<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1997
REGISTRATION NO. 333-36887
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
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)
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Ohio 7349 31-1567260
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) NO.)
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:
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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 18, 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. Approximately $17.6 million of
the net proceeds of the Offering will be received by the existing shareholders
of the Company. See "Use of Proceeds." 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.
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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
cleaning and facilities support services in the Midwest and Southeast focused on
technology-based industrial services, including 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, 61.7% 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.
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.
3
<PAGE> 5
THE OFFERING
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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 contributed their shares of Industrial to 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)
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<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......................... 10,738 10,738 10,738
</TABLE>
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SEPTEMBER 30, 1997
-------------------------
PRO FORMA
ACTUAL AS ADJUSTED (6)
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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>
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(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 3,741,794 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 45% 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
61.7% of the outstanding Common Stock (approximately 58.4% 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. Of the approximate $17.6
million of net proceeds to be received by existing Shareholders as repayment of
the AAA Notes, approximately $13.8 million, $2.1 million and $1.7 million will
be received by Monte R. Black, Susan K. Black and The Monte R. Black and Susan
K. Black 1994 Irrevocable Trust, respectively. 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 the fiscal year presented (July 1, 1996) and carried forward
through the interim period presented (September 30, 1997). 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>
THREE MONTHS ENDED SEPTEMBER 30,
YEAR ENDED JUNE 30, 1997 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)........................................ 10,738 10,738
</TABLE>
14
<PAGE> 16
<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(4) 63 37 100
Additional paid-in capital....................... 837 2,924(2) 2,022 34,238 36,260
477(4)
200(10)
(2,416)(12)
Retained earnings................................ 16,789 3,260(8) 1,265 -- 1,265
(21,200)(11)
2,416(12)
------- -------- ------- -------- -------
Total equity....................................... 17,688 (14,338) 3,350 34,275 37,625
------- -------- ------- -------- -------
Total liabilities and equity....................... $ 46,438 $ (2,253) $44,185 $ 3,699 $47,884
======= ======== ======= ======== =======
</TABLE>
- ---------------
(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 3,741,794 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.
15
<PAGE> 17
(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 reclassification of undistributed AAA.
(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........ 10,738 10,738 10,738 10,738 10,738
</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 $2.5 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
cleaning and facilities support services in the Midwest and Southeast focused on
technology-based industrial services, including 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.
23
<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 21 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")
25
<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
26
<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
acquisitions of Weston and 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.
27
<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 900 to 37,000 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
29
<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
45% 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 wastestreams. 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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<PAGE> 32
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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<PAGE> 33
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, Treasurer and Assistant Secretary
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)... 49 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 and Treasurer and Assistant Secretary since November 1997. 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,
chief executive and a director 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. Mr. Klisares also serves as a
director of Worthington Industries, Dominion Homes, Inc., a residential
construction firm, and Huntington National Bank, N.A., a national banking
association. 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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<PAGE> 35
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, Treasurer and Assistant
Secretary
</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.
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<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.
In fiscal 1995, Honda of America, Mfg., of which director Scott N. Whitlock
was an executive vice president, made payments to the Company for services
rendered totaling approximately 8.6% of the Company's consolidated revenues for
fiscal 1995. Mr. Whitlock currently serves as of counsel to Vorys, Sater,
Seymour and Pease, a law firm that MPW has retained in each of fiscal 1995, 1996
and 1997.
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<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 98.5% 6,200,000 61.7%
Susan K. Black.................................. 620,000 9.8% 620,000 6.2%
Monte R. Black and Susan K. Black 1994
Irrevocable Trust............................. 503,784 8.0% 503,784 5.0%
Ira O. Kane (2)................................. 518,000 7.6% 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 98.6% 6,788,300 63.8%
</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 (i) 620,000 shares held by Mr. Black's wife, Susan K. Black, (ii)
an aggregate of 503,784 shares held in trust for Mr. Black's children, and
(iii) 588,300 shares subject to options to purchase Common Stock exercisable
until August 1, 2006. Mr. Black disclaims beneficial ownership of the shares
referred to in (i) and (ii).
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, 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.
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<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.
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<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 November 15, 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.................. 10,738 10,738 10,738
</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.
On November 15, 1997, the Company adopted 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.
II-2
<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 certain of the owners of ESI as follows: 40,000
shares to Mr. Barry Thiel, 24,100 shares to Mr. Jerry Broyles, 11, 900 shares to
Mr. Dan Jones and 10,000 shares to each of Mr. George Sullivan and Mr. Kelly
Six. 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 33,900 shares of Common
Stock of the Company to each of Messrs. Greenwood and Leonard 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*
</TABLE>
II-4
<PAGE> 70
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
----------------------------------------------------------------------------------
<C> <S>
4(d) Second Amendment to Loan Agreement by and between MPW 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*
10(m) Form of Stock Exchange Agreement**
10(n) Instrument of Contribution and Stock Power**
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*
23(e) Consent of Farkas Berkowitz & Company**
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.
II-5
<PAGE> 71
(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
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 18TH DAY OF NOVEMBER 1997.
MPW INDUSTRIAL SERVICES GROUP, INC.
By: /s/ BRAD A. MARTYN
------------------------------------
Brad A. Martyn
Corporate Controller, Treasurer 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 18, 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, Treasurer and
- --------------------------------------------- Assistant Secretary (Principal Accounting
Brad A. Martyn Officer)
* 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, Treasurer 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 18, 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*
10 (m) Form of Stock Exchange Agreement**
10 (n) Instrument of Contribution and Stock Power**
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*
23 (e) Consent of Farkas Berkowitz & Company**
24 Powers of Attorney*
27 Financial Data Schedule*
</TABLE>
- ---------------
* Previously filed
** Filed herewith
<PAGE> 1
MPW INDUSTRIAL SERVICES GROUP, INC.
3,750,000 SHARES OF COMMON STOCKO
UNDERWRITING AGREEMENT
_______________, 1997
RAYMOND JAMES & ASSOCIATES, INC.
ROBERT W. BAIRD & CO. INCORPORATED
As Representatives of the Several Underwriters
Identified in Schedule I Annexed Hereto
c/o Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, FL 33716
Ladies and Gentlemen:
SECTION 1. INTRODUCTORY. MPW Industrial Services Group, Inc., an Ohio
corporation (the "Company"), proposes to sell 3,750,000 shares (the "Firm
Shares") of common stock, no par value per share (the "Common Stock"), to the
several underwriters identified in Schedule I annexed hereto (the
"Underwriters"), who are acting severally and not jointly. In addition, the
Company has agreed to grant to the Underwriters an option to purchase up to
562,500 additional shares of Common Stock (the "Optional Shares") as provided in
section 5 hereof. The Firm Shares and, to the extent such option is exercised,
the Optional Shares are hereinafter collectively referred to as the "Shares."
You, as representatives of the Underwriters (the "Representatives"), have
advised the Company that the Underwriters propose to make a public offering of
their respective portions of the Shares as soon hereafter as in your judgment is
advisable after the Registration Statement hereinafter referred to becomes
effective and that the Shares initially will be offered upon the terms set forth
in the Prospectus (as defined below) and the public offering price of the Shares
initially will be $____ per share.
The Company hereby confirms its agreements with the Underwriters as
follows:
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL
SHAREHOLDER. The Company and Monte R. Black (the "Principal Shareholder"),
jointly and
- --------
o Plus an option to acquire up to 562,500 additional shares of Common Stock from
the Company to cover over-allotments.
<PAGE> 2
severally, represent and warrant to, and agree with, the several Underwriters,
and shall be deemed to represent and warrant to the several Underwriters on each
Closing Date (as hereinafter defined), that:
(a) Each of the Company and the subsidiaries of the Company that are
listed on Exhibit 21.1 of the Registration Statement (as hereinafter
defined) (individually, a "Subsidiary" and collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation and in good standing under the laws of its jurisdiction of
incorporation, with full corporate and other power and authority to own,
lease and operate its properties and to conduct its business as presently
conducted and described in the Prospectus (as hereinafter defined) and the
Registration Statement (as hereinafter defined); each of the Company and
the Subsidiaries is duly registered and qualified to do business as a
foreign corporation under the laws of, and is in good standing as such in,
each jurisdiction in which such registration or qualification is required,
except where the failure to so register or qualify would not have a
material adverse effect on the financial condition, net worth, or results
of operations of the Company and the Subsidiaries, taken as a whole
("Material Adverse Effect"); and no proceeding has been instituted in any
such jurisdiction revoking, limiting or curtailing, or seeking to revoke,
limit or curtail, such power and authority or qualification. Complete and
correct copies of the articles or certificate of incorporation or formation
or other organizational document, as applicable, and code of regulations or
by-laws, as applicable, in each case as amended or restated (the "Charter"
and "By-laws," respectively), of the Company and each of the Subsidiaries
as in effect on the date hereof have been delivered to the Representatives,
and no changes thereto will be made on or subsequent to the date hereof and
prior to each Closing Date.
(b) The shares of Common Stock issued and outstanding immediately
prior to the issuance and sale of the Shares as set forth in the Prospectus
have been duly authorized and validly issued, are fully paid and
nonassessable and conform to the description thereof contained in the
Prospectus and the Registration Statement. There are no preemptive,
preferential or, except as described in the Prospectus, other rights to
subscribe for or purchase any shares of Common Stock (including the
Shares), and no shares of Common Stock have been issued in violation of
such rights. The Shares to be issued and sold to the Underwriters have been
duly authorized and, when issued, delivered and paid for pursuant to this
Agreement, will be validly issued, fully paid and nonassessable and will
conform to the description thereof contained in the Prospectus and the
Registration Statement. The delivery of certificates for the Shares to be
issued and sold hereunder and payment therefor pursuant to the terms of
this Agreement will pass valid title to such Shares to the Underwriters,
free and clear of any lien, claim, encumbrance or defect in title. Except
as described in the Prospectus, there are no outstanding options, warrants
or other rights of any description, contractual or otherwise, entitling any
person to be issued any class of security by the Company or any Subsidiary,
and there are no holders of Common Stock or other securities of the Company
or any Subsidiary, or of securities that are convertible or exchangeable
- 2 -
<PAGE> 3
into Common Stock or other securities of the Company or any Subsidiary,
that have rights to the registration of such Common Stock or securities
under the Securities Act of 1933, as amended, and the regulations
thereunder (together, the "Act") or the securities laws or regulations of
any of the states (the "Blue Sky Laws").
(c) Except for the Subsidiaries, and as otherwise set forth in the
Prospectus, the Company has no subsidiaries and does not own any equity
interest in or control, directly or indirectly, any other corporation,
limited liability company, partnership, joint venture, association, trust
or other business organization. Except for the minority interest in
Aquatech Environmental, Inc. which the Company will own directly on the
First Closing Date (as hereinafter defined) or immediately thereafter, the
Company owns directly, or indirectly through wholly-owned Subsidiaries, all
of the issued and outstanding capital stock of each Subsidiary, free and
clear of any and all liens, claims, encumbrances or security interests, and
all such capital stock has been duly authorized and validly issued and is
fully paid and nonassessable. There are no outstanding options, warrants or
other rights of any description, contractual or otherwise, entitling any
person to subscribe for or purchase any shares of capital stock of any
Subsidiary.
