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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended October 3, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
____
Commission File Number 333-57611
____
GROVE WORLDWIDE LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
____
23-2955766
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
____
1565 BUCHANAN TRAIL EAST
SHADY GROVE, PENNSYLVANIA 17256
(717) 597-8121
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
____
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
----- -----
(Registrant has not been subject to such filing requirements for the past
90 days.)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by Reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates of the Registrant. None.
Documents incorporated by reference: None.
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GROVE WORLDWIDE LLC
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED OCTOBER 3, 1998
PAGE
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . 10
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . 10
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . . . . 12
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Item 8. Financial Statements and Supplementary Data. . . . . . . . . . . . 23
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . . . . . 23
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . 24
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 27
Item 12. Security Ownership of Certain Beneficial Owners and Management. . 32
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . 33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. . 35
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The following report is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and combined and
consolidated financial statements of the Grove companies, the predecessor to the
Company, and the consolidated financial statements of Grove Worldwide LLC
including the notes thereto (the "financial statements"), included elsewhere in
this report. Unless otherwise noted, the "Company" or "Grove" refers to Grove
Worldwide LLC and its subsidiaries and includes the acquired business (as
defined). The Company's fiscal year ends on the Saturday closest to the last day
of September. References to fiscal 1994, fiscal 1995, fiscal 1996, fiscal 1997
and fiscal 1998 refer to the fiscal years ended October 1, 1994, September 30,
1995, September 28, 1996, September 27, 1997 and October 3, 1998, respectively.
Reference to the (i) seven months ended April 29, 1998 means the period from
September 27, 1997 to April 29, 1998 and (ii) five months ended October 3, 1998
means the period from April 29, 1998 to October 3, 1998. References to
historical financial information are to the historical combined and consolidated
financial results of the acquired business. See "Item 1. Business--Significant
Developments."
No separate financial statements of the subsidiary guarantors (as defined) and
Grove Capital, Inc. ("Grove Capital") are included herein. The Company considers
that such financial statements would not be material to investors because: (i)
this report does include, in the notes to the combined and consolidated
financial statements of the Company, supplemental financial information, setting
forth on a consolidated basis, balance sheets, statements of operations and cash
flows information for the subsidiary guarantors, the subsidiaries of the Company
that are not guarantors (the "non-guarantor subsidiaries") and the Company; and
(ii) the above-mentioned note provides sufficient detail to allow investors to
determine the nature of the assets held by, and the operations and cash flows of
the subsidiary guarantors and Grove Capital.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements in this report constitute "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any
statements that express, or involve discussions as to, expectations, beliefs,
plans, objectives, assumptions or future events or performance (often, but not
always, through the use of words or phrases such as "will likely result," "are
expected to," "will continue," "anticipates," "expects," "estimates," "intends,"
"plans," "projects," and "outlook") are not historical facts and may be
forward-looking. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results, levels
of activity, cost savings, performance or achievements of the Company, or
industry results, to be materially different from any future results, levels of
activity, cost savings, performance or achievements expressed or implied by such
forward-looking statements, and accordingly, such statements should be read in
conjunction with and are qualified in their entirety by reference to, such
risks, uncertainties and other factors, which are discussed throughout this
report. Such factors include, among others, the following: (i) substantial
leverage and ability to service debt; (ii) changing market trends in the mobile
hydraulic crane, aerial work platform and truck-mounted crane industries; (iii)
general economic and business conditions including a prolonged or substantial
recession; (iv) the ability of the Company to implement its business strategy
and maintain and enhance its competitive strengths; (v) the ability of the
Company to implement the Operations Improvement Program (as defined); (vi) the
ability of the Company to obtain financing for general corporate purposes; (vii)
competition; (viii) availability of key personnel; (ix) industry overcapacity;
and (x) changes in, or the failure to comply with, government regulations. As a
result of the foregoing and other factors, no assurance can be given as to
future results, levels of activity and achievements, and neither the Company nor
any other person assumes responsibility for the accuracy and completeness of
these forward-looking statements. Any forward-looking statements contained
herein speak solely as of the date on which such statements are made, and the
Company undertakes no obligation to update any forward-looking statements to
reflect events or circumstances after the date on which such statements were
made or to reflect the occurrence of unanticipated events.
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PART I
ITEM 1. BUSINESS
GENERAL
The Company is an international designer, manufacturer and marketer of
a comprehensive line of mobile hydraulic cranes, aerial work platforms and
truck-mounted cranes. The Company's products are used in a wide variety of
applications by commercial and residential building contractors, as well as by
industrial, municipal and military end-users. The Company's products are
marketed to independent equipment rental companies and directly to end-users
under three widely recognized brand names--GROVE CRANE, GROVE MANLIFT and
NATIONAL CRANE.
The Company's products are sold in over 50 countries primarily through
an established, global network of approximately 240 independent distributors.
The Company's major markets are North America (approximately 70% of fiscal 1998
new equipment sales), Europe (approximately 21% of fiscal 1998 new equipment
sales), Africa and the Middle East (approximately 3% of fiscal 1998 new
equipment sales), Asia (approximately 2% of fiscal 1998 new equipment sales) and
Latin America (approximately 4% of fiscal 1998 new equipment sales). The Company
markets its products through three operating divisions:
GROVE CRANE (approximately 69% and 66% of fiscal 1997 and fiscal 1998 net
sales) designs and manufactures over 40 models of mobile hydraulic cranes.
The Company's mobile hydraulic cranes, which are used primarily in
industrial, commercial and public works construction, are capable of
reaching maximum heights of 372 feet and lifting up to 300 tons.
GROVE MANLIFT (approximately 23% and 24% of fiscal 1997 and fiscal 1998 net
sales) designs and manufactures over 50 models of aerial work platforms.
The Company's aerial work platforms, which are used primarily in
industrial, commercial and construction applications, are capable of
lifting people to maximum working heights ranging from 19 to 131 feet.
Aerial work platforms elevate workers and their materials more safely,
quickly and easily than alternative methods such as scaffolding and
ladders.
NATIONAL CRANE (approximately 8% and 10% of fiscal 1997 and fiscal 1998 net
sales) designs and manufactures over 10 models of telescoping and 14 models
of articulating truck-mounted cranes. The Company's telescoping and
articulating cranes, which are used primarily in industrial, commercial,
public works and construction applications, are capable of reaching maximum
heights of 166 feet and lifting up to 36 tons. Telescoping and articulating
cranes are mounted on a standard truck chassis or on a pedestal at a fixed
location.
In December 1997, Grove Worldwide was formed as a Delaware limited
liability company for the purpose of acquiring, through certain of its
subsidiaries, the mobile hydraulic crane, aerial work platform and truck-mounted
crane businesses of Hanson Funding (G) PLC ("Hanson") and certain of its
subsidiaries (the "Acquired Business"). The principal executive offices of the
Company are located at 1565 Buchanan Trail East, Shady Grove, Pennsylvania
17256. The telephone number of the Company's executive offices is
(717) 597-8121.
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SIGNIFICANT DEVELOPMENTS
THE ACQUISITION
In March 1998, the Company entered into an agreement (together with
the related agreements, the "Acquisition Agreement") to acquire (the
"Acquisition"), the Acquired Business for aggregate cash consideration of
approximately $583.0 million plus certain assumed liabilities, subject to a
post-closing net worth adjustment described below.
On April 29, 1998 (the "Closing Date"), pursuant to the Acquisition
Agreement, the Company acquired the Acquired Business. Cash funding requirements
to consummate the Acquisition, including the payment of related fees and
expenses, were approximately $605.1 million, which were provided by: (i)
$210.1 million of borrowings under a $325.0 million credit facility among the
Company and certain banks (the "New Credit Facility"); (ii) $225.0 million of
estimated gross proceeds to the Company from the offering of its 91/2% Senior
Subordinated Notes due 2009 (the "Senior Subordinated Notes"); (iii) the
issuance by Grove Holdings LLC, a Delaware limited liability company ("Grove
Holdings"), of $50.0 million in gross proceeds of its 115/8% Senior Discount
Debentures due 2009 (the "Debentures"); and (iv) the issuance of $120.0 million
of limited liability company interests of Grove Holdings (the "Holdings Equity
Issuance") (collectively, the "Financings"). On the Closing Date, Grove
Holdings contributed (the "Equity Contribution") the net proceeds from the
Holdings Equity Issuance and the Debenture offering to the Company. The
Acquisition, the Financings and the application of the proceeds of the
Financings are hereinafter referred to as the "Transactions." See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Company received approximately $16.8 million and $10.5 million in
July 1998 and November 1998, respectively, from Hanson in payment of post
closing net worth adjustments.
THE INVESTOR GROUP
Grove Holdings owns all of the limited liability company interests of
the Company. Grove Investors LLC ("Grove Investors"), in turn, owns all of the
limited liability company interests of Grove Holdings. Keystone, Inc. and its
related parties ("Keystone"), FW Strategic Partners, L.P. ("Strategic
Partners"), certain minority investors and certain principals of, and an entity
formed by certain employees of, the George Group Inc. ("George Group") and
certain other investors, including certain members of senior management
(together with Keystone, Strategic Partners, the minority investors and George
Group, the "Investor Group") beneficially own in the aggregate all of the
outstanding membership interests of Grove Investors. Keystone is the principal
investment entity of Robert M. Bass. Strategic Partners is a Delaware limited
partnership formed to invest primarily in public and private debt and equity
securities. George Group is an acquisition and management consulting firm that
applies its strategic and operations management expertise to manufacturing
businesses.
OPERATIONS IMPROVEMENT PROGRAM
As a result of the Acquisition, the Company is operated on a
stand-alone basis rather than as part of a larger diversified enterprise. The
Company's management team expects to capitalize on the experience and expertise
of new senior management as it implements a program (the "Operations Improvement
Program") which it believes will enable the Company to reduce its annual costs
and achieve significant working capital efficiencies. The key components of the
Operations Improvement Program are: (i) implementing a product line
rationalization program which will position the Company to reduce both operating
costs and working capital requirements without diminishing the advantages
derived from its broad
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product line; (ii) reducing annual costs of goods sold by rationalizing its
product line and undertaking certain initiatives to improve the Company's
manufacturing process; (iii) reducing annual selling, general and administrative
expenses by reducing redundant functions across facilities, utilizing the
Company's new management information system and streamlining existing business
processes, including redesigning sales and administrative functions and (iv)
reducing working capital requirements by reducing inventory levels primarily as
a result of improved manufacturing processes, the shifting of production of
certain models and components to facilities where they can be more efficiently
produced and product rationalization. Estimates of potential cost savings are
inherently uncertain and the description of the Operations Improvement Program
should be read in conjunction with "Special Note Regarding Forward Looking
Statements" and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations." There can be no assurance that this
program will result in any cost savings. Further, it is expected that a portion
of any cost savings will be offset by certain non-recurring costs associated
with the implementation of the Operations Improvement Program, plus consulting
fees payable to George Group. See "Special Note Regarding Forward Looking
Statements" and "Item 13. Certain Relationships and Related
Transactions--Agreements with George Group Inc. for Management Consulting
Services."
SUNDERLAND, UNITED KINGDOM FACILITY
In August 1998, the Company announced a plan to cease manufacturing
operations by January 1999 at its Sunderland, United Kingdom facility due to
recurring operating losses. The Company is continuing to operate its sales,
marketing, and customer support operations from Sunderland covering activities
in Europe, Africa and the Middle East.
PRODUCTS
MOBILE HYDRAULIC CRANES (GROVE CRANE)
GROVE CRANE manufactures over 40 models of mobile hydraulic cranes,
which are used primarily in the industrial, commercial and public works
construction and in maintenance applications to lift material at job sites.
There are four main types of mobile hydraulic cranes: (i) Rough-Terrain, (ii)
All-Terrain, (iii) Truck-Mounted and (iv) Industrial. In addition, Grove Crane
produces three models of specialty cranes for the U.S. Department of Defense.
ROUGH-TERRAIN CRANES are designed to lift materials and equipment on
rough or uneven terrain. These cranes cannot be driven on highways, and,
accordingly, must be transported by truck to a work site. Grove Crane produces
15 models of rough-terrain cranes, believed to be the broadest such line in the
world, capable of working heights of up to 208 feet and maximum load capacities
of up to 100 tons.
ALL-TERRAIN CRANES are versatile cranes designed to lift materials and
equipment on rough or uneven terrain and yet are highly maneuverable and capable
of highway speeds. Grove Crane produces 11 models of all-terrain cranes capable
of working heights of up to 372 feet and maximum load capacities of up to 300
tons.
