILITIES> 11,224
<BONDS> 12,096
00
0
<COMMON> 62
<OTHER-SE> 17,626
<TOTAL-LIABILITY-AND-EQUITY> 46,438
<SALES> 21,865
<TOTAL-REVENUES> 21,865
<CGS> 14,380
<TOTAL-COSTS> 18,951
<OTHER-EXPENSES> 99
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<INTEREST-EXPENSE> 335
<INCOME-PRETAX> 2,480
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