(d) The Company has full corporate power and authority to enter into
and perform this Agreement, and the execution and delivery by the Company
of this Agreement and the performance by the Company of its obligations
hereunder and the consummation of the transactions described herein, have
been duly authorized with respect to the Company by all necessary corporate
action and will not: (i) violate any provisions of the Charter or By-laws
of the Company or any Subsidiary; (ii) violate any provisions of, or result
in the breach, modification or termination of, or constitute a default
under, any provision of any agreement, lease, franchise, license,
indenture, permit, mortgage, deed of trust, evidence of indebtedness or
other instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary, or any property owned or leased by the
Company or any Subsidiary, may be bound or affected; (iii) violate any
statute, ordinance, rule or regulation applicable to the Company or any
Subsidiary, or order or decree of any court, regulatory or governmental
body, arbitrator, administrative agency or instrumentality of the United
States or other country or jurisdiction having jurisdiction over the
Company or any Subsidiary; or (iv) result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
or any Subsidiary. No consent, approval, authorization or other order of
any court, regulatory or governmental body, arbitrator, administrative
agency or instrumentality of the United States or other country or
jurisdiction is required for the execution and delivery of this Agreement
by the Company, the performance of its obligations hereunder or the
consummation of the transactions contemplated hereby, except for compliance
with the Act, the Securities Exchange Act of 1934, as amended, and the
regulations thereunder (together, the "Exchange Act"), the Blue Sky Laws
applicable to the public offering of the Shares by the several Underwriters
and the clearance of such offering and the underwriting arrangements
evidenced hereby with the National Association of Securities Dealers, Inc.
(the "NASD"). This Agreement has been duly executed and delivered by and on
behalf of the Company and is a valid and binding
- 3 -
<PAGE> 4
agreement of the Company enforceable against the Company in accordance with
its terms subject to bankruptcy, insolvency, and moratorium laws and other
principles of equity.
(e) A registration statement on Form S-1 (Reg. No. 333-36887) with
respect to the Shares, including a preliminary form of prospectus, has been
prepared by the Company in conformity with the requirements of the Act and
has been filed with the Securities and Exchange Commission (the
"Commission"). Such registration statement, as finally amended and revised
at the time such registration statement was or is declared effective by the
Commission (including the information contained in the form of final
prospectus, if any, filed with the Commission pursuant to Rule 424(b) and
Rule 430A under the Act and deemed to be part of the registration statement
if the registration statement has been declared effective pursuant to Rule
430A(b)) and as thereafter amended by post-effective amendment, if any, is
herein referred to as the "Registration Statement." The related final
prospectus in the form first filed with the Commission pursuant to Rule
424(b) or, if no such filing is required, as included in the Registration
Statement, or any supplement thereto, is herein referred to as the
"Prospectus." The prospectus subject to completion in the form included in
the Registration Statement at the time of the initial filing of the
Registration Statement with the Commission, and each such prospectus as
amended from time to time until the date of the Prospectus, is referred to
herein as the "Preliminary Prospectus." The Company has prepared and filed
such amendments to the Registration Statement since its initial filing with
the Commission, if any, as may have been required to the date hereof, and
will file such additional amendments thereto as may hereafter be required.
There have been delivered to each Representative one signed copy of the
Registration Statement and each amendment thereto, if any, together with
one copy of each exhibit filed therewith, and such number of conformed
copies for each of the Underwriters of the Registration Statement and each
amendment thereto, if any (but without exhibits), and of each Preliminary
Prospectus and of the Prospectus as the Representatives have requested.
(f) Neither the Commission nor any state securities commission has
issued any order preventing or suspending the use of any Preliminary
Prospectus, nor, to the knowledge of the Company, has any proceedings for
that purpose been initiated or threatened, and each Preliminary Prospectus
filed with the Commission as part of the Registration Statement as
originally filed or as part of any amendment or supplement thereto complied
when so filed with the requirements of the Act and, as of its date, did not
include any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading. As of the effective date of the Registration
Statement, and at all times subsequent thereto up to each Closing Date, the
Registration Statement and the Prospectus contained or will contain all
statements that are required to be stated therein in accordance with the
Act and conformed or will conform in all respects to the requirements of
the Act, and neither the Registration Statement nor the Prospectus included
or will include any untrue statement of a material fact or omitted or will
omit to state a material fact required to be stated therein or necessary to
make the statements, therein not misleading other than the information
described in Section 4 of this Agreement. Neither
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<PAGE> 5
the Company, nor any person that controls, is controlled by (including the
Subsidiaries) or is under common control with the Company, has distributed
or will distribute prior to each Closing Date any offering material in
connection with the offering and sale of the Shares other than a
Preliminary Prospectus, the Prospectus, the Registration Statement or other
materials permitted by the Act and provided to the Representatives.
(g) Ernst & Young LLP, which has expressed its opinion with respect to
the audited consolidated financial statements and schedules filed with the
Commission and included as a part of each Preliminary Prospectus, the
Prospectus or the Registration Statement are independent accountants as
required by the Act.
(h) The consolidated financial statements and the related notes
thereto included in each of the Preliminary Prospectus, the Prospectus and
the Registration Statement present fairly the financial position, results
of operations and cash flows of the Company as of their respective dates or
for the respective periods covered thereby, all in conformity with
generally accepted accounting principles consistently applied throughout
the periods involved. The pro forma financial information and related notes
thereto included in each of the Preliminary Prospectus, the Prospectus, and
the Registration Statement have been prepared in accordance with the
applicable requirements of the Act, are all in conformity with generally
accepted accounting principles, include all adjustments necessary to
present fairly the pro forma financial condition and results of operations
at the respective dates and for the respective periods indicated and are
based upon good faith estimates and assumptions believed by the Company to
be reasonable at the time made, on the date hereof, on the First Closing
Date (as hereinafter defined), and the Second Closing Date (as hereinafter
defined), if any. The financial statement schedules, if any, included in
the Registration Statement present fairly the information required to be
stated therein on a basis consistent with the consolidated financial
statements of the Company contained therein. The Company had an outstanding
capitalization as set forth in the Registration Statement and under
"Capitalization" in the Prospectus as of the date indicated therein, and
there has been no material change thereto since such date except as
disclosed in the Prospectus. The financial and statistical information and
data relating to the Company in each Preliminary Prospectus, the Prospectus
and the Registration Statement are accurately presented and prepared on a
basis consistent with the books and records of the Company. The
consolidated financial statements and schedules and the related notes
thereto included in each Preliminary Prospectus, the Prospectus or the
Registration Statement are the only such financial statements and schedules
required under the Act to be set forth therein.
(i) Neither the Company nor any Subsidiary is in violation or in
breach of: (i) its respective Charter or By-laws; (ii) any statute,
ordinance, order, rule or regulation applicable to the Company or such
Subsidiary; (iii) any order or decree of any court, regulatory body,
arbitrator, administrative agency or other instrumentality of the United
States or other country or jurisdiction having jurisdiction over the
Company or such Subsidiary; or (iv) any provision of any agreement, lease,
franchise, license, indenture, permit, mortgage, deed of
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<PAGE> 6
trust, evidence of indebtedness or other instrument to which the Company or
such Subsidiary is a party or by which any property owned or leased by the
Company or such Subsidiary is bound or affected, except, in the cases of
clauses (ii) and (iv) above, for such violations or breaches that would not
have a Material Adverse Effect. Neither the Company nor any Subsidiary has
received notice of any material violation of any applicable statute,
ordinance, order, rule or regulation applicable to the Company or any
Subsidiary. The Company and each Subsidiary have obtained and hold, and are
in compliance with, all material permits, certificates, licenses,
approvals, registrations, franchises, consents and authorizations of
governmental or regulatory authorities required under all laws, rules and
regulations in connection with their businesses (hereinafter "permit" or
"permits"), and all of such permits are in full force and effect; and the
Company and each Subsidiary have fulfilled and performed all of their
respective obligations with respect to each such permit and no event has
occurred which would result in, or after notice or lapse of time would
result in, revocation or termination of any such permit or result in any
other impairment of the rights of the holder of such permit. Neither the
Company nor any Subsidiary is or has been (by virtue of any action,
omission to act, contract to which it is a party or other occurrence) in
material violation of any applicable foreign, federal, state, municipal or
local statutes, laws, ordinances, rules, regulations or orders (including
those relating to environmental protection, occupational safety and health
and equal employment practices) heretofore or currently in effect.
(j) There are no legal or governmental proceedings or investigations
pending or, to the knowledge of the Company, threatened to which the
Company or any Subsidiary is or may be a party or to which any property
owned or leased by the Company or any Subsidiary is or may be subject,
including, without limitation, any such proceedings that are related to
environmental or employment discrimination matters, which are required to
be described in the Registration Statement or the Prospectus which are not
so described, or which question the validity of this Agreement or any
action taken or to be taken pursuant hereto. Except as described in the
Registration Statement or the Prospectus, neither the Company nor any
Subsidiary: (i) is in violation of any statute, ordinance, rule or
regulation, or any decision, order or decree of any court, regulatory body,
arbitrator, administrative agency or other instrumentality of the United
States or other country or jurisdiction having jurisdiction over the
Company or such Subsidiary relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration
of the environmental or human exposure to hazardous or toxic substances
(collectively, "environmental laws"); (ii) owns or operates any real
property contaminated with any substance that is subject to any
environmental laws; (iii) is liable for any off-site disposal or
contamination pursuant to any environmental laws; or (iv) is subject to any
claim relating to any environmental laws, which violation, contamination,
liability or claim could have a Material Adverse Effect.
(k) There is no transaction, relationship, obligation, agreement or
other document required to be described in the Registration Statement or
the Prospectus or to be filed or deemed to be filed as an exhibit to the
Registration Statement by the Act, which has not
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<PAGE> 7
been described or filed as required. All contracts or agreements described
in the Registration Statement or the Prospectus or filed as an exhibit to
the Registration Statement to which the Company or any Subsidiary is a
party have been duly authorized, executed and delivered by the Company or
such Subsidiary, constitute valid and binding agreements of the Company or
such Subsidiary, and are enforceable by and against the Company or such
Subsidiary, in accordance with the respective terms thereof, subject to
bankruptcy, insolvency, and moratorium laws and other principles of equity.