TRUCK-MOUNTED CRANES are designed to provide simple set-up, long reach
high capacity booms and the capability of traveling from site to site at highway
speeds. These cranes are suitable for urban and suburban uses. Grove Crane
produces eight models of truck-mounted cranes, believed to be the broadest such
line in the world, capable of working heights of up to 270 feet and maximum load
capacities of up to 150 tons.
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INDUSTRIAL CRANES are designed primarily for plant maintenance,
storage yard and material handling jobs. Grove Crane produces three models of
industrial cranes capable of working heights of up to 85 feet and maximum load
capacities of up to 18 tons.
AERIAL WORK PLATFORMS (GROVE MANLIFT)
Grove Manlift manufactures over 50 models of aerial work platforms
which elevate workers and their materials more safely, quickly and easily than
alternative methods such as scaffolding and ladders. The work platform is
mounted to either a telescoping or articulating boom or to a vertical scissor or
mast lift mechanism. The boom lifting mechanism is mounted on a chassis powered
by electric motors or gas, diesel or propane engines. The Company manufactures
four types of aerial work platforms: (i) Scissor Lift, (ii) Articulating Boom,
(iii) Telescoping Boom and (iv) Vertical Mast.
SCISSOR LIFTS have a work platform that is mounted on top of a scissor
type lifting mechanism. The lifts are designed to set up and move quickly from
job to job in construction, industrial and commercial settings. Grove Manlift
produces 14 models of scissor lifts capable of working heights of up to 46 feet
and maximum load capacities of up to 2,000 pounds.
ARTICULATING BOOM LIFTS have a work platform that is mounted on top of
a jointed boom. These lifts are used primarily in the industrial and
construction settings where articulation allows users to access elevated areas
over machines or structural obstacles. Grove Manlift produces 16 models of
articulating boom lifts capable of working heights of up to 131 feet with
maximum load capacities of up to 600 pounds.
TELESCOPING BOOM LIFTS have a work platform that is mounted on top of
a telescoping boom and designed for strength, rigidity and resistance to
deflection. These lifts are used primarily outdoors in residential, commercial
and industrial construction and maintenance projects. Grove Manlift produces
nine models of telescoping boom lifts capable of working heights of up to 116
feet with maximum load capacities of up to 700 pounds.
VERTICAL MAST LIFTS have work platforms that are either mounted on top
of fork-lift type devices or on push-around type devices. These lifts are
designed for use by workers for general purpose indoor maintenance. Some models
are for vertical lifting applications only, while others also have out-reach
capabilities. Grove Manlift produces 15 models of vertical mast lifts capable of
working heights of up to 46 feet with maximum load capacities of up to 500
pounds.
TRUCK-MOUNTED CRANES (NATIONAL CRANE)
National Crane manufactures 24 models of truck-mounted cranes used
primarily by contractors engaged in industrial, commercial, public works and
residential construction, railroad and oil field service industries. They are
also used in maintenance applications to lift materials or personnel at the same
job site or to move material to another job site or location. The Company
manufactures two types of truck-mounted cranes: telescoping and articulating,
and also produces four models of pedestal-mounted, fixed location cranes.
TELESCOPING CRANES are used primarily for lifting material and
personnel on a job site. National Crane produces 10 models of truck-mounted
telescoping cranes capable of working heights of up to 166 feet and maximum load
capacities of up to 36 tons.
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ARTICULATING CRANES are used primarily to load and unload truck beds
at a job site. National Crane produces 14 models of truck-mounted articulating
cranes capable of working heights of up to 71 feet and maximum load capacities
of up to 28 tons.
OTHER CRANES include four models of pedestal-mounted cranes designed
for docks, factories, yards, and other areas where fixed, stationary lifting is
required. These cranes are capable of working heights of up to 90 feet and
maximum load capacities of up to 23 tons.
MARKETING AND DISTRIBUTION
GENERAL
The Company benefits from an established base of approximately 240
independent distributors located in 50 countries around the world. Over two
thirds of Grove Crane's North American distributors have been with the Company
for over 10 years.
MOBILE HYDRAULIC CRANES
The Company distributes its mobile hydraulic cranes primarily through
a global network of independent distributors, except in Germany, France and the
United Kingdom, where the Company has its own distributors. In addition, the
Company sells directly to certain large corporate customers and the United
States Government.
In fiscal 1998, 74% of the Company's unit sales of mobile hydraulic
cranes were derived from units shipped to North American and Latin American
distributors and customers. The Company has longstanding relationships with its
45 North American and 24 Latin American distributors. Shipments to Europe
comprised approximately 19% of the Company's shipments in fiscal 1998 through
three Company stores, located in the U.K., Germany and France, and 42
third-party distributors. In fiscal 1998, shipments to Asia, Africa and the
Middle East comprised approximately 2%, 2% and 3% of the Company's unit
shipments, respectively.
AERIAL WORK PLATFORMS
In fiscal 1998, aerial work platforms sold by North American
distributors represented approximately 66% of the Company's unit sales of aerial
work platforms. The Company has 65 authorized distributors in 187 locations
across North America providing coverage in most major markets. For fiscal 1998,
sales to customers in Europe represented approximately 28% of the Company's
units shipped of aerial work platforms. The Company's 13 European dealers
include independent and Company-owned distributors. Three Company locations in
the U.K., Germany and France and a major independent distributor in the
Netherlands collectively accounted for more than 70% of aerial work platform net
sales in Europe.
Asian customers purchased approximately 2% of the Company's units
shipped in fiscal 1998. Asia is supported by authorized distributors located in
Hong Kong, India, Indonesia, Korea, the Philippines, Singapore/Malaysia, Taiwan,
Thailand and Vietnam and a Company-owned distribution facility in Penrith,
Australia. Latin American customers purchased approximately 3% of the Company's
units shipped in fiscal 1998, while African and Middle Eastern customers
purchased less than 1% of the Company's units during the same period.
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TRUCK-MOUNTED CRANES (NATIONAL CRANE)
The Company's North American truck-mounted crane distribution network
consists of 66 distributors that carry multiple product lines, the majority of
which maintain rental fleets. In addition, the Company has eight distributors
that focus either on limited product lines and/or market niches. Certain of the
Company's "niche" distributors primarily sell to railroads and are a particular
strength of the Company's customer base.
END-USERS AND CUSTOMERS
Mobile hydraulic cranes are primarily used by contractors engaged in
industrial, commercial and public works construction, and for maintenance
applications and job site material handling. Aerial work platforms are primarily
used by contractors engaged in residential, commercial and industrial
construction and in maintenance projects. National Crane's truck-mounted cranes
are primarily used by contractors engaged in industrial, commercial, public
works and residential construction, railroad and oil field service industries,
and in maintenance applications to lift materials or personnel at the same job
site or to move material to another job site or location. In addition, U.S.
railroad companies and U.S. equipment rental companies use the Company's
truck-mounted cranes. Mobile hydraulic cranes and aerial work platforms are also
sold to the U.S. Department of Defense and other government agencies.
For the fiscal years ended September 28, 1996, September 27, 1997 and
October 3, 1998, approximately 20%, 19% and 25%, respectively, of the Company's
revenues were generated from sales to six major customers, with no one customer
accounting for more than 10% of total revenue. Approximately 31% and 13% of the
outstanding accounts and notes receivable balance as of September 27, 1997 and
October 3, 1998, respectively, were due from these customers.
DEALER FINANCING PROGRAM
The Company offers certain of its distributors up to 366-day inventory
financing. Units sold under this program generate secured notes receivable,
which the Company sells, from time to time, to a third-party financial
institution. The terms of the notes provide that if the distributor sells the
equipment prior to the maturity of the notes, the notes must be repaid
immediately along with any interest accrued thereon.
In June 1998, the Company entered into an agreement with a third-party
financial institution to sell up to $50.0 million of notes receivable generated
from sales of mobile hydraulic cranes and aerial work platforms on credit terms
of up to 366 days on a revolving basis. In December 1998, this agreement was
amended to increase the $50.0 million limit to $65.0 million and to include
notes receivable generated from the sale of National Crane's truck-mounted
cranes. The third-party financial institution purchases the notes receivable at
face value on a 90% non-recourse basis. The agreement requires the Company to
purchase credit insurance on behalf of the third-party to insure the 90% risk
assumed by the third-party financial institution. The Company retains 10% of
the credit risk.
ENGINEERING AND DESIGN
The Company's team of engineers focuses on developing innovative, high
performance, low maintenance products that create significant brand loyalty
among customers. Design engineers work closely with the Company's manufacturing
and marketing staff, enabling the Company to quickly identify changing end-user
requirements, implement new technologies and effectively introduce product
innovations. The Company spent approximately $15.0 million, $15.4 million and
$14.1 million in fiscal
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1996, fiscal 1997 and fiscal 1998, respectively, on Company-sponsored research
and development activities.
COMPETITION
The markets in which the Company competes are highly competitive. To
compete successfully, the Company must remain competitive in areas of quality,
value, product line, ease of use, safety, comfort and customer service. The
Company faces competition in each of its operating divisions from a number of
manufacturers. Competition in each of the Company's markets generally is based
on product design, overall product quality, maintenance costs and price. The
following table sets forth the Company's primary competitors in each of its
major product groups:
<TABLE>
<CAPTION>
OPERATING DIVISIONS PRODUCTS PRIMARY COMPETITORS
- ------------------- -------- -------------------
<S> <C> <C>
Grove Crane Mobile Hydraulic Cranes Liebherr Werk Nenzing, Link-Belt Construction Equipment Co., Mannesman DeMag,
Tadano Ltd. and Terex Corporation ("Terex")
Grove Manlift Aerial Work Platforms JLG Industries, Inc., Genie Industries, Sky Jack Inc., The Snorkel Company,
Terex and UpRight, a division of W.R. Carpenter North America, Inc.
National Crane Truck-Mounted Cranes Fassi Gru Idrauliche SpA, Hiab BV, Iowa Mold Tooling Co. Inc. (IMT), Manitex,
Inc., Palfinger GmbH, Pioneer Truck Cranes, manufactured by Pioneer
Engineering Corporation, Terex and USTC Inc.
</TABLE>
RAW MATERIALS
Principal materials used by the Company in its various manufacturing
processes include steel, castings, engines, tires, axles, transmissions,
hydraulic components and controls, hydraulic cylinders, electric controls,
motors, and a variety of other fabricated or manufactured items either purchased
complete or manufactured internally. Substantially all materials are normally
available from multiple suppliers but are designed and tested to meet specific
requirements. Current and potential suppliers are evaluated on a regular basis
on their ability to meet the Company's requirements and standards regarding
quality, delivery and value.
CYCLICALITY
The Company markets a large portion of its products in North America
and Europe, and historically, sales of products manufactured and sold by the
Company have been subject to cyclical variations caused by, among other things,
cyclical changes in general economic conditions and, in particular, in
conditions in the construction industry. During periods of expansion in
construction activity, the Company generally has benefitted from increased
demand for its products. Conversely, during recessionary periods, the Company
has been adversely affected by reduced demand for such products. Downward cycles
may result in reduction of the Company's new unit sales and pricing, which may
materially and adversely impact the Company's results of operations. See "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations--Cyclicality."
BACKLOG
The Company's backlog consists of firm orders for new equipment and
replacement parts. Total backlog as of October 3, 1998 was approximately $163.3
million compared to total backlog as of
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September 27, 1997 of $229.5 million. Substantially all of the Company's backlog
orders are expected to be filled within one year, although there can be no
assurance that all such backlog orders will be filled within that time period.
Parts orders are generally filled on an as-ordered basis.
EMPLOYEES
As of October 3, 1998, the Company had a total of approximately 4,913
employees, of which approximately 3,215 were employed in the United States.
Approximately 29% of the Company's employees are represented by labor unions. In
the United States, workers at the Company's Waverly, Nebraska facility are
organized and are subject to a collective bargaining agreement that expires on
April 11, 1999. Certain employees at the Company's Sunderland, United Kingdom,
Wilhelmshaven, Germany and Tonneins, France facilities are also organized under
the host country's labor laws. The collective bargaining agreements applicable
to remaining employees at the Company's Sunderland, United Kingdom facility are
subject to renegotiation in early 1999. The collective bargaining agreements
covering the Wilhelmshaven, Germany employees will not terminate unless due
notice is given by either party pursuant to special provisions within the
collective bargaining agreements, but are subject to renegotiation at various
times. Throughout all facilities, the Company considers its relations with its
employees and union representatives to be good.
MANAGEMENT INFORMATION SYSTEMS
In fiscal 1995, the Company launched the Year 2000 Project (as
defined). The Year-2000 Project, which is expected to be completed at the end of
fiscal 1999, will have a total cost of approximately $38.0 million, of which
approximately $33.0 million had been expended as of October 3, 1998. The Company
believes that this new system will enable the Company to reduce costs, improve
productivity and product development times, and enhance inventory management.