(l) The Company or a Subsidiary has good and valid title to all
property and assets reflected as owned by the Company or such Subsidiary in
the Company's consolidated financial statements included in the
Registration Statement (or elsewhere in the Registration Statement or the
Prospectus), free and clear of all material liens, claims, mortgages,
security interests or other encumbrance of any kind or nature whatsoever,
except those, if any, reflected in such financial statements (or elsewhere
in the Registration Statement or the Prospectus). All property (real and
personal) held or used by the Company or a Subsidiary under leases,
licenses, franchises or other agreements is held by the Company or such
Subsidiary under valid, subsisting, binding and enforceable leases,
franchises, licenses or other agreements.
(m) Neither the Company nor any person that controls, is controlled by
(including the Subsidiaries) or is under common control with the Company
has taken or will take, directly or indirectly, any action designed to
cause or result in, or which constituted, or which could cause or result
in, stabilization or manipulation, under the Exchange Act or otherwise, of
the price of any security of the Company to facilitate the sale or resale
of the Common Stock.
(n) Except as described in the Registration Statement or the
Prospectus, since the respective dates as of which information is given in
the Registration Statement or the Prospectus and prior to each Closing
Date: (i) neither the Company nor any Subsidiary has or will have incurred
any liability or obligation, direct or contingent, or entered into any
transaction, that is material to the Company, except as in the ordinary
course of business; (ii) the Company has not and will not have paid or
declared any dividend or other distribution with respect to its capital
stock and neither the Company nor any Subsidiary is or will be delinquent
in the payment of principal or interest on any outstanding debt obligation;
and (iii) there has not been and will not have been any change in the
capital stock, any material change in the indebtedness of the Company or
any Subsidiary, or any change or development involving or which could be
expected to involve, a Material Adverse Effect, whether or not arising from
transactions in the ordinary course of business.
(o) Neither the Company nor any person that controls, is controlled by
(including the Subsidiaries) or is under common control with the Company
has, directly or indirectly: (i) made any unlawful contribution to any
candidate for political office, or failed to disclose fully any
contribution in violation of law; or (ii) made any payment to any federal,
state or
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<PAGE> 8
foreign governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof or
applicable foreign jurisdictions.
(p) The Company or a Subsidiary owns or possesses adequate rights to
use all patents, patent applications, trademarks, service marks, trade
names, trademark registrations, service mark registrations, copyrights and
licenses presently used in or necessary for the conduct of its business or
ownership of its properties, and to the knowledge of the Company, neither
the Company nor any Subsidiary has violated or infringed upon the rights of
others, or received any notice of conflict with the asserted rights of
others, in respect thereof.
(q) The Company or a Subsidiary has in place and effective such
policies of insurance, with limits of liability in such amounts, as are
normal and prudent in the ordinary course of the business of the Company
and its Subsidiaries.
(r) No labor dispute with the employees of the Company or any
Subsidiary exists or, to the knowledge of the Company, is imminent, and,
other than the Maintenance Agreement for Specialized Plant Services between
the International Brotherhood of Painters and Allied Trades, AFL-CIO
Painters District Council No. 22 and the employer, Aquatech Environmental,
Inc., neither the Company nor any Subsidiary is a party to any collective
bargaining agreement and, to the knowledge of the Company, no union
organizational attempts are pending. There has been no change in the
relationship of the Company or any Subsidiary with any of its principal
suppliers, manufacturers, contractors or customers resulting in or that
could result in a Material Adverse Effect.
(s) Neither the Company nor any Subsidiary is an "investment company",
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company", as such terms are defined in the Investment Company
Act of 1940, as amended.
(t) All federal, state and local tax returns required to be filed by
or on behalf of the Company or any Subsidiary have been filed (or are the
subject of valid extension) with the appropriate federal, state and local
authorities (except where the failure to file would not have a Material
Adverse Effect on the Company and the Subsidiaries, taken as a whole), and
all such tax returns, as filed, are accurate in all material respects; all
federal, state and local taxes (including estimated tax payments) required
to be shown on all such tax returns or claimed to be due from or with
respect to the business of the Company or such Subsidiary have been paid or
reflected as a liability on the financial statements of the Company or such
Subsidiary for appropriate periods; all deficiencies asserted as a result
of any federal, state or local tax audits have been paid or finally
settled, and no issue has been raised in any such audit which, by
application of the same or similar principles, reasonably could be expected
to result in a proposed deficiency for any other period not so audited; to
the knowledge of the Company, no state of facts exist or has existed which
would constitute grounds for the assessment of any material tax liability
with respect to the periods which have not been
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<PAGE> 9
audited by appropriate federal, state or local authorities; there are no
outstanding agreements or waivers extending the statutory period of
limitation applicable to any federal, state or local tax return of any
period; and neither the Company nor any Subsidiary has ever been a member
of an affiliated group of corporations filing consolidated federal income
tax returns, other than a group of which the Company is the common parent.
A valid election with respect to the taxation of MPW Industrial Service,
Inc. under Subchapter S of the Internal Revenue Code of 1986, as amended,
has been continuously in effect with respect to the Company from December
31, 1986, through October 30, 1997.
(u) Except for the Company's group health, life, disability or other
welfare plan and its contributory or noncontributory defined contribution
retirement plan and defined benefit retirement plans listed on a schedule
attached hereto (collectively, the "Plans"), neither the Company nor any
Subsidiary is a participating employer or plan sponsor with respect to any
employee pension benefit plan as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any
employee welfare benefit plan as defined in Section 3(l) of ERISA,
including, without limitation, any multiemployer welfare or pension plan.
With respect to the Plans, the Company is in substantial compliance with
all applicable regulations, including ERISA and the Code. With respect to
each defined benefit retirement plan, such plan does not have benefit
liabilities (as defined in Section 4001(a)(16) of ERISA) exceeding the
assets of the plan. The Company or the administrator of each of the Plans,
as the case may be, has timely filed the reports required to be filed by
ERISA and the Code in connection with the maintenance of the Plans, and no
facts, including, without limitation, any "reportable event" as defined by
ERISA and the regulations thereunder, exist in connection with the Plans
which, under applicable law, would constitute grounds for the termination
of any of the Plans by the Pension Benefit Guaranty Corporation or for the
appointment by the appropriate United States District Court of a trustee to
administer any of the Plans.
(v) The Company and each Subsidiary maintain a system of internal
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of consolidated financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorizations; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(w) None of the Company, any Subsidiary, any officer or director of
the Company or any Subsidiary, or any person who owns, of record or
beneficially, any class of securities issued by the Company is: (i) an
officer, director or partner of any brokerage firm, broker or dealer that
is a member of the NASD ("NASD Member"); or (ii) directly or indirectly, a
"person associated with" an NASD member or an "affiliate", of an NASD
member, as such
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<PAGE> 10
terms are used in the NASD Rules of Fair Practice, other than Tim Walsh who
is on the Board of Directors of Farm Family Financial Services, Inc., which
is a wholly-owned subsidiary of Farm Family Holdings, Inc., a member of the
NASD. In addition, neither the Company nor any Subsidiary has issued or
transferred any Common Stock, warrants, options or other securities, or any
other items of value, to any of the Underwriters or any "related person" of
any Underwriter, as such term is used in the NASD Rules of Fair Practice,
except as provided in this Agreement.
(x) The Company has prepared and filed with the Commission a
registration statement for the Common Stock pursuant to Section 12(g) of
the Exchange Act. Such registration statement either has been declared
effective by the Commission under the Exchange Act or will be declared
effective by the Commission prior to or concurrently with the commencement
of the public offering of the Shares. The Common Stock has been approved
for designation upon notice of issuance as a Nasdaq National Market
security on The Nasdaq Stock Market ("Nasdaq") concurrently with the
effectiveness of the Registration Statement.
(y) All offers and sales of the securities of the Company and each
Subsidiary prior to the date hereof were made in compliance with the Act
and all other applicable state and federal laws or regulations.
(z) The Company has obtained for the benefit of the Underwriters the
agreement, enforceable by Raymond James & Associates, Inc. ("Raymond
James"), of each of the officers, directors, and shareholders of the
Company, that for a period of 180 days after the date of the Prospectus,
such persons will not, without the prior written consent of Raymond James,
directly or indirectly, offer, sell, transfer, or pledge, contract to sell,
transfer or pledge, or cause or in any way permit to be sold, transferred,
pledged, or otherwise disposed of, any: (i) shares of Common Stock; (ii)
rights to purchase shares of Common Stock (including, without limitation,
shares of Common Stock that may be deemed to be beneficially owned by any
such shareholder in accordance with the applicable regulations of the
Commission and shares of Common Stock that may be issued upon the exercise
of a stock option, warrant or other convertible security); or (iii)
securities that are convertible or exchangeable into shares of Common
Stock.
A certificate signed by any officer of the Company and delivered to the
Representatives or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company and the Principal Shareholder to the
Underwriters as to the matters covered thereby. A certificate delivered by the
Company to its counsel for purposes of enabling such counsel to render the
opinion referred to in section 8(d) will also be furnished to the
Representatives and counsel for the Underwriters and shall be deemed to be
additional representations and warranties to the Underwriters by the Company as
to the matters covered thereby.
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<PAGE> 11
SECTION 3. REPRESENTATION OF UNDERWRITERS. The Representatives will act as
the representatives for the several Underwriters in connection with the public
offering of the Shares, and any action under or in respect of this Agreement
taken by the Representatives will be binding upon all of the Underwriters.
SECTION 4. INFORMATION FURNISHED BY THE UNDERWRITERS. The information set
forth in the last paragraph on the outside front cover page of the Prospectus
concerning the terms of the offering by the Underwriters, the paragraph on the
inside front cover page of the Prospectus relating to stabilization practices,
and the third, fifth and eighth paragraphs appearing under the caption
"Underwriting" in the Prospectus constitute all of the information furnished to
the Company by and on behalf of the Underwriters for use in connection with the
preparation of the Registration Statement and the Prospectus, as such
information is referred to in this Agreement.
SECTION 5. PURCHASE, SALE AND DELIVERY OF SHARES.
(a) On the basis of the representations, warranties and agreements
herein contained, and subject to the terms and conditions herein set forth,
the Company agrees to sell to the Underwriters identified in Schedule I
annexed hereto 3,750,000 Firm Shares, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company the number of Firm
Shares as hereinafter set forth at the price per share of $_____. The
obligation of each Underwriter to the Company shall be to purchase from the
Company that number of full Firm Shares which (as nearly as practicable in
full shares as determined by the Representatives) bears the same proportion
to the number of Firm Shares to be sold by the Company as the number of
shares set forth opposite the name of such Underwriter in Schedule I
annexed hereto bears to the total number of Firm Shares to be purchased by
all of the Underwriters under this Agreement.
(b) On the First Closing Date (as hereinafter defined), the Company
will deliver to the Representatives, at the offices of Raymond James &
Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida 33716, or
through the facilities of The Depository Trust Company, for the accounts of
the several Underwriters, certificates representing the Firm Shares to be
sold by them against payment in St. Petersburg, Florida, of the purchase
price therefor by wire transfer or certified or official bank check or
checks in New York Clearing House (next day) funds payable to the order of
the Company with respect to the Firm Shares being sold by the Company. As
referred to in this Agreement, the "First Closing Date" shall be on the
third full business day after the date of the Prospectus, at 9:00 a.m.
Eastern time, or at such other date or time not later than ten full
business days after the date of the Prospectus as the Representatives and
the Company may agree. The certificates for the Firm Shares to be so
delivered will be in denominations and registered in such names as the
Representatives request by notice to the Company, prior to the First
Closing Date, and such certificates will be made available for checking and
packaging at 9:00 a.m. Eastern time on the first full business day
preceding the First Closing Date at a location to be designated by the
Representatives.
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<PAGE> 12
(c) In addition, on the basis of the representations, warranties and
agreements herein contained, and subject to the terms and conditions herein
set forth, the Company hereby agrees to sell to the Underwriters, and the
Underwriters, severally and not jointly, shall have the right at any time
within 30 days after the date of the Prospectus to purchase up to 562,500
Optional Shares from the Company at the purchase price per share to be paid
for the Firm Shares, for use solely in covering any over-allotments made by
the Underwriters in the sale and distribution of the Firm Shares. The
option granted hereunder may be exercised upon notice by the
Representatives to the Company within 30 days after the date of the
Prospectus setting forth the aggregate number of Optional Shares to be
purchased by the Underwriters and sold by the Company, the names and
denominations in which the certificates for such shares are to be
registered and the date and place at which such certificates will be
delivered. Such date of delivery (the "Second Closing Date") shall be
determined by the Representatives, provided that the Second Closing Date,
which may be the same as the First Closing Date, shall not be earlier than
the First Closing Date and, if after the First Closing Date, shall not be
earlier than three nor later than ten full business days after delivery of
such notice to exercise. The number of Optional Shares to be sold by the
Company pursuant to such notice shall equal that number of full Optional
Shares which (as nearly as practicable in full shares as determined by the
Representatives) bears the same proportion to the number of Optional Shares
to be purchased by the Underwriters as the number of Firm Shares to be sold
by the Company under this Agreement bears to the total number of Firm
Shares. Certificates for the Optional Shares will be made available for
checking and packaging at 9:00 a.m. Eastern time, on the first full
business day preceding the Second Closing Date at a location to be
designated by the Representatives. The manner of payment for and delivery
of (including the denominations of and the names in which certificates are
to be registered) the Optional Shares shall be the same as for the Firm
Shares.
(d) The Representatives have advised the Company that each Underwriter
has authorized the Representatives to accept delivery of the Shares and to
make payment therefor. It is understood that the Representatives,
individually and not as representatives of the Underwriters, may (but shall
not be obligated to) make payment for any Shares to be purchased by any
Underwriter whose funds shall not have been received by the Representatives
by the First Closing Date or the Second Closing Date, as the case may be,
for the account of such Underwriter, but any such payment shall not relieve
such Underwriter from any obligation under this Agreement. As referred to
in this Agreement, "Closing Date" shall mean either the First Closing Date
or the Second Closing Date.
SECTION 6. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the several Underwriters that:
(a) If the effective time of the Registration Statement is not prior
to the execution and delivery of this Agreement, the Company will use its
best efforts to cause the Registration Statement to become effective at the
earliest possible time and, upon
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<PAGE> 13
notification from the Commission that the Registration Statement has become
effective, will so advise the Representatives and counsel to the
Underwriters promptly. If the effective time of the Registration Statement
is prior to the execution and delivery of this Agreement and any
information shall have been omitted therefrom in reliance upon Rule 430A,
the Company, at the earliest possible time, will furnish the
Representatives with a copy of the Prospectus to be filed by the Company
with the Commission to comply with Rule 424(b) and Rule 430A under the Act
and, if the Representatives do not object to the contents thereof, will
comply with such Rules. Upon compliance with such Rules, the Company will
so advise the Representatives promptly. The Company will advise the
Representatives and counsel to the Underwriters promptly of the issuance by
the Commission or any state securities commission of any stop order
suspending the effectiveness of the Registration Statement or of the
institution of any proceedings for that purpose, or of any notification of
the suspension of qualification of the Shares for sale in any jurisdiction
or the initiation or threatening of any proceedings for that purpose, and
will also advise the Representatives and counsel to the Underwriters
promptly of any request of the Commission for amendment or supplement of
the Registration Statement, of any Preliminary Prospectus or of the
Prospectus, or for additional information, and the Company will not file
any amendment or supplement to the Registration Statement (either before or
after it becomes effective), to any Preliminary Prospectus or to the
Prospectus (including a prospectus filed pursuant to Rule 424(b)) if the
Representatives have not been furnished with a copy prior to such filing
(with a reasonable opportunity to review such amendment or supplement) or
if the Representatives object to such filing.
(b) If, at any time when a prospectus relating to the Shares is
required by law to be delivered in connection with sales by an Underwriter
or dealer, any event occurs as a result of which the Prospectus would
include an untrue statement of a material fact, or would omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to supplement the
Prospectus to comply with the Act, the Company promptly will advise the
Representatives and counsel to the Underwriters and will promptly prepare
and file with the Commission, at its expense, an amendment to the
Registration Statement which will correct such statement or omission or an
amendment which will effect such compliance; and, if any Underwriter is
required to deliver a prospectus after the effective date of the
Registration Statement, the Company, upon request of the Representatives,
will prepare promptly such prospectus or prospectuses as may be necessary
to permit compliance with the requirements of Section 10(a)(3) of the Act.
The Company consents to the use, in accordance with the provisions of the
Act and with the Blue Sky Laws of the jurisdictions in which the Shares are
offered by the several Underwriters and by dealers, of each Preliminary
Prospectus.
(c) Neither the Company nor any Subsidiary will, prior to the Second
Closing Date, if any, incur any material liability or obligation, direct or
contingent, or enter into any material transaction, other than in the
ordinary course of business, or enter into any
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<PAGE> 14
transaction with an "affiliate," as defined in Rule 405 under the Act,
which is required to be described in the Prospectus pursuant to Item 404 of
Regulation S-K under the Act, except as described in the Prospectus.
(d) Neither the Company nor any Subsidiary will, prior to the Second
Closing Date, if any, acquire any of the Common Stock nor will the Company
declare or pay any dividend or make any other distribution upon its Common
Stock payable to shareholders of record on a date prior to the Second
Closing Date, if any, except as described in the Prospectus.
(e) The Company will make generally available to its security holders
and the Representatives an earnings statement as soon as practicable, but
in no event later than 60 days after the end of its fiscal quarter in which
the first anniversary of the effective date of the Registration Statement
occurs, covering a period of 12 consecutive calendar months beginning after
the effective date of the Registration Statement, which will satisfy the
provisions of the last paragraph of Section 11(a) of the Act and Rule 158
promulgated thereunder.
(f) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the Company
will furnish to the Representatives, at the expense of the Company, copies
of the Registration Statement, the Prospectus, any Preliminary Prospectus
and all amendments and supplements to any such documents in each case as
soon as available and in such quantities as the Representatives may
reasonably request.
(g) The Company will apply the net proceeds from the sale of the
Shares to be sold by it hereunder for the purposes set forth in the
Prospectus.
(h) The Company will cooperate with the Representatives and counsel to
the Underwriters in qualifying or registering the Shares for sale under the
Blue Sky Laws of such jurisdictions as the Representatives designates, and
will continue such qualifications or registrations in effect so long as
reasonably requested by the Representatives to effect the distribution of
the Shares. The Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any such
jurisdiction where it is not presently qualified or to take any action that
would subject it to service of process in any jurisdiction where it is not
now subject. In each jurisdiction where any of the Shares shall have been
qualified as provided above, the Company will file such reports and
statements as may be required to continue such qualification for a period
of the lesser of (i) one year from the date of the Prospectus or (ii) the
time necessary to complete the Offering in such state . The Company shall
promptly prepare and file with the Commission, from time to time, such
reports as may be required to be filed by the Act and the Exchange Act, and
the Company shall comply in all respects with the undertakings given by the
Company in connection with the qualification or registration of the Shares
for offering and sale under the Blue Sky Laws.
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<PAGE> 15
(i) During the period of three years from the date of the Prospectus,
the Company will furnish to each of the Representatives and to each of the
other Underwriters who may so request, as soon as available, each report,
statement or other document of the Company or its Board of Directors mailed
to its shareholders or filed with the Commission, and such other
information concerning the Company as the Representatives may reasonably
request.
(j) The Company shall deliver the requisite notice of issuance to
Nasdaq and shall take all necessary or appropriate action within its power
to maintain the authorization for trading of the Common Stock as a Nasdaq
National Market security, or take such action to authorize the Common Stock
for listing on the New York Stock Exchange or the American Stock Exchange,
if applicable, for a period of at least 36 months after the date of the
Prospectus.
(k) Except for the issuance and sale by the Company of Common Stock
upon exercise of presently existing outstanding stock options, the sale of
the Shares to be sold by the Company pursuant to this Agreement, and the
grant of employee stock options pursuant to the Company's 1997 Stock Option
Plan, a copy of which is filed as an exhibit to the Registration Statement,
and provided that none of such options shall be exercisable during the
180-day period herein described, the Company shall not, for a period of 180
days after the date of the Prospectus, without the prior written consent of
Raymond James, directly or indirectly, offer, sell or otherwise dispose of,
contract to sell or otherwise dispose of, or cause or in any way permit to
be sold or otherwise disposed of, any: (i) shares of Common Stock; (ii)
rights to purchase shares of Common Stock; or (iii) securities that are
convertible or exchangeable into shares of Common Stock.
(l) The Company will maintain a transfer agent and, if required by law
or the rules of The Nasdaq Stock Market or any national securities exchange
on which the Common Stock is listed, a registrar (which, if permitted by
applicable laws and rules, may be the same entity as the transfer agent)
for its Common Stock. The Company shall, as soon as practicable after the
date hereof, use its best efforts to obtain listing in Standard and Poor's
Stock Guide, or such other recognized securities manuals for which it may
qualify for listing, and the Company shall use its best efforts to maintain
such listings for at least five years after the First Closing Date.
(m) If the sale to the Underwriters of the Shares is not consummated
for any reason other than termination of this Agreement pursuant to section
11 hereof, without limiting any other rights the Underwriters may have, the
Company agrees to reimburse the Underwriters upon demand for all
out-of-pocket expenses (including reasonable fees and expenses of counsel
for the Underwriters), that shall have been incurred by the Underwriters in
connection with the proposed purchase and sale of the Shares, and the
provisions of sections 7 and 10 hereof shall at all times be effective and
apply.
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<PAGE> 16
(n) The Company will use its best efforts to comply or cause to be
complied with the conditions to the obligations of the Underwriters in
section 8 hereof.
SECTION 7. PAYMENT OF EXPENSES. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective, or
if this Agreement is terminated for any reason, the Company will pay the costs,
fees and expenses incurred in connection with the public offering of the Shares.