The Company's new system is expected to provide improved cost data,
facilitate inventory and work-in-process tracking and provide improved order
processing. In addition, the system is expected to improve organizational
performance due to timely and meaningful performance measurements and the
availability of timely and accurate management information across all functions
and all levels. The new software will cover the Company's product lifecycle,
including the functionality needed for new product development, order management
and lifetime product service and support, as well as accounting support
activities. The system will also address the Company's global requirements such
as a multi-lingual and multi-currency system to cover all of its facilities.
The completion of the Year 2000 Project is expected to render all of
the Company's major computer systems Year-2000 compliant. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Management Information Systems and the Impact of Year 2000."
ENVIRONMENTAL MATTERS
The Company generates hazardous and non-hazardous waste in the normal
course of its manufacturing operations. As a result, the Company is subject to a
wide range of Federal, state, local and foreign environmental laws, including
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), that (i) govern activities or operations that may have adverse
environmental effects, such as discharges to air and water, as well as handling
and disposal practices for hazardous and nonhazardous wastes, and (ii) impose
liability for the costs of cleaning up, and certain damages resulting from,
sites of past spills, disposals or other releases of hazardous substances.
Compliance with such laws has required, and will continue to require,
expenditures by the Company on a continuing basis. The
8
<PAGE>
Company does not expect that these expenditures will have a material adverse
effect on its financial condition or results of operations.
In 1990, the Clean Air Act was amended and established a list of 189
toxic air pollutants that must be controlled using maximum achievable control
technology ("MACT") as prescribed by the EPA. The Company believes that by 2003
it will be subject to MACT regulations with respect to its surface coating air
omissions. At this time, the Company does not expect the cost of compliance
with these MACT regulations to have a significant impact on the Company.
INTELLECTUAL PROPERTY
The Company's products are sold primarily under the logo "G-Registered
Trademark-", and the trademarks GROVE-Registered Trademark-, G GROVE
WORLDWIDE-Registered Trademark-, GROVE MANLIFT-Registered Trademark-,
MANLIFT-Registered Trademark-, G MANLIFT-Registered Trademark-, G MEGATRAK-TM- ,
MAXX-Registered Trademark-, SUPER-MAXX-Registered Trademark- ,
TOUCAN-Registered Trademark-, and YARDBOSS-TM- . The Company owns a number of
patents and trademarks relating to the products it manufactures that have been
obtained over a number of years. These patents and trademarks have been of value
in the growth of the Company's business and may continue to be of value in the
future.
ITEM 2. PROPERTIES
The Company maintains major manufacturing and engineering facilities
in Shady Grove, Pennsylvania and Wilhelmshaven, Germany, as well as plants in
Tonneins, France and Waverly, Nebraska. All such manufacturing facilities are
ISO 9001 certified. The Company also maintains administrative and service
facilities in the United Kingdom, France, Germany, and Australia, and offices
in Singapore, the United Arab Emirates, and China.
The following table outlines the principal facilities owned or leased
by the Company:
<TABLE>
<CAPTION>
Approximate
Facility Location Type of Facility Square Footage Owned/Leased
----------------- ---------------- -------------- ------------
<S> <C> <C> <C>
Shady Grove, Pennsylvania Manufacturing/ Headquarters 1,165,600 owned
Quincy, Pennsylvania Manufacturing 40,100 owned
Chambersburg, Pennsylvania Office/Storage 81,000 owned
Waverly, Nebraska Manufacturing/ Headquarters 303,800 owned
Sunderland, U.K.(1) Warehouse/Office 102,200 leased
Wilhelmshaven, Germany(2) Manufacturing/ Storage/Office 410,400 owned/leased
Langenfeld, Germany(3) Storage/Office/ Field Testing 80,300 leased
Tonneins, France(4) Manufacturing/ Storage/Office 101,900 owned/leased
Osny, France Storage/Repair/Office 43,000 owned
</TABLE>
- ------------------
(1) The lease for the Sunderland facilities expires on December 31, 1999. See
"Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
(2) The buildings are owned by the Company and the underlying land is leased
from the Federal Republic of Germany and Friedrich Krupp AG Hoesch Krupp
("Krupp"). The lease with the Federal Republic of Germany expires December
31, 2043 and the lease with Krupp expires December 31, 2042.
(3) The lease at Langenfeld, Germany runs year to year, through July 31, 1999.
Unless the Company gives notice of intent to vacate the facility by January
31 1999, the lease will automatically extend for an additional year,
through July 31, 2000.
(4) Includes two facilities, one of which is leased. The lease expires on
November 29, 2004.
To the extent any such properties are leased, the Company expects to
be able to renew such leases or lease comparable facilities on terms
commercially acceptable to the Company. Management believes that the Company's
facilities are suitable for its operations and provide sufficient capacity to
meet the Company's requirements for the foreseeable future.
9
<PAGE>
The obligations of the Company under the New Credit Facility are
secured by a mortgage on certain of the Company's owned, domestic real
properties.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings which have arisen
in the normal course of its operations. The outcome of these legal proceedings,
if determined adversely to the Company, is unlikely to have a material adverse
effect on the Company. The Company is also subject to product liability claims
for which it believes it has adequate insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 22, 1998, Grove Holdings, the sole holder of the Company's
membership interests, adopted at a meeting certain resolutions whereby it
approved and ratified: (i) an amendment and restatement of the Company's
Operating Agreement; (ii) the filing of the Company's Form S-4 Registration
Statement; (iii) the Company's fiscal year; and (iv) the appointment of a
statutory auditor.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
HOLDERS
There is no established trading market for the membership interests of
the Company. Grove Holdings owns all of the limited liability company interests
of the Company and Grove Investors owns all of the limited liability company
interests of Grove Holdings. For certain information concerning the ownership
of the limited liability company interests of Grove Investors, see "Item 12.
Security Ownership of Certain Beneficial Owners and Management."
MARKET INFORMATION
No dividends have been paid on the Company's membership interests.
The Company's borrowing arrangements limit the ability of the Company to pay
dividends. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected historical financial data of the
Company (i) as of and for each of the fiscal years ended October 1, 1994,
September 30, 1995, September 28, 1996 and September 27, 1997, for the seven
months ended April 28, 1998 (the "Predecessor Periods") and as of and for the
five months ended October 3, 1998 (the "Successor Period"). As a result of the
Acquisition, which was accounted for using the purchase method, results of
operations for the Successor Period are not comparable with those for the
Predecessor Periods. The selected historical financial data set forth below
should be read in conjunction with "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the historical financial
statements and the related notes thereto included elsewhere in this report.
10
<PAGE>
<TABLE>
<CAPTION>
Predecessor Company
------------------------------------------------------------------- -----------------
Seven months ended Five months ended
1994 1995(1) 1996 1997 April 28, 1998 October 3, 1998
------------------------------------------------------------------- -----------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $393,526 $503,815 $794,209 $856,812 $476,200 $393,779
Gross profit(2) 87,991 126,589 185,079 203,273 98,863 58,015
Operating expenses 80,752 88,216 134,459 135,382 79,041 61,189
Operating profit (loss) 7,239 38,373 50,620 67,891 19,822 (3,174)
Net income (loss)(3) (4,942) 16,769 25,448 42,220 (395) (23,981)
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents $ 7,135 $ 18,685 $ 8,184 $ 5,024 $ 34,289
Total assets 509,189 652,000 730,158 881,496 910,348
Total debt -- -- 7,443 7,265 430,027
Total invested capital 399,762 467,306 502,554 628,492 145,861
OTHER DATA:
Depreciation and amortization(4) $ 13,258 $ 13,765 $ 17,313 $ 17,985 $ 11,399 $ 8,213
Capital expenditures(5) 6,042 7,385 19,443 32,491 19,521 7,230
Sales backlog at end of period 109,350 208,152 185,237 229,513 268,682 163,314
</TABLE>
- ---------------
(1) The results of the KMK division of Krupp and Delta Systems SA ("Delta")
have been included since their dates of acquisition on August 30, 1995
and November 30, 1995, respectively.
(2) Gross profit for the five months ended October 3, 1998 was adversely
impacted by the write-off of $27.7 million of purchase accounting
adjustments with respect to the amount assigned to inventory in excess of
historical cost.
(3) Includes losses by the Company's Sunderland U.K. facility of $14,085 and
$5,999 for the seven months ended April 28, 1998 and the five months ended
October 3, 1998, respectively. On November 27, 1998, the Company announced
a plan to cease manufacturing operations by January 1999 at its Sunderland,
United Kingdom facility due to recurring operating losses. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
(4) Depreciation and amortization excludes depreciation on equipment held for
rent.
(5) Includes expenditures on the Company's new management information system of
approximately $4,300 in fiscal 1996, approximately $14,000 in fiscal 1997,
approximately $9,322 for the seven months ended April 28, 1998 and
approximately $5,377 for the five months ended October 3, 1998.
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the more
detailed information and the historical combined and consolidated financial
statements included elsewhere in this report.
OVERVIEW
The Company generates most of its net sales from the manufacture and
sale of new mobile hydraulic cranes, aerial work platforms and truck-mounted
cranes. The Company also generates a portion of its net sales from after-market
sales (parts, service and used equipment) of the products it manufactures. Sales
of used equipment are not material and are generally limited to trade-ins on new
equipment through Company-owned distributors in France, Germany and the United
Kingdom.
The following is a summary of net sales for the periods indicated
(dollars in millions):
Fiscal Year
-------------------------------
1996 1997 1998
------ ------ ------
New equipment sold (1) $632.4 $670.1 $679.5
After-Market 120.6 125.8 123.2
Other (2)(3) 41.2 60.9 67.3
------ ------ ------
Net sales $794.2 $856.8 $870.0
====== ====== ======
- ---------------
(1) Excludes specialty cranes and equipment sold to the U.S. government.
(2) Includes specialty cranes and equipment sold to the U.S. government and
revenues from unit sales accounted for as operating leases.
(3) Includes revenues resulting from a non-recurring contract for crane
refurbishment with the Ministry of Defence of the United Kingdom.
Consistent with industry practice, particularly in Germany, certain of
the Company's mobile hydraulic crane sales (generally less than 5% of units sold
annually) are made with residual value guarantees under which the full sales
price is collected in cash on normal commercial terms following delivery of the
cranes. However, these sales are accounted for in a manner similar to operating
leases. Upon collection, the sales price is deferred and accounted for as
deferred revenue (current and non-current) while the related inventory is
reclassified as "property, plant and equipment/equipment held for rent." Over
the term of the residual value guarantee, deferred revenue is recognized as
sales and the depreciation of the related equipment held for rent is classified
as cost of goods sold, the effect of which is to recognize sales, costs of goods
sold and gross profit over the residual value guarantee period, typically five
years, as opposed to at the time of delivery of the crane. Losses with respect
to residual value guarantees have been insignificant. See Note 3 of Notes to
Combined and Consolidated Financial Statements.
As a result of the Acquisition, a significant portion of the Company's
business is operated as a limited liability company organized under the laws of
Delaware, as a result of which (i) Grove Worldwide LLC is not itself subject to
income tax, (ii) the taxable income of the mobile hydraulic crane, aerial work
platform and truck-mounted crane businesses in the United States is allocated to
the equity holders of Grove Worldwide, and (iii) such equity holders are
responsible for income taxes on such taxable income. The Company intends to make
distributions in the form of dividends to equity holders of Grove Worldwide to
enable them to meet their tax obligations with respect to income allocated to
them by the Company.
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<PAGE>
RESULTS OF OPERATIONS
For financial reporting purposes, the Acquisition creates a new basis
of accounting and, accordingly, the Company is required to report results prior
to the Acquisition separate from results subsequent to the Acquisition. For
purposes of the following discussion of the Company's results of operations, the
Company has compiled certain financial information for the fiscal year ended
October 3, 1998 by combining results of operations for the seven months ended
April 28, 1998 (prior to the Acquisition) with those for the five months October
3, 1998 (subsequent to the Acquisition). In connection with the Acquisition, the
Company was formed as a limited liability company and its capital structure was
changed significantly. Accordingly, comparisons of interest, taxes, and net
income for fiscal 1998 relative to fiscal 1997 would not be meaningful and are
therefore not presented.
Set forth below is certain information regarding the Company's results
of operations for fiscal 1996, fiscal 1997 and fiscal 1998 (dollars in
thousands).