Such costs, fees and expenses to be paid by the Company include, without
limitation:
(a) All costs, fees and expenses (excluding the expenses incurred by
the Underwriters and the legal fees and disbursements of counsel for the
Underwriters, but including such fees and disbursements described in
subsection (b) of this section 7) incurred in connection with the
performance of the Company's obligations hereunder, including without
limiting the generality of the foregoing: the registration fees related to
the filing of the Registration Statement with the Commission; the fees and
expenses related to the quotation of the Shares on the Nasdaq Stock Market
or other national securities exchange; the fees and expenses of the
Company's counsel, accountants, transfer agent and registrar; the costs and
expenses incurred in connection with the preparation, printing, shipping
and delivery of the Registration Statement, each Preliminary Prospectus and
the Prospectus (including all exhibits and financial statements) and all
agreements and supplements provided for herein, this Agreement and any Blue
Sky memoranda, including, without limitation, shipping expenses via
overnight delivery and/or courier service to comply with applicable
prospectus delivery requirements; and the costs and expenses associated
with the production of materials related to, and travel expenses incurred
by the management of the Company in connection with, the various meetings
to be held between the Company's management and prospective investors.
(b) All registration fees and expenses, including legal fees and
disbursements of counsel for the Underwriters incurred in connection with
qualifying or registering all or any part of the Shares for offer and sale
under the Blue Sky Laws and the clearing of the public offering and the
underwriting arrangements evidenced hereby with the NASD.
(c) All fees and expenses related to printing of the certificates for
the Shares, and all transfer taxes, if any, with respect to the sale and
delivery of the Shares.
SECTION 8. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters under this Agreement shall be subject to
the accuracy of the representations and warranties on the part of the Company
and the Principal Shareholder herein set forth as of the date hereof and as of
each Closing Date, to the accuracy of the statements of the Company's officers
made pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, and to the following additional conditions, unless waived
in writing by the Representatives:
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<PAGE> 17
(a) The Registration Statement shall have been declared effective by
the Commission not later than 5:30 p.m., Washington, D.C. time, on the day
prior to the date of this Agreement, or such later time as shall have been
consented to by the Representatives; all filings required by Rules 424(b)
and 430A under the Act shall have been timely made; no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the Commission or any state securities commission nor, to the
knowledge of the Company or the Principal Shareholder, shall any
proceedings for that purpose have been initiated or threatened; and any
request of the Commission or any state securities commission for inclusion
of additional information in the Registration Statement, or otherwise,
shall have been complied with to the satisfaction of the Representatives.
(b) Since the dates as of which information is given in the
Registration Statement:
(i) there shall not have occurred any change or development
involving, or which could be expected to involve, a Material Adverse
Effect, whether or not arising from transactions in the ordinary
course of business; and
(ii) the Company shall not have sustained any material loss or
interference from any labor dispute, strike, fire, flood, windstorm,
accident or other calamity (whether or not insured) or from any court
or governmental action, order or decree,
the effect of which on the Company, in any such case described in clause
(i) or (ii) above, is in the opinion of the Representatives so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares on the terms and in the
manner contemplated in the Registration Statement and the Prospectus.
(c) The Representatives shall not have advised the Company that the
Registration Statement or the Prospectus contains an untrue statement of
fact that, in the opinion of the Representatives or counsel for the
Underwriters, is material, or omits to state a fact that, in the opinion of
the Representatives or such counsel, is material and is required to be
stated therein or necessary to make the statements therein not misleading.
(d) The Representatives shall have received an opinion of Jones, Day,
Reavis & Pogue, counsel for the Company addressed to the Representatives,
as the representatives of the Underwriters, and dated the First Closing
Date or the Second Closing Date, as the case may be, to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation and in good standing in its jurisdiction of
incorporation, with full corporate power and authority to own, lease
and operate its properties and conduct its business as presently
conducted and as described in the Prospectus and the
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<PAGE> 18
Registration Statement; the Company is not registered and qualified to
do business as a foreign corporation under the laws of any
jurisdiction;
(ii) The authorized capital stock of the Company consists of
30,000,000 shares of Common Stock, no par value per share, and
5,000,000 shares of Preferred Stock, par value $0.01 per share, and
all such stock conforms as to legal matters to the descriptions
thereof in the "Description of Capital Stock" in the Prospectus and
the Registration Statement;
(iii) The issued and outstanding shares of capital stock of the
Company immediately prior to the issuance and sale of the Shares to be
sold by the Company hereunder have been duly authorized and validly
issued, are fully paid and nonassessable, and there are no statutory
preemptive rights to subscribe for or purchase any shares of capital
stock of the Company;
(iv) Except for the Subsidiaries, the Company has no
subsidiaries, and the Company does not own any equity interest in or
control, directly or indirectly, any other corporation, limited
liability company, partnership, joint venture, association, trust or
other business organization except as described in the Prospectus and
the Registration Statement; each of MPW Industrial Services, Inc., MPW
Management Services Corp., Weston Engineering, Inc., Aquatech
Environmental, Inc., ESI International, Inc., and ESI North Limited
(collectively, the "Significant Subsidiaries" and individually, a
"Significant Subsidiary") has been duly incorporated and is validly
existing and in good standing under the laws of its jurisdiction of
incorporation, with full power and authority to own, lease and operate
its properties and to conduct its business as described in the
Prospectus and the Registration Statement; each Significant Subsidiary
is duly registered or qualified to do business as a foreign
corporation under the laws of, and is in good standing as such in, the
jurisdictions set forth in Attachment 1 to such opinion; the issued
and outstanding shares of the capital stock of each Subsidiary have
been duly authorized and validly issued, are fully paid and
nonassessable and there are no statutory preemptive rights to
subscribe for or purchase any shares of capital stock of any
Significant Subsidiary; the Company owns directly or indirectly and,
to such counsel's knowledge, beneficially all of the issued and
outstanding capital stock of each Subsidiary, free and clear of any
and all liens, claims, encumbrances and security interests;
(v) The certificates for the Shares to be delivered hereunder
conform in all material respects to the requirements of applicable
law; and when duly countersigned by the Company's transfer agent, and
delivered to the Representatives or upon the order of the
Representatives against payment of the agreed consideration therefor
in accordance with the provisions of this Agreement, the Shares to be
sold by the Company represented thereby will be duly authorized and
validly issued,
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<PAGE> 19
fully paid and nonassessable, and free of any preemptive rights to
subscribe for or purchase shares of Common Stock;
(vi) The Registration Statement has become effective under the
Act, and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been initiated or are
threatened under the Act or any Blue Sky Laws; the Registration
Statement and the Prospectus and any amendment or supplement thereto
(except for the financial statements and other statistical or
financial data included therein as to which such counsel need express
no opinion) comply as to form in all material respects with the
requirements of the Act; no facts have come to the attention of such
counsel which lead it to believe that either the Registration
Statement or the Prospectus or any amendment or supplement thereto
contains any untrue statement of a material fact or omitted or will
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus, as of the First Closing Date or the Second Closing Date,
as the case may be, contained any untrue statement of a material fact
or omitted or will omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made (except for the
financial statements and other financial and statistical data included
therein as to which such counsel need express no opinion); to the best
of such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened, including, without limitation, any
such proceedings that are related to environmental or employment
discrimination matters, required to be described in the Registration
Statement or the Prospectus which are not so described or which
question the validity of this Agreement or any action taken or to be
taken pursuant thereto, nor is there any transaction, relationship,
agreement, contract or other document of a character required to be
described in the Registration Statement or the Prospectus or to be
filed as an exhibit to the Registration Statement by the Act, which is
not described or filed as required;
(vii) The Company has full corporate power and authority to enter
into and perform this Agreement; the performance of the Company's
obligations hereunder and the consummation of the transactions
described herein have been duly authorized by the Company by all
necessary corporate action and this Agreement has been duly executed
and delivered by and on behalf of the Company, and is a legal, valid
and binding agreement of the Company enforceable against the Company
in accordance with its terms, except that rights to indemnity or
contribution may be limited by applicable law or the public policy
underlying such law and except as enforceability of this Agreement may
be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, and by equitable
principles limiting the right to specific performance or other
equitable relief; no consent, approval, authorization or other order
or decree of
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<PAGE> 20
any court, regulatory or governmental body, arbitrator, administrative
agency or other instrumentality of the United States or other country
or jurisdiction having jurisdiction over the Company is required for
the execution and delivery of this Agreement or the consummation of
the transactions contemplated by this Agreement (except for compliance
with the Act, the Exchange Act, applicable Blue Sky Laws and the
clearance of the underwriting arrangements by the NASD);
(viii) The execution, delivery and performance of this Agreement
by the Company will not: (A) violate any provisions of the Charter or
By-laws of the Company or any Subsidiary; (B) violate, to the best of
such counsel's knowledge, any provisions of, or result in the breach,
modification or termination of, or constitute a default under, any
agreement, lease, franchise, license, indenture, permit, mortgage,
deed of trust, other evidence of indebtedness or other instrument to
which the Company or any Subsidiary is a party or by which the Company
or such Subsidiary, or any of their respective owned or leased
property is bound, and which is filed as an exhibit to the
Registration Statement; or (C) violate, to the best of such counsel's
knowledge, any statute, ordinance, order, rule, decree or regulation
of any court, regulatory or governmental body, arbitrator,
administrative agency or other instrumentality of the United States or
other country or jurisdiction having jurisdiction over the Company or
any Subsidiary (assuming compliance with all applicable federal and
state securities laws);
(ix) To the best of such counsel's knowledge, except as described
in the Prospectus, there are no holders of Common Stock or other
securities of the Company, or securities that are convertible or
exchangeable into Common Stock or other securities of the Company,
that have rights to the registration of such securities under the Act
or any Blue Sky Laws;
(x) Neither the Company nor any Subsidiary is an "investment
company", an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company", as such terms are defined
in the Investment Company Act of 1940, as amended, and, upon its
receipt of any proceeds from the sale of the Shares, the Company will
not become or be deemed to be an "investment company" thereunder;
(xi) The description in the Registration Statement and the
Prospectus of statutes, law, regulations, legal and governmental
proceedings, and contracts and other legal documents described
therein, insofar as they purport to summarize or characterize certain
of the provisions thereof, fairly and correctly present, in all
material respects, the information required to be included therein by
the Act; and
In rendering such opinion, counsel for the Company may rely, to the extent
counsel deems such reliance proper, as to matters of fact upon certificates of
officers of the Company and of
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<PAGE> 21
governmental officials, and copies of all such certificates shall be furnished
to the Representatives and for the Underwriters on or before each Closing Date.
(e) The Representatives shall have received an opinion of
McDermott, Will & Emery, counsel for the Underwriters, dated the First
Closing Date or the Second Closing Date, as the case may be, with
respect to the issuance and sale of the Shares by the Company, the
Registration Statement and other related matters as the
Representatives may require, and the Company shall have furnished to
such counsel such documents and shall have exhibited to them such
papers and records as they request for the purpose of enabling them to
pass upon such matters.