Fiscal Year
Fiscal Year
----------------------------------
1996 1997 1998
--------- --------- ---------
Net Sales $ 794,209 $ 856,812 $ 869,979
Cost of goods sold 609,130 653,539 685,394
Write-off of amount assigned to
inventory in excess of historical
costs resulting from purchase
accounting adjustments -- -- 27,707
--------- --------- ---------
Gross profit 185,079 203,273 156,878
Selling, engineering, general
and administrative expenses 119,619 124,152 131,762
Management fees paid to Hanson 5,655 2,176 162
Amortization of goodwill 9,185 9,054 8,306
--------- --------- ---------
Operating profit $ 50,620 $ 67,891 $ 16,648
========= ========= =========
FISCAL 1998 COMPARED TO FISCAL 1997
NET SALES. Net sales for the Company increased $13.2 million, or 1.5%,
from $856.8 million for fiscal 1997 to $870.0 million for fiscal 1998.
Net sales of mobile hydraulic cranes declined from fiscal 1997 to
fiscal 1998 on higher unit sales. The decline in net sales was caused by a shift
in product mix and higher price concessions, primarily on mobile hydraulic
cranes produced by the Company's Sunderland, U.K. facility. While net sales to
North American and European customers remained stable, net sales to Asia
declined. The modest decline in net sales to the Asian market was a result of
Asia's recent economic crisis.
Net sales of aerial work platforms increased modestly from fiscal 1997
to fiscal 1998. Unit sales of aerial work platforms were down; however, net
sales increased as a result of improved sales mix.
Net sales of truck-mounted cranes increased significantly from fiscal
1997 to fiscal 1998. Net sales increased as the result of increased production
capacity as well as significantly increased demand for higher priced models.
13
<PAGE>
After-market sales, including parts and services, decreased slightly
from fiscal 1997 to fiscal 1998. This decrease was due primarily to a decrease
in used equipment sales partially offset by a slight increase in parts sales.
Other sales increased 10.5% as a result of higher revenue from unit
sales that were accounted for as operating leases, partially offset by lower
revenues following the completion of a non-recurring contract for crane
refurbishment with the Ministry of Defence of the United Kingdom.
GROSS PROFIT. Gross profit decreased $46.4 million, or 22.8%, from
$203.3 million in fiscal 1997 to $156.9 million in fiscal 1998. Gross profit was
adversely impacted by a $27.7 million write-off of amounts assigned to inventory
in excess of historical costs in accounting for the Acquisition. The decline in
gross profit was also attributable to a $14.8 million decline in gross profit at
the Company's Sunderland, U.K. facility caused by higher price concessions and
lower sales volume available to absorb fixed overhead. The higher price
concessions were primarily required to induce the sale of U.K. manufactured
products, including 17 all-terrain cranes that were built to order for a
customer that refused delivery in fiscal 1998. The sale of the 17 cranes, which
were sold for approximately $8.2 million during the second quarter of fiscal
1998, resulted in a loss of approximately $1.5 million.
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling,
engineering, general and administrative expenses increased $7.6 million, or
6.1%, from $124.2 million in fiscal 1997 to $131.8 million in fiscal 1998. As a
percentage of net sales, selling, engineering, general and administrative
expenses were 14.5% in fiscal 1997 and 15.1% in fiscal 1998. The expense growth
occurred broadly across the Company as the result of the impact of the
Acquisition on operations. Included in selling, engineering, general and
administrative expenses for fiscal 1998 are approximately $2.7 million of George
Group expenses and $3.1 million of ownership transition costs related to the
sale of the Company and the hiring of new management. Included in selling,
engineering, general and administrative expenses for fiscal 1997 are
approximately $2.0 million in restructuring charges related to the U.K. crane
manufacturing operation.
FISCAL 1997 COMPARED TO FISCAL 1996
NET SALES. Net sales increased $62.6 million, or 7.9%, from $794.2
million in fiscal 1996 to $856.8 million in fiscal 1997.
Net sales of mobile hydraulic cranes were virtually unchanged from
fiscal 1996 to fiscal 1997. Unit shipments increased in fiscal 1997 versus
fiscal 1996, with substantially all of the increase representing units sold to
Latin American customers. Sales of the Company's mobile hydraulic cranes
reflected strong demand in North America.
Net sales of aerial work platforms increased significantly from fiscal
1996 to fiscal 1997. Unit sales increased as a result of continued industry
growth led by efficiency considerations as well as government-mandated safety
standards for people working in elevated environments.
Net sales of truck-mounted cranes increased significantly from fiscal
1996 to fiscal 1997. Unit sales increased principally due to increased
international marketing efforts. Net sales of truck-mounted cranes also
benefited from an improved product sales mix resulting primarily from increased
demand for higher priced models.
14
<PAGE>
After-market sales, including parts and services, increased from
fiscal 1996 to fiscal 1997. This increase was due primarily to an increase in
parts sales resulting from a larger installed base and relatively high rental
fleet utilization.
Other sales increased significantly as a result of a non-recurring
crane refurbishment contract for cranes with the Ministry of Defence of the
United Kingdom.
GROSS PROFIT. Gross profit increased $18.2 million, or 9.8%, from
$185.1 million in fiscal 1996 to $203.3 million in fiscal 1997. The increase in
gross profit was due primarily to increased sales in the aerial work platform
and truck-mounted crane businesses. As a percentage of sales, gross profit
improved modestly from 23.3% in fiscal 1996 to 23.7% in fiscal 1997.
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling,
engineering, general and administrative expenses increased $4.6 million, or
3.8%, from $119.6 million in fiscal 1996 to $124.2 million in fiscal 1997.
However, as a percentage of net sales, selling, engineering, general and
administrative expenses declined from 15.1% in fiscal 1996 to 14.5% in fiscal
1997 as a result of higher sales that absorbed fixed costs. The dollar increase
was principally related to higher selling and advertising costs to support the
sales growth of the Company's product lines as well as general cost increases.
Included in selling, engineering, general and administrative expenses
are research and development expenses, which increased 2.7% from $15.0 million
in fiscal 1996 to $15.4 million in fiscal 1997. In addition, in fiscal 1996 and
fiscal 1997, general and administrative expenses included $2.7 million and $1.3
million, respectively, due to process reengineering and systems assessment costs
associated with the installation of the Company's management information system.
See "--Management Information Systems and the Impact of Year 2000."
MANAGEMENT FEES. Results of operations for fiscal 1996 and fiscal
1997 included management fees paid to Hanson of $5.7 million and $2.2 million,
respectively. Management believes the Company's results of operations in all
material respects reflect all operating costs on a stand alone basis. Management
estimates that costs to replace services provided by Hanson prior to the
Acquisition together with other stand alone costs will be less than $1.0 million
for the twelve months following the Acquisition. Such costs, which are generally
less than the management fees charged by Hanson on an annual basis, relate to
additional treasury, human resource and income tax requirements. Management
believes such additional costs will be more than offset by planned costs savings
in other general and administrative areas.
NET INTEREST EXPENSE/INCOME. Net interest expense/income included (i)
interest income of $0.6 million in fiscal 1996 and $2.1 million in fiscal 1997,
which was generated primarily from notes receivable under the Company's special
North American dealer financing program and (ii) interest expense of $3.3
million in fiscal 1996 and $2.0 million in fiscal 1997, substantially all of
which was paid to Hanson with respect to intercompany borrowings.
INCOME TAXES. Income tax expense, virtually all of which was
U.S.-based, increased 18.3% from $22.2 million in fiscal 1996 to $26.2 million
in fiscal 1997. The overall effective tax rates were 46.6% and 38.3% for fiscal
1996 and fiscal 1997, respectively. The decline in tax rate was caused
principally by a reduction in permanent goodwill additions which resulted from
the transactions consummated to effect a demerger of certain of Hanson PLC's
various businesses. The Company has established valuation allowances for net
operating losses generated by its foreign subsidiaries.
15
<PAGE>
NET INCOME. Net income increased $16.8 million, or 65.9%, from $25.4
million in fiscal 1996 to $42.2 million in fiscal 1997. The increase related
principally to increased sales and operating profits.
GEOGRAPHIC COMPARISONS DURING THE THREE YEARS ENDED OCTOBER 3, 1998.
Net sales to unaffiliated customers by the Company's domestic
subsidiaries contributed in excess of 70% of the Company's sales in fiscal 1998
and virtually all of its income from operations. Net sales to unaffiliated
customers by the Company's domestic subsidiaries increased by $23.8 million or
3.9% in fiscal 1998 as compared to fiscal 1997. The increase in net sales by the
Company's domestic subsidiaries was caused by strong sales of aerial work
platforms and truck-mounted cranes. Net sales of mobile hydraulic cranes by the
Company's domestic subsidiaries were virtually unchanged in fiscal 1998 as
compared to fiscal 1997. Net sales to unaffiliated customers by the Company's
foreign subsidiaries decreased by $10.6 million or 4.2% in fiscal 1998 as
compared to fiscal 1997. The decrease in net sales by the Company's foreign
subsidiaries was primarily the result of Sunderland's completion of the Ministry
of Defence contract in February 1998. Recurring operating losses by the
Company's manufacturing facility in Sunderland, U.K. of approximately
$15.9 million in fiscal 1998 exceeded all of the operating earnings of the
Company's German and French subsidiaries during the same period.
Net sales to unaffiliated customers by the Company's domestic
subsidiaries contributed in excess of 70.0% of the Company's sales in fiscal
1997 and virtually all of its net income. Net sales to unaffiliated customers by
the Company's domestic subsidiaries increased by $43.6 million or 7.8% in fiscal
1997 as compared to fiscal 1996, which represented approximately 70.0% of the
Company's overall sales increase for fiscal 1997. The increase in net sales by
the Company's domestic subsidiaries was caused by strong sales of aerial work
platforms and truck-mounted cranes. Net sales of mobile hydraulic cranes by the
Company's domestic subsidiaries were virtually unchanged in fiscal 1997 as
compared to fiscal 1996. Net sales to unaffiliated customers by the Company's
foreign subsidiaries increased by $16.7 million or 7.2% in fiscal 1997 as
compared to fiscal 1996. The increase in net sales by the Company's foreign
subsidiaries was primarily the result of continued growth of aerial work
platform sales in Europe. Recurring operating losses by the Company's
manufacturing facility in Sunderland, U.K. of approximately $2.5 million in
fiscal 1997 offset virtually all of the operating earnings of the Company's
German and French subsidiaries during the same period.
Net sales to unaffiliated customers by the Company's domestic
subsidiaries contributed in excess of 70.0% of the Company's sales in fiscal
1996 and all of its net income. The acquisition of Krupp contributed significant
sales growth to both domestic and European operations. Operating losses by the
Company's manufacturing facility in Sunderland, U.K. of approximately
$3.8 million offset all of the operating earnings of the Company's German and
French subsidiaries. The acquisitions of Delta and Krupp improved the operating
results of the Company's German and French subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business is working capital-intensive, requiring
significant investments in receivables and inventory. In addition, the Company
requires capital for replacement and improvements of existing plant, equipment
and processes.
During the twelve fiscal months ended October 3, 1998, the Company's
operating activities generated approximately $150.4 million in operating cash
flow ($93.1 million for the seven months ended April 28, 1998 and $57.3 for the
five month ended October 3, 1998). This amount resulted primarily from income
from operations before non-cash charges of $76.9 million, declines in the
investment in accounts
16
<PAGE>
receivable and inventory of $34.4 million, proceeds from sales of notes
receivable to a third-party financial institution of $24.8 million and increases
in other non-current liabilities of approximately $10.0 million. The Company
has entered into an agreement with a third-party financial institution to sell
up to $65.0 million of notes receivable obtained under the Company's special
North American Dealer Finance Program. The third-party financial institution
purchases the notes at face value on a 90.0% non-recourse basis. The Company
retains 10% of the credit risk. The sale of the notes qualifies as a sale under
generally accepted accounting principles and, accordingly, upon sale, the notes
receivable are removed from the Company's balance sheet. See Note 4 of Notes
to Combined and Consolidated Financial Statements.
During the fiscal 1998 seven months, the Company used (i) $33.8
million in investing activities, consisting of $19.5 million of capital
expenditures (of which $9.3 million was for the new management information
system) and $16.4 million of investment in equipment held for rent (due to the
operating lease treatment relating to certain sales which are accounted for as
operating leases), and (ii) $55.3 million in financing activities, principally
consisting of amounts paid to Hanson.
During the five months ended October 3, 1998, the Company used
approximately $589.4 million of cash flow for investing activities of which
$562.7 million was related to the Acquisition, $7.2 million was for capital
expenditures (of which $5.4 million was for the new management information
system) and $20.8 million was for investment in equipment held for rent. The
cash flows used in investing activities were funded by cash flows from operating
activities and through the issuance of long-term debt of $450.2 million and an
equity contribution from Grove Holdings of $168.2 million. Net cash flows from
financing activities also included the payment of $35.2 million of long term
debt and $14.5 million of deferred financing costs.
In August 1998, the Company announced a plan to cease manufacturing
operations by January 1999 at its Sunderland, United Kingdom facility due to
recurring operating losses. Management believes closing the facility will
improve operating earnings as well as provide the opportunity for additional
cost reductions through product rationalization, reduced selling, general and
administrative expenses and reduced manufacturing costs. Management has
estimated total closure costs to be approximately $18.5 million, consisting of
approximately $11.5 million of employee severance and $7.0 million of plant
shut-down costs (asset disposal and plant clean up costs), all of which are
expected to be expended in the next twelve months.
The Company expects that cash flows from foreign operations will be
required to meet its domestic debt service requirements. Such cash flows are
expected to be generated from intercompany interest expense on loans the Company
made to certain of its foreign subsidiaries to consummate the acquisition of
Hanson's crane and aerial work platform subsidiaries in the U.K., Germany and
France and for working capital requirements. The loans have been established
with amounts and interest rates to allow for repatriation without restriction or
additional tax burden. However, there is no assurance that the foreign
subsidiaries will generate the cash flow required to service the loans or that
the laws in the foreign jurisdictions will not change to limit repatriation or
increase the tax burden of repatriation.
In connection with the Acquisition, the Company entered into a
seven-year, $125 million Revolving Credit Facility, permitting it, subject to
certain borrowing conditions, to obtain revolving credit loans and issue letters
of credit for working capital, acquisitions and general corporate purposes. A
portion of the Revolving Credit Facility is available for borrowing the
Eurocurrency markets of British pounds sterling, German marks and French francs
and certain other currencies. As of October 3, 1998 the Company had available
borrowings of $124.1 million under the Revolving Credit Facility. For
additional information regarding the Revolving Credit Facility, see Note 10 of
Notes to the Combined and
17
<PAGE>
Consolidated Financial Statements of the Company. Management believes that the
Company's income from operations and available borrowings under the Revolving
Credit Facility will be sufficient to meet its debt service obligations, capital
expenditure requirements and distributions in the form of dividends to equity
holders of Grove Holdings to enable them to meet their tax obligations with
respect to income allocated to them by the Company for at least the next twelve
months.
CERTAIN SUBSIDIARIES OF THE COMPANY
In connection with the Acquisition, the Company and its wholly owned
subsidiary, Grove Capital, a Delaware corporation, issued the Senior
Subordinated Notes. Grove Capital was organized as a direct wholly owned
subsidiary of the Company for the purpose of acting as a co-issuer of the Senior
Subordinated Notes and was also a co-registrant of the Registration Statement
for the Senior Subordinated Notes. This was done so that certain institutional
investors to which the Senior Subordinated Notes were marketed that might
otherwise have been restricted in their ability to purchase debt securities
issued by a limited liability company, such as the Company, by reason of the
legal investment laws of their states of organization or their charter
documents, would be able to invest in the Senior Subordinated Notes. Grove
Capital has no assets, no liabilities (other than the Senior Subordinated Notes
and as a borrower under the New Credit Facility) and no operations. Grove
Capital does not have any revenues and is prohibited from engaging in any
business activities. As a result, holders of the Senior Subordinated Notes
should not expect Grove Capital to participate in servicing the interest and
principal obligations on the Senior Subordinated Notes.
The payment obligations of the Company and Grove Capital under the
Senior Subordinated Notes are fully and unconditionally guaranteed on a joint
and several basis by the Subsidiary Guarantors (the "Subsidiary Guarantees'),
all of which are wholly owned. The Subsidiary Guarantors are Grove U.S. LLC, a
Delaware limited liability company, Grove Finance LLC, a Delaware limited
liability company, Crane Acquisition Corp., a Delaware corporation, Crane
Holding Inc., a Delaware corporation, and National Crane Corporation, a Delaware
corporation. Grove U.S. LLC and National Crane Corporation are the Company's
domestic operating subsidiaries and together hold substantially all of the
Company's domestic assets. The remaining subsidiaries of the Company, which are
foreign subsidiaries, have not issued, and are not expected to issue, Subsidiary
Guarantees.
No separate financial statements of the Subsidiary Guarantors and
Grove Capital are included in this report. The Company considers that such
financial statements would not be material to investors because: (i) this report
does include, in the notes to the combined and consolidated financial statements
of the Company, supplemental financial information, setting forth on a
consolidated basis, balance sheets, statements of operations and cash flows
information for the Subsidiary Guarantors, the Non-Guarantor Subsidiaries and
the Company; and (ii) the above-mentioned note provides sufficient detail to
allow investors to determine the nature of the assets held by, and the
operations and cash flows of the Subsidiary Guarantors and Grove Capital.
The ability of the Company's subsidiaries to make cash distributions
and loans to the Company and the Subsidiary Guarantors is not significantly
restricted under the terms of the Senior Subordinated Notes, the Indenture
governing the Senior Subordinated Notes, the Indenture governing the Debentures
or the New Credit Facility. The obligations of each Subsidiary Guarantor under
its Subsidiary Guarantee are limited so as not to constitute a fraudulent
conveyance under applicable law. For more information regarding the assets,
liabilities, revenues and cash flows of the Subsidiary Guarantors and the
Company's non-guarantor subsidiaries, see Note 21 of Notes to the Combined and
Consolidated Financial Statements of the Company.
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BACKLOG
The Company's backlog consists of firm orders for new equipment and
replacement parts. Total backlog as of October 3, 1998 was approximately $163.3
million compared to total backlog as of September 27, 1997 of $229.5 million.
Substantially all of the Company's backlog orders are expected to be filled
within one year, although there can be no assurance that all such backlog orders
will be filled within that time period. Parts orders are generally filled on an
as-ordered basis.
CYCLICALITY
Historically, sales of products manufactured and sold by the Company
have been subject to cyclical variations based, among other things, on general
economic conditions and, in particular, on conditions in the construction
industry. During periods of expansion in construction activity, the Company
generally has benefited from increased demand for construction equipment.
Conversely, during recessionary times, the Company has been adversely affected
by reduced demand for such products. Downward cycles result in reductions in the
Company's new unit sales and prices, which adversely impact the Company's
results of operations. Management believes there are several factors that may
mitigate the effects of future cyclical trends in the Company's business. These
factors include the continued growth of its aerial work platform business, which
has a lower correlation to the results of the construction industry, the global
diversification of its sales network and the decrease in the fixed costs
elements of the Company's overall business. After-market sales for parts and
services accounted for 11.4% of the Company's net sales fiscal 1998. Such sales
typically have higher gross margins and are less cyclical than new equipment
sales. However, there can be no assurance that a decline in the general
condition of the economy will not have a material adverse impact on the Company.
During fiscal 1996, fiscal 1997 and fiscal 1998 net sales of new units
to Asian customers represented 5.6%, 5.1% and 2.0% of the Company's net sales,
respectively. The Asian economic crisis has had a limited impact on the
Company's results of operations. Although the Company is not dependent on sales
to Asian customers, management cannot reasonably predict what impact, if any,
the crisis will have on its competitors or on markets outside of Asia where the
Company sells its products.
MANAGEMENT INFORMATION SYSTEMS AND THE IMPACT OF YEAR 2000
Certain computer programs and microprocessors use two digits rather
than four to define the applicable year. Computer programs that have
date-sensitive software and microprocessors may recognize a date using "00" as
the year 1900 rather than the year 2000. This phenomenon (the "Year-2000 Issue")
could cause a disruption of operations, including, among other things, a
temporary inability to utilize manufacturing equipment, send invoices or engage
in similar normal business activities.
In fiscal 1995, the Company conducted a Year-2000 assessment of all
management information systems used at its crane and aerial work platform
facilities in the United States, United Kingdom and Germany. Upon completing
this review in October 1995, the Company launched a campaign designed to replace
all existing software and hardware that was not Year-2000 compliant (the
"Year-2000 Project"). In addition to replacing all business application software
and hardware, the Year-2000 Project was designed to provide improved business
processes and procedures.
The Company determined that the Year-2000 Project would not need to be
implemented at its National Crane facility in Waverly, Nebraska. National Crane
implemented upgrades to all of its existing hardware and software and converted
all of its data. Management believes the completion of this project has rendered
all of National Crane's major computer systems Year-2000 compliant.
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The Year-2000 Project is expected to be completed in September 1999
and will have a total cost of approximately $38.0 million, of which
approximately $33.0 million had been expended as of October 3, 1998. If the
Year-2000 Project is delayed, the Company will be required to shorten its
planning horizons and replace certain computerized functions, such as inventory
and work-in-process tracking, billing and order processing, with manual systems.
Any such delay could result in part shortages and slow the delivery of products
to the Company's customers. Management believes that all of the Company's major
computer systems will be rendered Year-2000 compliant. If such modifications and
conversions are not completed in a timely manner, the Year-2000 Issue could have
a material impact on the operations of the Company. See "Item 1.
Business--Management Information Systems."
The Company has also polled the manufacturers of its computerized
numerical control ("CNC") manufacturing/production equipment. The Company has
been informed by such manufacturers that there are no Year-2000 Issues with
respect to the Company's CNC equipment at its Shady Grove, Pennsylvania and
Waverly, Nebraska facilities. The Company is also conducting an internal review
of its CNC equipment to confirm its Year-2000 readiness. Although management
believes that the Year-2000 Issue will not have a material adverse impact on its
CNC equipment, there can be no assurance that it will not.
In addition, the Company has initiated communications with suppliers
and customers to determine the extent to which the Company may be vulnerable to
such parties' failure to remediate their own Year-2000 Issues. There can be no
guarantee that the systems of other companies on which the Company's systems
rely will be timely converted, or that a failure to convert by another company,
or a conversion that is incompatible with the Company's systems, would not have
material adverse effect on the Company. However, based on its current
assessment, management believes that the Year-2000 Issue will not have a
material adverse impact on the Company's future results of operations or
financial conditions, although there can be no assurance that such will be the
case.
IMPACT OF CONVERSION BY THE EUROPEAN UNION TO A COMMON CURRENCY
On January 1, 1999, eleven of the fifteen member countries of the
European Union are scheduled to establish fixed conversion rates between their
existing currencies and the euro, a new European currency, and to adopt the euro
as their common legal currency. Either the euro or a participating country's
present currency will be accepted as legal tender from January 1, 1999 to
January 1, 2002, from which date forward only the euro will be accepted. The
euro will be implemented initially as an additional currency both in domestic
and foreign markets for European businesses domiciled in the European
monetary zone. In fiscal 1998, approximately 18% of the Company's revenues
were derived from operations in member countries of the European monetary union.
The Company has initiated an assessment of euro-related issues and
their impact on information systems, currency exchange rate risk, employment and
benefits, taxation, contracts, competition, selling prices and costs,
communications, finance and administration. Initially the Company intends to
continue to do business in the national currency of the countries adopting the
euro. Customers and vendors who wish to do business in the euro will be
accommodated by the Company. During fiscal 1999 and 2000 the Company intends to
upgrade its information systems in Germany and France to facilitate its ability
to transact all business using the euro by January 1, 2002. After this date all
transactions involving the Company with respect to countries participating in
the euro conversion will be based solely on the euro. The Company does not
currently expect the cost of such modifications to have a material effect on the
Company's results of operations or financial condition.
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The Company has outstanding foreign exchange contracts involving the
currencies of countries participating in the euro conversion. The Company
believes that conversion to the euro may reduce the amount of the Company's
exposure to exchange rate risk, due to the netting effect of having assets and
liabilities denominated in a single currency as opposed to the various legacy
currencies. As a result, the Company's foreign exchange hedging costs could
be reduced. Conversely, because there will be less diversity in the Company's
exposure to foreign currencies, movements of the euro's value relative to the
U.S. dollar could have a more pronounced effect, whether positive or negative.
The largest European country which is not currently participating in
the euro conversion is the United Kingdom, which, in fiscal 1998, accounted for
approximately 10% of the Company's consolidated net sales. The Company is
considering the potential impact which the United Kingdom's nonparticipation
might have on trading activities with countries participating in the euro
conversion as well as on internal United Kingdom operations.
The Company does not expect the euro conversion, including the costs
of implementation, to have a material adverse effect upon the Company's results
of operations, financial condition or cash flow. However, the Company cannot
guarantee that, with respect to the euro conversion, all problems, including
long-term competitive implications of the conversion, will be foreseen and
corrected, that no material disruption of the Company's business will occur, or
that there will be no delays in the dates targeted by the Company for the euro
conversion process.