(f) The Representatives shall have received on each Closing Date,
a certificate of Monte R. Black, Chief Executive Officer, and Ira O.
Kane, President and Chief Operating Officer, of the Company, to the
effect that:
(i) The representations and warranties of the Company and
the Principal Shareholder set forth in section 2 hereof are true
and correct as of the date of this Agreement and as of the date
of such certificate, and the Company has complied with all the
agreements and satisfied all the conditions to be performed or
satisfied by it at or prior to the date of such certificate;
(ii) The Commission has not issued an order preventing or
suspending the use of the Prospectus or any Preliminary
Prospectus or any amendment or supplement thereto; no stop order
suspending the effectiveness of the Registration Statement has
been issued; and to the knowledge of the respective signatories,
no proceedings for that purpose have been initiated or are
pending or contemplated under the Act or under the Blue Sky Laws
of any jurisdiction;
(iii) Each of the respective signatories has carefully
examined the Registration Statement and the Prospectus, and any
amendment or supplement thereto, and such documents contain all
statements required to be stated therein, and do not include any
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading, and since the date on
which the Registration Statement was initially filed, no event
has occurred that was required to be set forth in an amended or
supplemented prospectus or in an amendment to the Registration
Statement that has not been so set forth; and
(iv) Since the date on which the Registration Statement was
initially filed with the Commission, there shall not have
occurred any change or development involving, or which could be
expected to involve, a Material Adverse Effect, whether or not
arising from transactions in the ordinary course of business,
except as disclosed in the Prospectus and the Registration
Statement as heretofore amended or
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<PAGE> 22
(but only if the Representatives expressly consent thereto in
writing) as disclosed in an amendment or supplement thereto filed
with the Commission and delivered to the Representatives after
the execution of this Agreement; since such date and except as so
disclosed or in the ordinary course of business, the Company has
not incurred any liability or obligation, direct or indirect, or
entered into any transaction which is material to the Company;
since such date and except as so disclosed, there has not been
any change in the outstanding capital stock of the Company, or
any change that is material to the Company in the short-term debt
or long-term debt of the Company; since such date and except as
so disclosed, the Company has not acquired any of the Common
Stock or other capital stock of the Company nor has the Company
declared or paid any dividend, or made any other distribution,
upon its outstanding Common Stock payable to shareholders of
record on a date prior to such Closing Date; since such date and
except as so disclosed, the Company has not incurred any material
contingent obligations, and no material litigation is pending or
threatened against the Company; and, since such date and except
as so disclosed, the Company has not sustained any material loss
or interference from any strike, fire, flood, windstorm, accident
or other calamity (whether or not insured) or from any court or
governmental action, order or decree.
The delivery of the certificate provided for in this subsection (f) shall
be and constitute a representation and warranty of the Company as to the facts
required in the immediately foregoing clauses (i), (ii), (iii) and (iv) to be
set forth in said certificate.
(g) At the time this Agreement is executed and also on each
Closing Date, there shall be delivered to the Representatives a letter
addressed to the Representatives, as the representatives of the
Underwriters, from Ernst & Young LLP, the Company's independent
accountants, the first letter to be dated the date of this Agreement,
the second letter to be dated the First Closing Date and the third
letter (if applicable) to be dated the Second Closing Date, which
shall be in form and substance satisfactory to the Representatives and
shall contain information as of a date within five days of the date of
such letter. There shall not have been any change or decrease set
forth in any of the letters referred to in this subsection (g) which
makes it impracticable or inadvisable in the judgment of the
Representatives to proceed with the public offering or purchase of the
Shares as contemplated hereby.
(h) The Shares shall have been qualified or registered for sale
under the Blue Sky Laws of such jurisdictions as shall have been
specified by the Representatives, if any, the underwriting terms and
arrangements for the offering shall have been cleared by the NASD, and
the Common Stock shall have been designated for inclusion as a Nasdaq
National Market security on The Nasdaq Stock Market and shall have
been registered under the Exchange Act.
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<PAGE> 23
(i) Such further certificates and documents as the
Representatives may reasonably request (including certificates of
officers of the Company).
(j) Each of the directors, officers, and shareholders of the
Company shall have entered into the holdback agreements described in
Section 2(z) above.
(k) Each of the shareholders of the Company owning more than 5%
of the Common Stock of the Company shall have entered into the Tax
Indemnification Agreement with the Company in the form and substance
acceptable to the Underwriters.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to the
Representatives and to McDermott, Will & Emery, counsel for the Underwriters.
The Company shall furnish the Representatives with such manually signed or
conformed copies of such opinions, certificates, letters and documents as the
Representatives may reasonably request.
If any condition to the Underwriters' obligations hereunder to be satisfied
prior to or at either Closing Date is not so satisfied, this Agreement at the
election of the Representatives will terminate upon notification to the Company
without liability on the part of any Underwriter, including the Representatives,
the Company except for the provisions of section 6(n) hereof, the expenses to be
paid by the Company pursuant to section 7 hereof and except to the extent
provided in section 10 hereof.
SECTION 9. MAINTAIN EFFECTIVENESS OF REGISTRATION STATEMENT. The Company
will use its best efforts to prevent the issuance of any stop order suspending
the effectiveness of the Registration Statement, and, if such stop order is
issued, to obtain as soon as possible the lifting thereof.
SECTION 10. INDEMNIFICATION.
(a) The Company and the Principal Shareholder, jointly and severally
agree to indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of the Act or the
Exchange Act, from and against any losses, claims, damages, expenses,
liabilities or actions in respect thereof ("Claims"), joint or several, to
which such Underwriter or each such controlling person may become subject
under the Act, the Exchange Act, Blue Sky Laws or other federal or state
statutory laws or regulations, at common law or otherwise (including
payments made in settlement of any litigation), insofar as such Claims
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto, or in any application filed under any Blue Sky Law or other
document executed by the Company for that purpose or based upon written
information furnished by the Company and filed in any state or other
jurisdiction to qualify any or all of the Shares under the securities laws
thereof
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<PAGE> 24
(any such document, application or information being hereinafter called a
"Blue Sky Application") or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Company and the Principal Shareholder agree to reimburse each Underwriter
and each such controlling person for any legal fees or other expenses
incurred by such Underwriter or any such controlling person in connection
with investigating or defending any such Claim; provided, however, that the
Company and the Principal Shareholder will not be liable in any such case
to the extent that: (i) any such Claim arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus or supplement thereto or in any Blue Sky Application in
reliance upon and in conformity with the written information furnished to
the Company pursuant to section 4 of this Agreement; or (ii) such statement
or omission was contained or made in any Preliminary Prospectus and
corrected in the Prospectus and (1) any such Claim suffered or incurred by
any Underwriter (or any person who controls any Underwriter) resulted from
an action, claim or suit by any person who purchased Shares which are the
subject thereof from such Underwriter in the offering, and (2) such
Underwriter failed to deliver or provide a copy of the Prospectus to such
person at or prior to the confirmation of the sale of such Shares in any
case where such delivery is required by the Act, unless such failure was
due to failure by the Company to provide copies of the Prospectus to the
Underwriters as required by this Agreement. The indemnification obligations
of the Company and the Principal Shareholder as provided above are in
addition to and in no way limit any liabilities the Company and the
Principal Shareholder may otherwise have. Notwithstanding any provision of
this Section 10 to the contrary, the liability of the Principal Shareholder
to the Underwriters arising under this Section 10 shall not exceed $16
million.
(b) Each Underwriter, severally and not jointly, will indemnify and
hold harmless the Company, each of its directors and each of its officers
who signs the Registration Statement, and each person, if any, who controls
the Company within the meaning of the Act or the Exchange Act and the
Principal Shareholder against any Claim to which the Company, or any such
director, officer, controlling person or Principal Shareholder may become
subject under the Act, the Exchange Act, Blue Sky Laws or other federal or
state statutory laws or regulations, at common law or otherwise (including
payments made in settlement of any litigation, if such settlement is
effected with the written consent of such Underwriter and Raymond James),
insofar as such Claim arises out of or is based upon any untrue or alleged
untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or in any Blue Sky Application, or arises out of or is
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or in
any Blue Sky Application, in reliance solely upon
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<PAGE> 25
and in conformity with the written information furnished by the
Representatives to the Company pursuant to section 4 of this Agreement.
Each Underwriter will severally reimburse any legal fees or other expenses
incurred by the Company, or any such director, officer, controlling person
or Principal Shareholder in connection with investigating or defending any
such Claim, and from any and all Claims solely resulting from failure of an
Underwriter to deliver a Prospectus, if the person asserting such Claim
purchased Shares from such Underwriter and a copy of the Prospectus (as
then amended if the Company shall have furnished any amendments thereto)
was not sent or given by or on behalf of such Underwriter to such person,
if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended) would have cured the defect giving rise to such
Claim. The indemnification obligations of each Underwriter as provided
above are in addition to any liabilities any such Underwriter may otherwise
have.
(c) Promptly after receipt by an indemnified party under this section
of notice of the commencement of any action in respect of a Claim, such
indemnified party will, if a Claim in respect thereof is to be made against
an indemnifying party under this section, notify the indemnifying party in
writing of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve an indemnifying party from any
liability it may have to any indemnified party under this section or
otherwise except to the extent that the indemnifying party was prejudiced
by such failure to notify. In case any such action is brought against any
indemnified party, and such indemnified party notifies an indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate in and, to the extent that he, she or it may wish, jointly
with all other indemnifying parties, similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, if the defendants in any such action include both
the indemnified party and any indemnifying party and the indemnified party
shall, pursuant to written advice from counsel, have reasonably concluded
that there may be legal defenses available to the indemnified party and/or
other indemnified parties which are different from or additional to those
available to any indemnifying party, the indemnified party or parties shall
have the right to select separate counsel to assume such legal defenses and
to otherwise participate in the defense of such action on behalf of such
indemnified party or parties.
(d) Upon receipt of notice from the indemnifying party to such
indemnified party of the indemnifying party's election to assume the
defense of such action and upon approval by the indemnified party of
counsel selected by the indemnifying party, the indemnifying party will not
be liable to such indemnified party under this section for any legal fees
or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, unless:
(i) the indemnified party shall have employed separate counsel in
connection with the assumption of legal defenses in accordance with
the proviso to the last sentence of subsection (c) of this section (it
being understood, however, that
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<PAGE> 26
the indemnifying party shall not be liable for the legal fees and
expenses of more than one separate counsel, approved by Raymond James,
if one or more of the Underwriters or their controlling persons are
the indemnified parties);
(ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the indemnified
party's notice to the indemnifying party of commencement of the
action; or
(iii) the indemnifying party has authorized in writing the
employment of counsel at the expense of the indemnifying party.