ENVIRONMENTAL MATTERS
The Company generates hazardous and non-hazardous waste in the normal
course of its manufacturing operations. As a result, the Company is subject to a
wide range of Federal, state, local and foreign environmental laws, including
CERCLA, that (i) govern activities or operations that may have adverse
environmental effects, such as discharges to air and water, as well as handling
and disposal practices for hazardous and nonhazardous wastes, and (ii) impose
liability for the costs of cleaning up, and certain damages resulting from,
sites of past spills, disposals or other releases of hazardous substances.
Compliance with such laws has required, and will continue to require,
expenditures by the Company on a continuing basis. The Company does not expect
that these expenditures will have a material adverse effect on its financial
condition or results of operations.
In 1990, the Clean Air Act was amended and established a list of 189
toxic air pollutants that must be controlled using MACT as prescribed by the
EPA. The Company believes that by 2003 it will be subject to MACT regulations
with respect to its surface coating air omissions. At this time, the Company
does not expect the cost of compliance with these MACT regulations to have a
significant impact on the Company.
CHANGE IN ACCOUNTING STANDARDS
In 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting of Comprehensive Income." This Statement requires the reporting
of comprehensive income in interim and annual financial statements. Net income
together with periodic adjustments with respect to foreign currency translation
and minimum pension liabilities will result in comprehensive income. The
Company intends to adopt the pronouncement in the first quarter of fiscal 1999.
In 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information." This
Statement requires that public business enterprises disclose information about
their products and services, operating segments, the geographic areas
21
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in which they operate, and their major customers. Management will adopt the
provisions of this Standard in fiscal 1999. At this time, management has not
definitively determined the content or nature of the Company's segment
reporting.
In 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities measured at fair value. Management
has not yet evaluated this statement's impact on the Company's financial
condition or results of operations. Adoption of this statement will be required
for fiscal 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The Company's principal market risk exposure is changing interest
rates, primarily changes in short term interest rates. The Company does not
enter into financial instruments for trading or speculative purposes. The
Company's policy is to manage interest rates through use of a combination of
fixed and floating rate debt. The Company may also use derivative financial
instruments to manage its exposure to interest rate risk. A summary of the
Company's principal financial instruments which are subject to interest rate
risk at October 3, 1998 is as follows (dollars in thousands):
AMOUNT OUTSTANDING
DESCRIPTION AT OCTOBER 3, 1998 INTEREST RATE FAIR VALUE
- ----------- ------------------ ------------- ----------
Revolving Credit Facility $ - Floating $ -
Term Loan Facility $190,000 Floating $190,000
Senior Subordinated Notes $225,000 9.25% $198,000
At the Company's option, loans under the Revolving Credit Facility (as
defined in the New Credit Facility) and Term Loan Facility (as defined in the
New Credit Facility) bear interest (a) in the case of loans in U.S. dollars, at
the highest of (x) 1/2 of 1.0% in excess of the Federal Funds Effective Rate (as
defined in the New Credit Facility) (y) 1.0% in excess of a certificate of
deposit rate and (z) the bank's prime rate, plus the applicable margin (as
defined in the New Credit Facility), or (b) in the case of all loans, the
relevant Eurocurrency Rate (as defined in the New Credit Facility), plus the
applicable margin. The applicable margin will vary based upon the Company's
operating results and will range between 1.25% and 2.25% for borrowings under
the Revolving Credit Facility and between 2.0% and 2.5% for borrowings under the
Term Loan Facility. As of October 3, 1998, the margins for borrowings under the
Revolving Credit Facility and Term Loan Facility were 2.25% and 2.5%,
respectively. The average interest rate on borrowings under the Term Loan
Facility was 8.33% for the five months ended October 3, 1998.
The Revolving Credit Facility expires in fiscal 2005. The Term Loan
Facility matures in fiscal 2006 and must be repaid in semi-annual installments
in April and October of each year in an aggregate amount of (i) $2,000 for the
first six years, (ii) $88,000 during the fiscal 2005 and (iii) the balance in
fiscal 2006. The Senior Subordinated Notes mature in fiscal 2008.
The Company has an interest rate collar to manage exposure to
fluctuations in interest rates on $100.0 million of its floating rate long-term
debt through September 2001. Under the agreement the Company will receive, on
a $100.0 million notional amount, three month LIBOR and pay 6.5%, anytime LIBOR
exceeds 6.5%, and will receive three month LIBOR and pay 5.19% anytime LIBOR is
below 5.19%. The agreement effectively caps the Company's exposure on $100.0
million of its floating rate debt at 6.5% plus the applicable margin.
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Movement in foreign currency exchange rates creates risk to the
Company's operations to the extent of sales made and costs incurred in foreign
currencies. The major foreign currencies, among others, in which the Company
does business are the British pound sterling, German mark and French franc. In
addition, changes in currency exchange rates can affect the competitiveness of
the Company's products and could result in management reconsidering pricing
strategies to maintain market share. Specifically, the Company is most
sensitive to changes in the German mark. In the seven months ended April 28,
1998 and the five months October 3, 1998, approximately 29% and 26%,
respectively, of the Company's net sales were transacted in foreign currencies
and approximately 15% and 18%, respectively, were transacted in the German mark.
During the past three fiscal years, the impact of currency fluctuations has not
had significant impact on the Company's results of operations. Had the average
exchange rate for the Company's foreign currencies been 10% higher in fiscal
1998 the Company's reported earnings would have been higher by $2.0 million and
$1.1 million for the seven months ended April 28, 1998 and the five months
October 3, 1998, respectively. Based on the Company's overall currency rate
exposure at October 3, 1998, a 10% change in currency rates would not have had a
material effect on the financial position, results of operations or cash flows
of the Company.
In order to manage currency risk, the Company's practice is to
contract for purchases and sales of goods and services in the functional
currency of the Company's subsidiary executing the transaction. To the extent
the purchases or sales are in currencies other than the functional currency of
the subsidiary, the Company will generally purchase forward contracts to hedge
firm purchase and sales commitments. As of October 3, 1998, the Company was a
party to 11 such contracts with an aggregate value of $6.7 million. These
forward contracts generally have average maturities of less than three months.
The Company has not taken any actions at this time to hedge its net investment
in foreign subsidiaries but may do so in the future.
The Company does not have any commodity contracts.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Combined and Consolidated Financial Statements of the Company,
along with the Report of Independents Accountants, are included on pages F-1
through F-47 of this Form 10-K.
Supplementary data called for by this item is not presented, as it is
not applicable to the Company.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Until July 1998, Ernst & Young LLP ("Ernst & Young") was the
independent accountant of the Company. In July 1998, Ernst & Young was replaced
by KPMG Peat Marwick LLP ("KPMG") as the independent accountant of the Company.
Ernst & Young did not resign nor was it dismissed under adverse circumstances.
Ernst & Young's report on the financial statements for the past two years did
not contain an adverse opinion or a disclaimer of opinion, nor was it qualified
or modified as to uncertainty, audit scope, or accounting principles. The
decision to change accountants was recommended by the parent of the Company. In
addition, during the two most recent fiscal years (and the subsequent interim
periods) prior to the Company's change in accountants, there were no
disagreements with Ernst & Young on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Ernst & Young, would have
caused Ernst & Young to make reference to the subject matter of the
disagreements in connection with its report.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Grove Holdings, as Managing Member, sets the terms of office of the
members of the Management Committee of the Company (the "Company Management
Committee"). Aside from Mr. Bonanno, the executive officers of the Company serve
at the discretion of the Company Management Committee. See "Item 11. Executive
Compensation--Employment Arrangements." The following table sets forth
information concerning executive officers of the Company and the members of the
Company Management Committee, each of whom is also a member of the Management
Committee of Grove Holdings (the "Holdings Management Committee" and, together
with the Company Management Committee, the "Management Committees"):
NAME AGE POSITION
- -------------------- ------- ---------------------------------------------
Salvatore J. Bonanno 57 Chairman and Chief Executive Officer, Grove
Worldwide and Member of each Management
Committee
Jeffry D. Bust 45 President and Chief Operating Officer, Grove
Crane
Theodore J. Urbanek 64 President, National Crane Corporation
Stephen L. Cripe 42 Vice President and Chief Financial Officer,
Grove Worldwide
Keith R. Simmons 48 Senior Vice President, General Counsel and
Business Development, Grove Worldwide
Donald Mallo 49 Senior Vice President, Human Resources, Grove
Worldwide
John Wheeler 53 President, Europe, Africa, and the Middle
East
J Taylor Crandall 43 Member of each Management Committee
Michael L. George 59 Member of each Management Committee
Gerald Grinstein 66 Member of each Management Committee
Steven B. Gruber 40 Member of each Management Committee
Robert B. Henske 37 Member of each Management Committee
Gerard E. Holthaus 49 Member of each Management Committee
Anthony P. Scotto 50 Member of each Management Committee
Mr. Bonanno serves as Chairman and Chief Executive Officer of the Company
and serves as a member of each Management Committee. From July 1995 to June
1997, he was President of Foamex L.P. and from July 1997 to March 1998, he was
President, Chief Operating Officer and a Board Member of Foamex International
Inc. ("Foamex"), a $1 billion polyurethane manufacturing company, where he was
responsible for directing all manufacturing operations, strategic planning and
policy-making activities for Foamex's cushioning foams, automotive foams and
technical foams businesses. While at Foamex, Mr. Bonanno led an organizational
restructuring which included streamlining three layers of management,
restructuring manufacturing operations and reducing costs. From July 1993 to
July 1995, Mr. Bonanno served as General Manager of International Manufacturing
Operations for Chrysler Corporation where his responsibilities included solely
owned operations, joint ventures and licensing agreements outside of North
America. Mr. Bonanno joined Chrysler in 1965.
Mr. Bust serves as President and Chief Operating Officer of Grove Crane, a
position in which he has served since June 1998, and is responsible for the
business direction of Grove Crane, including directly overseeing the
manufacturing, quality, marketing, sales, product support and engineering
departments at Grove Crane's Shady Grove, Pennsylvania facility, and indirectly
at Wilhelmshaven, Germany and Sunderland, United Kingdom facilities. From
November 1994 to June 1998, he served as President and General Manager for
Manitowoc Cranes, Inc. and the Lattice Crane Group. From January 1989 to
November 1994, he held the positions of Senior Vice President, Mining Equipment
Division, and Vice President of Operations for Harnischfeger Corporation. He
also held various management positions with FMC Corporation from June 1982 to
January 1989.
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Mr. Urbanek serves as President of National Crane, a position in which he
has served since 1975. Mr. Urbanek is responsible for the business direction of
National Crane, including overseeing the manufacturing, engineering, marketing,
sales, product support, quality, human resources, accounting and information
services departments at the Waverly, Nebraska facility. His past positions (all
while also serving as President of National Crane) include acting Vice President
and General Manager of Grove Manlift from 1981 to 1983 and Group Vice President
for Circle Steel Corp. and Cook Pump (a Grove Worldwide operation) from 1984 to
1987.
Mr. Cripe serves as Senior Vice President and Chief Financial Officer of
the Company, a position in which he has served since August 1998. Mr. Cripe is
responsible for accounting and control, treasury functions, budgeting and
planning and information systems oversight for the Company and its operating
companies. From April 1996 to August 1998, he was Vice President of the Tenneco
Automotive Group, Lake Forest, Illinois. From 1990 to April 1996, he was
Controller for the Industrial Fibers Group of Allied Signal.
Mr. Simmons serves as Senior Vice President, General Counsel and Business
Development of the Company. He has served in this position since May 1995, and
is responsible for managing the legal affairs of Grove Worldwide and its
operating companies and, in conjunction with the operating companies, for
developing and implementing external growth initiatives. From April 1992 to May
1995, he was Senior Vice President and General Counsel for Grove Worldwide.
Mr. Mallo serves as Senior Vice President, Human Resources of the Company,
a position to which he has served since October 1998. Mr. Mallo is responsible
for the strategic development, planning and oversight of the Company=s human
resources and employment policies. From October 1993 to September 1998, he held
the position of Executive Vice President, Human Resources, for Foamex
International, Inc. and as Senior Vice President Human Resources for the United
Auto Group, a related company. From August 1988 to October 1993, he served as
Vice President, Human Resources and General Counsel for General Felt Industries,
Inc. until its acquisition by Foamex and his subsequent promotion within the
Foamex organization. He has also held various human resources and legal
positions with the Lerner Stores Corporation and New York City Transit
Authority. Mr. Mallo has a J. D. Degree and is admitted to practice law in New
York State.
Mr. Wheeler serves as President, Europe, Africa, and the Middle East,
a position to which he was appointed in December 1998. Mr. Wheeler is
responsible for the day-to-day operations of the Company's manufacturing,
marketing, sales, finance, and product support activities in Europe, Africa, and
the Middle East. From 1995 to December 1998, he served as Senior Vice
President-Worldwide Operations for the Grove Crane operation of the Company.
From January 1985 to June 1995, Mr. Wheeler held various executive and
manufacturing management positions with Ingersoll Rand.
Mr. Crandall serves as a member of each Management Committee. Mr.
Crandall has been a Managing Partner of Oak Hill Capital Management, Inc.
since November 1998, and the Chief Operating Officer of Keystone since
October 1998. Between 1986 and October 1998, he served as Chief Financial
Officer and Vice President of Keystone. Since 1991, he has served as a
President and a director of Acadia MGP, Inc. Mr. Crandall is a director of
Bell & Howell Company, Quaker State Corporation, Specialty Foods, Inc.,
Washington Mutual, Inc., Integrated Orthopedics, Inc., Physician Reliance
Network Inc. and Sunterra Corporation. Mr. Crandall also serves on the Board
of Advisors of Oak Hill Strategic Partners, L.P. and on the Investment
Committees of Insurance Partners, L.P. and Brazos Fund L.P.
Mr. George serves as a member of each Management Committee. Since
1984, Mr. George has served as Chief Executive Officer and Chairman of the Board
of George Group, an acquisition and management consulting firm based in Dallas,
Texas. He is a director of Reliant Building Products, Inc.
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Mr. Grinstein serves as a member of each Management Committee. Since
August 1997, Mr. Grinstein has been the non-executive Chairman of Delta Air
Lines, Inc. He served as Chairman of Burlington Northern Santa Fe Corp., a
railroad transportation company, until his retirement in 1995. He was Chairman
and Chief Executive Officer of Burlington Northern Inc. from 1991 to 1995.
Before joining Burlington Northern in 1987, he was Chairman of Western Airlines
from 1983 to 1987 and a partner in the law firm of Preston, Thorgrimson, Ellis
and Holman from 1969 to 1983. In addition to being a director of Delta Airlines,
Mr. Grinstein also serves as a director of Browning-Ferris Industries, Inc.,
PACCAR Inc., Sundstrand Corp., Imperial Holly Corp and The Pittston Company and
Vans, Inc.
Mr. Gruber serves as a member of each Management Committee. Mr.
Gruber has been a Managing Partner of Oak Hill Capital Management, Inc. since
November 1988, and has been a Managing Director of Oak Hill Partners, Inc.
since March 1992. From May 1990 to March 1992, he was a Managing Director of
Rosecliff, Inc. Since February 1994, Mr. Gruber has also been an officer of
Insurance Partners Advisors, L.P., an investment adviser to Insurance
Partners, L.P. Since October 1992, he has been a Vice President of Keystone.
From 1981 to 1990, Mr. Gruber was a Managing Director and co-head of High
Yield Securities and held various other positions at Lehman Brothers, Inc.
Mr. Gruber serves as a director of Superior National Insurance Group, Inc.,
MVE Holdings, Inc., Reliant Building Products, Inc. and several private
companies related to Keystone, Insurance Partners, L.P. and Oak Hill
Partners, Inc.
Mr. Henske serves as a member of each Management Committee. Since
November 1998, Mr. Henske has been a Managing Partner of Oak Hill Capital
Management, Inc. Since January 1997, Mr. Henske has served as a principal at
Arbor Investors, LLC. From January 1996 to December 1996, he was Executive Vice
President, Chief Financial Officer and Board Member of American Savings Bank,
F.A., a federally-chartered thrift. From 1986 to January 1996, he was a partner
and held various other positions with Bain & Company, Inc., a management
consulting firm. Mr. Henske is a director of Reliant Building Products, Inc.
and Williams Scotsman, Inc.
Mr. Holthaus serves as a member of each Management Committee. Since
April 1997, Mr. Holthaus has been President and Chief Executive Officer of
Williams Scotsman, Inc. From September 1995 to April 1997, he was President and
Chief Operating Officer of Williams Scotsman, Inc. and was Executive Vice
President and Chief Financial Officer prior thereto. He has served as a director
of Williams Scotsman, Inc. since June 1994. Before joining Williams Scotsman,
Inc., Mr. Holthaus served as Senior Vice President of MNC Financial, Inc. from
April 1988 to June 1994. From 1971 to 1988, Mr. Holthaus was associated with the
accounting firm of Ernst & Young (Baltimore), where he served as a partner from
1982 to 1988. He is a director of the Baltimore Life Insurance Company.
Mr. Scotto serves as a member of each Management Committee. Mr.
Scotto has been a consultant to Oak Hill Capital Management, Inc. since
November 1998, and has served as a Managing Director of Oak Hill Partners,
Inc. since 1992. Mr. Scotto is a director of Holophane Corporation, Ivex
Packaging Corporation and Specialty Foods, Inc.
MANAGEMENT COMMITTEE SUBCOMMITTEES AND FEES
The Company Management Committee has an executive committee,
compensation committee, operating committee, finance committee, and audit/ethics
committee. The members of the Company Management Committee and the
subcommittees are not compensated for their services as such.
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ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation paid during the
last fiscal year to Grove Worldwide's current and former Chief Executive
Officers, those officers who were, at October 3, 1998, the next four highest
paid officers of Grove Worldwide, and those two additional individuals for whom
disclosure would have been provided but for the fact that such individuals were
not serving as executive officers of Grove Worldwide at the end of the last
completed fiscal year (collectively, together with the Chief Executive Officers,
the "Named Executive Officers"):
<TABLE>
<CAPTION>
Long Term
Annual Compensation(a) Compensation Awards
---------------------- ---------------------------
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus Options(b) Ltip Payouts Compensation(c)
- --------------------------- ---- ------ ----- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
S. Bonanno, CEO, Grove Worldwide 1998 $273,718 $ - 1,500 $ - $ 93,776(d)
R. Stift, CEO, Grove Worldwide(e) 1998 233,417 97,500 - 434,786 2,807,258(f)
1997 391,000 390,000 - 23,776 21,129(g)
K. Simmons, General Counsel,
Grove Worldwide 1998 192,759 45,540 187 161,238 14,120(h)
1997 186,004 138,750 - 3,214 15,728(i)
J. Kolinski, President, Grove Manlift(j) 1998 207,012 7,757 - 192,238 748,267(k)
1997 201,004 142,000 - 10,364 19,555(l)
T. Urbanek, President, National Crane 1998 161,334 41,397 - 155,013 12,000(m)
1997 156,312 93,787 - 24,785 11,751(n)
J. Wheeler, President, Europe, Africa,
and the Middle East 1998 185,205 69,882 300 98,580 13,190(o)
1997 176,008 131,250 - - 12,355(p)
F. Heidinger, CFO, Grove Worldwide(q) 1998 113,505 43,750 - 157,793 736,032(r)
1997 175,408 131,250 - 7,782 13,320(s)
J. Shull, President, Grove Crane(t) 1998 224,519 101,192 - 195,048 16,212(u)
1997 221,008 220,000 - 3,237 15,928(v)
</TABLE>
- --------------------
(a) The value of perquisites and benefits for each Named Executive Officer does
not exceed the lesser of $50,000, 10% of the total annual salary and bonus
of such executive officer and, accordingly, is not reported herein.
(b) Certain of the Named Executive Officers have been granted options to
purchase limited liability interests in Grove Investors denominated in
Class A Units (as defined in the Option Plan).
(c) Represents the value of personal use of a company vehicle, employer
matching contributions under Grove Worldwide's 401(k) plan, excess group
term life insurance value, supplemental health care insurance and long-term
disability insurance premiums. Does not include benefits that are made
available to all employees.
(d) Includes a payment of $63,462 to compensate Mr. Bonanno for compensation
foregone under an employment arrangement with his former employer and
$26,150 for relocation costs incurred in connection with becoming Chairman
and Chief Executive Officer of Grove Worldwide on April 29, 1998.
(e) Robert C. Stift served as Chairman and Chief Executive Officer of Grove
Worldwide until April 29, 1998.
(f) Includes a payment of $2,802,528 made to Mr. Stift under his Change of
Control Agreement and employer matching contributions under Grove
Worldwide's 401(k) plan of $5,000.
(g) Includes excess group term life insurance valued at $8,550.
(h) Includes the use of a company vehicle valued at $4,660 and employer
matching contributions under Grove Worldwide's 401(k) plan of $5,000.
(i) Includes the use of a company vehicle valued at $4,579 and employer
matching contributions under Grove Worldwide's 401(k) plan of $5,430.
(j) James A. Kolinski served as President of Grove Manlift until November 19,
1998.
(k) Includes a payment of $730,643 made to Mr. Kolinski under his Change of
Control Agreement, the use of a company vehicle valued at $6,723 and
employer matching contributions under Grove Worldwide's 401(k) plan of
$5,000.
(l) Includes the use of a company vehicle valued at $6,279 and excess group
term life insurance valued at $8,550.
(m) Includes the use of a company vehicle valued at $3,843, employer matching
contributions under Grove Worldwide's 401(k) plan of $5,000 and excess
group term life insurance valued at $3,875.
(n) Includes the use of a company vehicle valued at $3,842, employer matching
contributions under Grove Worldwide's 401(k) plan of $4,216 and excess
group term life insurance valued at $3,693.
(o) Includes employer matching contributions under Grove Worldwide's 401(k)
plan of $5,000.
(p) Includes the use of a company vehicle valued at $3,119 and employer
matching contributions under Grove Worldwide's 401(k) plan of $5,000.
(q) G. Fred Heidinger served as Senior Vice President and Chief Financial
Officer of Grove Worldwide until May 15, 1998.
27
<PAGE>
(r) Includes a payment of $725,743 made to Mr. Heidinger under his Change of
Control Agreement, the use of a company vehicle valued at $3,079 and
employer matching contributions under Grove Worldwide's 401(k) plan of
$5,000.
(s) Includes the use of a company vehicle valued at $4,328 and employer
matching contributions under Grove Worldwide's 401(k) plan of $5,052.
(t) Joseph A. Shull served as Chairman of Grove Crane until September 30, 1998.
(u) Includes the use of a company vehicle valued at $5,053 and employer
matching contributions under Grove Worldwide's 401(k) plan of $5,000.
(v) Includes the use of a company vehicle valued at $4,990 and employer
matching contributions under Grove Worldwide's 401(k) plan of $4,197.
Kidde Industries, Inc. (a subsidiary of Hanson), Grove Worldwide
and/or Hanson maintained certain other compensation programs that were
terminated on or prior to the consummation of the Transactions.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth individual grants of options pursuant
to the Grove Investors LLC Management Option Plan (the "Option Plan") for
officers, members and employees during the last fiscal year to the Named
Executive Officers:
<TABLE>
<CAPTION>
Securities Underlying % of Total options/SARS Granted Exercise or Base
Name Options Granted(#)(1) to Employees in Financial Year Price ($/Security) Expiration Date(2)
- ---- --------------------- ------------------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
S. Bonanno 1,500 42.0% $1,000 April 28, 2008
K. Simmons 187 5.25 1,000 April 28, 2008
J. Wheeler 300 8.45 1,000 April 28, 2008
</TABLE>
- --------------------
(1) Options to purchase limited liability interests in Grove Investors
denominated in Class A Units (as defined in the Option Plan).
(2) The options may be exercised: (i) April 28, 2008; (ii) 30 days following
termination of the Named Executive Officer concerned without cause (as
described in the Option Plan); (iii) one year following the death or
disability of the Named Executive Officer concerned; (iv) the effective
date of termination for cause (as described in the Option Plan); or (v) the
effective date of voluntary termination for any reason (as described in the
Option Plan).
AGGREGATED OPTIONS EXERCISED DURING FISCAL 1998 AND YEAR-END VALUES
The following table sets forth certain information with regard to
stock options exercised under the Hanson PLC Share Option Plan (the "Hanson
Plan") held by the Named Executive Officers during fiscal 1998:
<TABLE>
<CAPTION>
Number of securities Value of Unexercised
underlying unexercised in-the-Money Options at the
options end of Fiscal 1998 End of Fiscal 1998(2)
--------------------------- ---------------------------
Securities
Acquired on Value
Name(1) Exercise(3) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Stift 97,033 $49,522 99,782 0 $0 $0
K. Simmons - - 47,116 0 0 0
J. Kolinski - - 47,116 0 2,936 0
T. Urbanek 11,641 10,963 63,193 0 0 0
J. Wheeler - - 7,442 0 594 0
F. Heidinger 11,641 19,476 46,564 0 0 0
J. Shull - - 50,997 0 5,871 0
</TABLE>
- ----------------
(1) Hanson PLC maintained the Hanson Plan under which the options described in
this table were issued. The Hanson Plan was terminated in 1995.
(2) Value of unexercised in the money options is calculated based on the
closing price for ordinary shares of Hanson PLC on October 3, 1998 of 370
pence and converted to U.S. dollars using the exchange rate of 1.7041 which
was the rate on October 3, 1998.