(e) If the indemnification provided for in this section is unavailable
to or insufficient to hold harmless an indemnified party under subsection
(a) or (b) hereof in respect of any Claim referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall,
subject to the limitations hereinafter set forth, contribute to the amount
paid or payable by such indemnified party as a result of such Claim:
(i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, the Principal Shareholder, and the
Underwriters from the offering of the Shares; or
(ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i)
above, but also the relative fault of the Company, the Principal
Shareholder, and the Underwriters in connection with the statements or
omissions which resulted in such Claim, as well as any other relevant
equitable considerations.
The relative benefits received by each of the Company, the Principal
Shareholder and the Underwriters shall be deemed to be in such proportion so
that the Underwriters are responsible for that portion represented by the
percentage that the amount of the underwriting discounts and commissions per
share appearing on the cover page of the Prospectus bears to the public offering
price per share appearing thereon, and the Company and the Principal Shareholder
are responsible for the remaining portion. The relative fault of the Company,
the Principal Shareholder and the Underwriters shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Principal Shareholder or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the Claims referred to above shall be
deemed to include, subject to the limitations set forth in subsections (c) and
(d) of this section, any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim.
- 26 -
<PAGE> 27
(f) The Company, the Principal Shareholder and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this
section were determined by pro rata or per capita allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method or allocation which does not take into account the equitable
considerations referred to in subsection (d) of this section.
Notwithstanding the other provisions of this section, no Underwriter shall
be required to contribute any amount that is greater than the amount by
which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this section are
several in proportion to their respective underwriting commitments and not
joint.
SECTION 11. DEFAULT OF UNDERWRITERS. It shall be a condition to the
obligations of each Underwriter to purchase the Shares in the manner as
described herein, that, except as hereinafter provided in this section, each of
the Underwriters shall purchase and pay for all the Shares agreed to be
purchased by such Underwriter hereunder upon tender to the Representatives of
all such Shares in accordance with the terms hereof. If any Underwriter or
Underwriters default in their obligations to purchase Shares hereunder on either
the First Closing Date or the Second Closing Date and the aggregate number of
Shares which such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of Shares which the
Underwriters are obligated to purchase on such Closing Date, the Representatives
may make arrangements for the purchase of such Shares by other persons,
including any of the Underwriters, but if no such arrangements are made by such
Closing Date the nondefaulting Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the Shares
which such defaulting Underwriters agreed but failed to purchase on such Closing
Date. If any Underwriter or Underwriters so default and the aggregate number of
Shares with respect to which such default or defaults occur is greater than 10%
of the total number of Shares which the Underwriters are obligated to purchase
on such Closing Date, and arrangements satisfactory to the Representatives for
the purchase of such Shares by other persons are not made within 36 hours after
such default, this Agreement will terminate without liability on the part of any
nondefaulting Underwriter, the Company and the Principal Shareholder except for
the expenses to be paid by the Company pursuant to section 7 hereof and except
to the extent provided in section 10 hereof.
In the event that Shares to which a default relates are to be purchased by
the nondefaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First
Closing Date or the Second Closing Date, as the case may be, for not more than
seven business days in order that the necessary changes in the Registration
Statement, Prospectus and any other documents, as well as any other
arrangements, may be effected. As used
- 27 -
<PAGE> 28
in this Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
SECTION 12. EFFECTIVE DATE. This Agreement shall become effective upon (i)
the execution and delivery of this Agreement by the parties hereto and (ii)
release of notification of the effectiveness of the Registration Statement by
the Commission. Such execution and delivery shall include an executed copy of
this Agreement sent by facsimile transmission or other means of transmitting
written documents.
SECTION 13. TERMINATION. Without limiting the right to terminate this
Agreement pursuant to any other provision hereof, this Agreement may be
terminated by the Representatives prior to or on the First Closing Date and the
over-allotment option from the Company referred to in section 5 hereof, if
exercised, may be cancelled by the Representatives at any time prior to or on
the Second Closing Date, if in the judgment of the Representatives, payment for
and delivery of the Shares is rendered impracticable or inadvisable because:
(a) additional governmental restrictions, not in force and effect on
the date hereof, shall have been imposed upon trading in securities
generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or the American Stock Exchange,
or trading in securities generally shall have been suspended or materially
limited on either such exchange or on The Nasdaq Stock Market or a general
banking moratorium shall have been established by either federal or state
authorities in New York, Ohio, or Florida;
(b) any event shall have occurred or shall exist which makes untrue or
incorrect in any material respect any statement or information contained in
the Registration Statement or which is not reflected in the Registration
Statement but should be reflected therein to make the statements or
information contained therein not misleading in any material respect which
cannot be cured by an amendment thereto; or
(c) an outbreak or escalation of hostilities or other national or
international calamity or any substantial change in political, financial or
economic conditions shall have occurred or shall have accelerated to such
extent, in the judgment of the Representatives, as to have a material
adverse effect on the financial markets of the United States, or to make it
impracticable or inadvisable to proceed with completion of the sale of and
payment for the Shares as provided in this Agreement.
Any termination pursuant to this Section shall be without liability on the
part of any Underwriter to the Company and the Principal Shareholder, or on the
part of the Company and the Principal Shareholder to any Underwriter, except for
expenses to be paid by the Company pursuant to section 6 hereof or reimbursed by
the Company pursuant to section 6(n) hereof and except as to indemnification to
the extent provided in section 10 hereof.
- 28 -
<PAGE> 29
SECTION 14. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties, covenants and
other statements of the Company, of its officers or directors, of the Principal
Shareholder and of the several Underwriters set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter, the Principal Shareholder
or the Company or any of its or their partners, officers, directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Shares sold hereunder.
SECTION 15. NOTICES. All communications hereunder will be in writing and,
if sent to the Representatives, will be mailed, delivered, telecopied (with
receipt confirmed) or telegraphed and confirmed to Raymond James & Associates,
Inc. at 880 Carillon Parkway, St. Petersburg, Florida 33716, Attention: Thomas
W. Mullins, Senior Vice President, with a copy to Timothy R.M. Bryant,
McDermott, Will & Emery, 227 W. Monroe, Chicago, Illinois 60606, and if sent to
the Company or the Principal Shareholder, will be mailed, delivered, telecopied
(with receipt confirmed) or telegraphed and confirmed to the Company or the
Principal Shareholder, respectively at MPW Industrial Services Group, Inc., 9711
Lancaster Road, S.E., Hebron, Ohio, 43025, Attention: Ira O. Kane, with a copy
to Jones, Day, Reavis & Pogue, 41 South High Street, 19th Floor, Columbus, Ohio,
43215, Attention: Robert J. Gilker.
SECTION 16. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors, personal
representatives and assigns, and to the benefit of the officers and directors
and controlling persons referred to in section 10 hereof and no other person
will have any right or obligation hereunder. The term "successors" shall not
include any purchaser of the Shares as such from any of the Underwriters merely
by reason of such purchase.
SECTION 17. PARTIAL UNENFORCEABILITY. If any section, paragraph, clause or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph clause or provision hereof.
SECTION 18. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of Ohio
without reference to conflict of law principles thereunder. This Agreement may
be signed in various counterparts which together shall constitute one and the
same instrument, and shall be effective when at least one counterpart hereof
shall have been executed by or on behalf of each party hereto.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed duplicates hereof, whereupon it will
become a binding agreement among the Company, the Principal Shareholder and the
several Underwriters, including the Representatives, all in accordance with its
terms.
Very truly yours,
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<PAGE> 30
MPW INDUSTRIAL SERVICES GROUP, INC.
By:
--------------------------------
THE PRINCIPAL SHAREHOLDER:
- --------------------------
Monte R. Black
- 30 -
<PAGE> 31
The foregoing Underwriting
Agreement is hereby confirmed
and accepted as of the date
first above written.
RAYMOND JAMES & ASSOCIATES, INC.
ROBERT W. BAIRD & CO. INCORPORATED
By: RAYMOND JAMES & ASSOCIATES, INC.
Acting as Representatives of the several
Underwriters (including themselves) identified
in Schedule I annexed hereto.
By:
-----------------------------------
Authorized Representative
- 31 -
<PAGE> 32
MPW INDUSTRIAL SERVICES GROUP, INC.
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm Shares
Name of Underwriter to be Purchased
<S> <C>
Raymond James & Associates, Inc. . . . . . .
Robert W. Baird & Co. Incorporated. . . . . .
</TABLE>
---------------------
Total 3,750,000
- 32 -
<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 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> 1
EXHIBIT 5
November 18, 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 and, when issued and delivered to the Underwriters pursuant to the
Underwriting Agreement against payment of the consideration therefor as
provided therein, will be 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
directors, 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
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<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.
"NONEMPLOYEE DIRECTOR" means a member of the Board, who is
not also an employee of the Company or any of its subsidiaries on the date an
Option Right is granted to him or her pursuant to Section 4(b) of this Plan.
"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 or a
Nonemployee Director receiving an Option Right pursuant to Section 4(b) hereof.
"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.
(a) 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:
(i) Each grant shall specify the number of Common Shares to
which it pertains.
(ii) 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.
(iii) 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 (A) cash in the form of currency or check or
other cash equivalent acceptable to the Corporation, (B) 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, (C) 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(a)(iv) below, on such basis as the
Committee may determine in accordance with this Plan and (D) any combination of
the foregoing.
(iv) 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.
(v) 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.
(vi) Successive grants may be made to the same Participant
regardless of whether any Option Rights previously granted to such Participant
remain unexercised.
(vii) 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.
(viii) Option Rights granted under this Plan may be (A)
options that are intended to qualify under particular provisions of the Code,
including without limitation Incentive Stock Options, (B) options that are not
intended to so qualify or (C) combinations of the foregoing.
(ix) 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
(x) 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.
(b)(i) Notwithstanding the above, each director who is a
Nonemployee Director, is hereby granted, effective the close of business on the
first business day after (1) the date of the first annual meeting of
Shareholders occurring after the date of this Plan at which he or she is
elected a Director, an option to purchase 2,000 Common Shares, and (2) the date
of each subsequent annual meeting of shareholders at which he or she is elected
a Director, an option to purchase 1,000 Common Shares.
(ii) All options granted pursuant to Section 2(b)(i)
hereof shall be non-statutory options not intended to qualify under Section 422
of the Code and 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 such Nonemployee Director, and which agreement shall be in the form attached
hereto as Exhibit A.
(iii) The Option Price per Common Share shall be equal to
100% of the Market Value per Share as of the date such option is granted, shall
be exercisable in full one year following the date of grant and shall expire
ten years from the date of grant, unless terminated earlier in accordance with
the stock option agreement.
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.
-6-
<PAGE> 1
EXHIBIT 10(m)
FORM OF
STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement (the "Agreement"), by and between Robert G.
Greenwood, a Michigan resident ("Greenwood"), James C. Leonard, a Michigan
resident ("Leonard"), and MPW Industrial Services Group, Inc., an Ohio
corporation ("MPW"), is made on this _____ day of November, 1997.
W I T N E S S E T H :
WHEREAS, Greenwood and Leonard desire to sell to MPW the 43 shares and
43 shares, respectively, of Aquatech Environmental, Inc., a Michigan corporation
("Aquatech"), common stock without par value (the "Aquatech Shares"), which
constitute all issued and outstanding shares of capital stock of Aquatech owned
by them in exchange for shares of MPW common stock, without par value (the "MPW
Shares").
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1.
SALE OF AQUATECH SHARES AND PURCHASE OF MPW SHARES
1.1 Sale Consideration.
(a) Effective as of the consummation and closing of an
initial public offering ("IPO") by MPW (the "Closing Date") and subject to the
terms and conditions of this Agreement, Greenwood and Leonard hereby agree to
sell, assign, transfer and deliver to MPW and MPW hereby agrees to purchase from
Greenwood and Leonard the Aquatech Shares free and clear of all liens,
encumbrances, claims, options, calls, pledges and other agreements or
arrangements.
(b) In full consideration for the sale of the Aquatech Shares,
Greenwood and Leonard shall receive on the Closing Date certificates for MPW
Shares representing $339,000 and $339,000, respectively, in value of MPW Shares,
based on a per share price equal to the Per Share Price to Public disclosed on
the cover page of the final Prospectus used by MPW in connection with the IPO
(the "Share Consideration"), registered in Greenwood's and Leonard's names
accordingly. On the Closing Date, all MPW Shares and Aquatech Shares with duly
executed stock powers shall be delivered and distributed pursuant to the terms
and conditions of this Agreement.
1.2 Prior Agreements. Each of Greenwood and Leonard are a party to a
certain Amended and Restated Stock Grant and Employment Agreement, dated July 1,
1996, by and among Aquatech, MPW Industrial Services, Inc. and Greenwood and
Leonard, respectively (the "Employment
<PAGE> 2
Agreements"). The parties hereby expressly agree that (i) this Agreement
obviates and renders moot those portions of the Employment Agreements dealing
with or touching upon any aspect of ownership by Greenwood and Leonard of the
common stock of Aquatech (Sections 1 and 12 thereof), and (ii) the other
provisions of the Employment Agreements shall remain in full force and effect.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
2.1 Representation and Warranty of MPW. MPW represents and warrants
that as of the Closing Date, MPW Shares will be duly authorized, validly issued,
fully paid and nonassessable.
2.2 Representations and Warranties of Greenwood and Leonard. Each of
Greenwood and Leonard represents and warrants to MPW that as of the Closing
Date: (i) he is the record and beneficial owner of his respective Aquatech
Shares; (ii) he has good and valid title to his respective Aquatech Shares free
and clear of all liens, encumbrances and equities of whatever character, with
full power and authority to transfer, sell, exchange or otherwise dispose of
such shares as contemplated hereby; (iii) he holds the power and authority to
enter into this Agreement as required under applicable law; (iv) he is
purchasing the MPW Shares for investment purposes and not with a view to resale
and acknowledges that the MPW Shares are "restricted securities" within the
meaning of Rule 144 under the Securities Act of 1933, as amended (the "Act");
(v) has been given access to all information concerning, and an opportunity to
make all inquiries about, MPW and the MPW Shares necessary for him to make his
investment in the MPW Shares; and (vi) will resell the MPW Shares in accordance
with the Act or pursuant to an exemption from registration under the Act.
ARTICLE 3
MISCELLANEOUS
3.1 Notices. All notices, waivers and other communications required
or permitted to be given hereunder to any of the parties by any other party
shall be in writing and shall be delivered or sent by next day delivery service,
personal delivery, or registered or certified mail, postage prepaid, addressed
as follows:
(a) If to MPW, addressed to:
MPW Industrial Services, Inc.
9711 Lancaster Road, SE
PO Box 838
Hebron, OH 43025
-2-
<PAGE> 3
With a copy to:
Jones, Day, Reavis & Pogue
1900 Huntington Center
Columbus, Ohio 43215
Attention: Robert J. Gilker
(b) If to Greenwood, addressed to:
Robert G. Greenwood
Aquatech Environmental, Inc.
12400 Universal Drive
Taylor, Michigan 48180
(c) If to Leonard, addressed to:
James C. Leonard
Aquatech Environmental, Inc.
12400 Universal Drive
Taylor, Michigan 48180
In the case of (b) or (c), with a copy to:
Mark A. Hopper, P.C.
Suite 250
301 E. Liberty Street
Ann Arbor, MI 48104-2251
(d) Any party may from time to time designate as to itself
or himself a different address or addresses for delivery of notices,
provided that a notice of change of address shall be effective and
deemed given only upon actual receipt thereof.
(e) Any notice delivered or sent by next day delivery
service or personal delivery shall be deemed to have been given on the
date it is so delivered, and any notice delivered by registered or
certified mail shall be deemed to have been given on the date it is
received.
3.2 Execution of Further Documents. From and after the execution and
delivery of this document, upon the reasonable request of any of the parties
hereto, each of the other parties hereto shall execute, acknowledge, and deliver
all such further acts, deeds, bills of sale, certificates, assignments,
transfers, conveyances, sales, use or other transfer tax documentation, powers
of attorney, and assurances as may be required to evidence the consummation of
the transactions contemplated by this Agreement and as may be appropriate
otherwise to carry out the transactions contemplated by this Agreement.
-3-
<PAGE> 4
3.3 Expenses. Except as otherwise expressly provided herein, each
party shall pay any fees and expenses incurred by it incident to this Agreement
and in preparing to consummate the transactions contemplated hereby.
3.4 Waiver. No waiver of any right hereunder shall be effective
unless it is in a writing which specifically refers to the provision hereof
under which such right arises, and no such waiver shall operate or be construed
as a waiver of any subsequent breach, whether of a similar or dissimilar nature.
3.5 Amendments, Supplements, Etc. This Agreement may be amended or
supplemented at any time by additional written agreements executed by all of the
parties hereto, as may mutually be determined by such parties to be necessary,
desirable or expedient to further the purposes of this Agreement, or to clarify
the intention of the parties hereto.
3.6 Applicable Law. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the
substantive laws of the State of Ohio applicable to contracts made and to be
performed therein, without giving effect to the principles of conflict of laws
thereof.
3.7 Execution in Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
3.8 Titles and Headings. Titles and descriptive headings to sections
herein are inserted for convenience of reference only, and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.
3.9 No Third-Party Rights. Nothing herein, contemplated hereby or
related hereto shall create any express or implied rights in any person or
entity other than the parties hereto. Without limiting the generality of the
foregoing, no party hereto shall have any rights against any director, officer,
employee or stockholder of MPW or any affiliate or representative thereof by
reason of this Agreement, the transactions contemplated hereby or any matter
related thereto.
3.10 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors, assigns,
heirs and legal representatives. No party hereto may assign its rights or
delegate its duties hereunder.
3.11 Validity. If any term, provisions, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the parties agree that such term provision, covenant or
restriction shall be reformed to the extent possible consistent with such
judicial holding to reflect the intent of the parties as stated herein and the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. The parties hereby stipulate and declare their intention to be
that they will execute the remaining terms, provisions, covenants and
restrictions herein without including herein any such terms, provisions,
covenants or restrictions that may be hereafter declared invalid, void or
unenforceable.
-4-
<PAGE> 5
3.12 Termination. In the event an IPO does not occur within one year
from the day and year first written above, then this agreement shall terminate
and all conditions and terms herein shall no longer bind any parties hereto nor
their respective successors, assigns, heirs or legal representatives.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto duly executed this Agreement
effective as of the day and year first above written.
MPW INDUSTRIAL SERVICES GROUP, INC.
--------------------------------------------
Daniel P. Buettin, Vice President
--------------------------------------------
Robert G. Greenwood, Individually
--------------------------------------------
James C. Leonard, Individually
-6-
<PAGE> 1
EXHIBIT 10(n)
INSTRUMENT OF CONTRIBUTION AND STOCK POWER
WHEREAS, Monte R. Black, Susan K. Black and the Monte R. Black and
Susan K. Black 1994 Irrevocable Trust (the "Shareholders"), desires to
contribute and transfer all outstanding shares of Common Stock, without par
value, of MPW Industrial Services, Inc., an Ohio corporation ("MPW Industrial")
owned by them to MPW Industrial Services Group, Inc., an Ohio corporation
("MPW");
WHEREAS, the Shareholders own all of the issued and outstanding stock
of both MPW Industrial and MPW; and
WHEREAS, the Shareholders and MPW intend that no gain or loss shall be
recognized on the transfer pursuant to Section 351 of the Internal Revenue Code
of 1986, as amended from time to time.
NOW, THEREFORE, the Shareholders agree as follows:
CONTRIBUTION
KNOW ALL MEN BY THESE PRESENTS, that the Shareholders hereby
contributes and transfer to MPW an aggregate of 1,550,000 shares of common stock
of MPW Industrial, without par value, as evidenced by Certificate Nos. 2, 8, 10
and 11 (the "Shares").
STOCK POWER
KNOW ALL MEN BY THESE PRESENTS, that the Shareholders have assigned and
transferred and conveyed, and by these presents do hereby assign and transfer
and convey to MPW the Shares. The Shareholders hereby irrevocably constitute and
appoint an officer of MPW as the true and lawful attorney for the Shareholders,
to use, sell, assign, transfer, and set over the Shares, to make or execute all
necessary acts of assignment and transfer necessary to use, sell, assign,
transfer, or set over the Shares, and to substitute one or more persons with
like full power; and hereby ratify and confirm the use, sale, assignment,
transfer or set over of the Shares and all actions necessary thereto by MPW or
its substitute or substitutes.
IN WITNESS WHEREOF, the undersigned have duly executed this Instrument
of Contribution and Stock Power effective the 30th day of October, 1997.
/s/ MONTE R. BLACK
---------------------------------------
Monte R. Black
/s/ SUSAN K. BLACK
---------------------------------------
Susan K. Black
THE MONTE R. BLACK AND SUSAN K. BLACK
1994 IRREVOCABLE TRUST
By: /s/ JAMES H. BALTHASER
---------------------------------------
James H. Balthaser, Trustee
<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 November 15,
1997) in Amendment No. 3 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 15, 1997
<PAGE> 1
EXHIBIT 23(e)
CONSENT OF FARKAS BERKOWITZ & COMPANY
In reference to the Registration Statement on Form S-1 and the related
Prospectus of MPW Industrial Services Group, Inc. (File No. 333-36887), we
hereby consent to the reference to us in such Registration Statement and
Prospectus.
FARKAS BERKOWITZ & COMPANY
By: /s/ JOAN B. BERKOWITZ
------------------------------------
Name: Joan B. Berkowitz
Title: Managing Director
Columbus, Ohio
November 6, 1997