(3) All options described in this table are to purchase the ordinary shares of
Hanson PLC.
28
<PAGE>
PENSION BENEFITS
The following table sets forth the standard annual benefits payable to
participants in the Company's pension plan and nonqualified supplemental benefit
plan:
PENSION PLAN TABLE
YEARS OF SERVICE
---------------------------------------------------------
REMUNERATION #15 #20 #25 #30 #35
- ------------ --- --- --- --- ---
$125,000 $27,903 $37,203 $46,504 $55,805 $65,106
$150,000 $34,090 $45,453 $56,817 $68,180 $79,543
$175,000 $40,278 $53,703 $67,129 $80,555 $93,981
$200,000 $46,465 $61,953 $77,442 $92,930 $108,418
$225,000 $52,653 $70,203 $87,754 $105,356 $122,856
$300,000 $61,315 $81,753 $101,192 $122,630 $143,068
$400,000 $61,315 $81,753 $102,192 $122,630 $143,068
$450,000 $61,315 $81,753 $102,192 $122,630 $143,068
$500,000 $61,315 $81,753 $102,192 $122,630 $143,068
Salaried employees of the Company are eligible to participate in the
Company's defined benefit pension plan, and each named Executive Officer
participates in a supplemental excess retirement plan. Under the aggregated
plans, benefits are determined based on years of service and average annual base
salary (up to $260,000 for years after 1996) for the highest three of the last
10 years of service. Benefits under the plan equal 1% of final average pay plus
0.65% of final average pay in excess of social security covered compensation,
minus any benefits payable under the Company's prior plan. Mr. Stift was covered
by a special, non-qualified, unfunded supplemental retirement plan, which
provides a total retirement benefit of 66.66% of base pay averaged over the full
60 months prior to retirement. This total benefit is reduced by benefits from
the Grove and Hanson pension plans, 50% of the Primary Social Security benefit
and for employment after July 1, 1984 of less than 20 years.
All of the Named Executive Officers are participants in the pension
plan.
The following table sets forth the estimated credited years of service
for each of the Named Executive Officers as of the end of fiscal 1998:
ESTIMATED CREDITED YEARS OF SERVICE AS OF THE END OF FISCAL YEAR 1998
NAME CREDITED YEARS
---- OF SERVICE
----------
S. Bonanno 0.5
R. Stift(1) 14.5
K. Simmons 13.1
J. Kolinski 5.4
T. Urbanek 26.1
J. Wheeler 3.3
F. Heidinger 4.8
J. Shull 30.3
- -----------------
(1) Includes 8.4 credited years of service with Hanson.
29
<PAGE>
DESCRIPTION OF MANAGEMENT OPTION PLAN
In April 1998, Grove Investors, the parent company of Grove Holdings,
adopted the Option Plan. The purpose of the Option Plan is to promote the
interests of Grove Investors and its members by (i) attracting and retaining
exceptional officers and other key employees of Grove Investors and its
affiliates, specifically the Company, and (ii) enabling such individuals to
acquire an equity interest in, and participate in the long-term growth and
financial success of Grove Investors.
Subject to a participant's continued employment with the Company or
its affiliates, options granted under the Option Plan will vest over a five year
period as follows. For each of the first five fiscal years beginning after the
date the options are granted, the options will vest and become cumulatively
exercisable with respect to 20% of Grove Investors' membership interests subject
to such options on the last day of such fiscal year if the Company and its
subsidiaries meet the EBITDA target established for that fiscal year. If the
EBITDA actually achieved for a year is less than the EBITDA target for that
year, then the vesting schedule for that year will be proportionately reduced.
In addition, options will not vest in any year if the actual EBITDA for that
year is less than a minimum percentage of the EBITDA target.
To the extent not previously canceled, any unvested portion of an
option will, as of the date of a Change in Control (as defined in the Option
Plan), be deemed vested and exercisable immediately prior to such Change in
Control. In addition, as a result of a termination of employment by any
participant, Grove Investors has the assignable right but not the obligation to
purchase the participant's membership interests in Grove Investors for an amount
to be calculated based on the participant's reason for termination of
employment.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Certain management employees of the Company participated in Hanson
Industries' 1996 Long-Term Incentive Plan (the "1996 LTIP") and 1997 Long-Term
Incentive Plan (the "1997 LTIP"). Under the terms of each of the plans, the
management employees had been or would have been entitled to receive cash
compensation if certain targets were met. These awards were determined by
evaluating the actual performance of the business units operated by such
management employees against performance goals for such units.
In connection with the Acquisition, in April 1998, approximately $1.1
million and $2.0 million of compensation was awarded and paid to certain
management employees of the Company, including certain of the Named Executive
Officers, under the 1996 LTIP and 1997 LTIP, respectively. See "--Summary
Compensation Table." Upon consummation of the Transactions, the 1996 LTIP and
1997 LTIP were terminated.
SHORT-TERM INCENTIVE PLAN
The Company's short-term incentive plan (the "STIP") permits the
Company to pay officers and other key employees, including prospective officers
and employees, of the Company and its affiliates an annual bonus conditioned on
the attainment of certain pre-established financial performance criteria based
on EBITDA targets for the Company and/or designated business sub-units. The STIP
is administered by certain persons designated by the Compensation Committee of
the Company.
30
<PAGE>
EMPLOYMENT ARRANGEMENTS
Mr. Bonanno entered into an employment contract with the Company in
March 1998. Mr. Bonanno's term of employment is two years, beginning on April
29, 1998, subject to two-year automatic renewal periods. Mr. Bonanno is entitled
to an annual salary of $500,000, STIP awards and two additional payments of
$450,000 on March 31, 1999 and March 31, 2000. See "--Short-Term Incentive
Plan." In addition, the Company arranged with a third party to purchase Mr.
Bonanno's former residence for approximately $219,000, the difference between
the residence's estimated market value and the outstanding mortgage balance,
and reimbursed the third party for the $219,000 payment. Upon sale of the
residence, any amount received by the third party in excess of the
outstanding mortgage balance will be paid to the Company.
As part of his employment contract, Mr. Bonanno was granted an option
under the Option Plan to purchase 2.0% of the outstanding membership interests
of Grove Investors, calculated as of the Closing Date. See "--Description of
Management Option Plan." The contract also provides that Mr. Bonanno has the
option to purchase additional membership interests of Grove Investors.
In March 1998, Mr. Bonanno entered into a separate employment
agreement with the Company covering the period between March 16, 1998 and April
29, 1998, under which he received a ratable payment based on the actual number
of days elapsed during such period based on a yearly salary of $500,000.
Mr. Shull entered into an executive agreement with the Company in June
1998, providing for his employment through September 1998. During the term of
his employment, Mr. Shull was entitled to a ratable payment based on his current
salary and STIP awards. See "--Short-Term Incentive Plan." In addition, in
consideration of his agreeing not to compete with the Company through August 31,
2001, and to waive his change of control agreement, Mr. Shull will receive
additional annual payments through August 31, 2001. See "--Termination and
Change of Control Agreements." Mr. Shull also entered into a consulting
arrangement covering the period between October 1, 1998 and December 31, 2000.
TERMINATION AND CHANGE OF CONTROL AGREEMENTS
In 1997, each of Messrs. Stift, Heidinger, Kolinski, Shull, Simmons
and Urbanek entered into separate change of control agreements with Grove
Worldwide. Each executive's agreement provides that if, within two years
after a change in control of Grove Worldwide, (a) the executive is terminated
by Grove Worldwide without Cause (as defined therein) or due to death,
disability or retirement, or (b) the executive terminates his employment for
Good Reason, then, in addition to payment for certain unreimbursed expenses,
deferred compensation, health coverage premiums (including reimbursement for
any income tax liability resulting from such payment) and other
employment-related benefits, the executive will also be entitled to a
lump-sum payment equal to two times (three times in the case of Stift) the
sum of (x) his highest annual base salary in effect within 180 days prior to
the change of control and (y) his highest annual bonus paid or payable for
either of the last two completed years by the Company or its predecessors.
Each executive is also entitled to the above-described severance amount in
the event his employment is within 180 days prior to a change in control
terminated (a) by the Company without Cause or (b) by him for Good Reason
(based on an event that occurred within the 180-day period) or (c) due to his
death. Pursuant to Mr. Shull's 1998 executive agreement, he has waived any
rights under his change of control agreement. See "--Employment
Arrangements." Messrs. Stift, Heidinger and Kolinski were paid approximately
$2.8 million, $730,000 and $730,000, respectively, under their change of
control agreements upon their departures from the Company.
31
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Certain of the Named Executive Officers entered into employment
agreements during fiscal 1998. See "--Employment Arrangements." Until the
Closing Date, the compensation of the executive officers of the Company, other
than Mr. Stift, was determined by Mr. Stift and by Mr. Andrew Dougal, Chief
Executive Officer of Hanson. Mr. Stift's compensation was determined by Mr.
Dougal. Since the Closing Date, the compensation of the executive officers of
the Company, other than Mr. Bonanno, has been determined by Mr. Bonanno. Mr.
Bonanno's compensation has been determined by the Company's Management
Committee. No other executive officers of the Company participated in
deliberations regarding their compensation.
In July 1998, a compensation committee, made up of members of the
Company's Management Committee (the "Compensation Committee"), was formed to
approve executive compensation policies. The chairman of the Compensation
Committee is Mr. Henske. Messrs. Crandall and Gruber are also members of the
Compensation Committee. Traditionally, the Company's compensation practices have
been based on a modified "Hay" system. The Company is currently transitioning
into a "market" value system and is developing procedures to review, and if
appropriate, adjust its salary grades.
MANAGEMENT OF GROVE CAPITAL
Messrs. Henske, Scotto and Bonanno are the directors of Grove Capital.
They are not compensated in any way for acting in their capacity as such. The
board of directors of Grove Capital does not have a compensation committee,
audit committee or nominating committee.
Mr. Bonanno is the Chief Executive Officer of Grove Capital. Mr.
Simmons is the Vice President and Secretary of Grove Capital. Mr. Cripe is the
Vice President and Chief Financial Officer of Grove Capital. None of the
executive officers of Grove Capital are compensated for their services as such.
See "Item 10. Directors and Executive Officers of the Registrant" for
biographical information on the members and executive officers of Grove
Capital.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the issued and outstanding membership interests of the Company
are beneficially owned by Grove Holdings whose principal address is 1565
Buchanan Trail East, Shady Grove, Pennsylvania 17256. All shares of the issued
and outstanding capital stock of Grove Capital are beneficially owned by the
Company, whose principal address is 1565 Buchanan Trail East, Shady Grove,
Pennsylvania 17256. All of the issued and outstanding membership interests of
Grove Holdings are beneficially owned by Grove Investors, whose principal
address is 201 Main Street, Fort Worth, Texas 76102.
The following table sets forth certain information regarding
beneficial ownership of the membership interests of Grove Investors, the
managing member of Grove Holdings, by (i) each person or entity who owns five
percent or more thereof, (ii) each member of the Company Management Committee
individually who holds membership interests, (iii) each Named Executive Officer
who holds membership interests and (iv) all executive officers and members of
the Company Management Committee as a group:
32
<PAGE>
PERCENTAGE OF
GROVE INVESTORS
NAME OF BENEFICIAL OWNER MEMBERSHIP INTERESTS
------------------------ --------------------
FW Strategic Partners, L.P.(1) (2)
201 Main Street, Suite 3200
Forth Worth, Texas 76102 43.38%
FW Grove Coinvestors, L.P. (2) (3)
201 Main Street, Suite 3200
Forth Worth, Texas 76102 43.38%
GGEP-Grove, L.P. (2) (4)
One Galleria Tower
13355 Noel Road, Suite 1100
Dallas, Texas 75240 2.66%
D. Brown (3) ---
J Crandall (1) ---
M. George (2) (4) 1.89%
S. Bonanno (5) 2.67%
J. Shull (5) *
K. Simmons (5) *
J. Wheeler (5) *
All executive officers and members of
the Company Management Committee as
a group (14 persons) 7.66%
- ------------------
* Indicates less than one percent.
(1) The general partner of FW Strategic Partners, L.P. is FW Strategic Asset
Management, L.P., whose general partner is Strategic Genpar, Inc. J Taylor
Crandall is the sole stockholder of Strategic Genpar, Inc. Accordingly, Mr.
Crandall may be deemed to be the beneficial owner of the membership
interests of FW Strategic Partners, L.P. Mr. Crandall disclaims beneficial
ownership of these membership interests.
(2) Represents Class B Membership Interests. The Class B Membership Interests
and the Class A Membership Interests are substantially identical except
that, under the terms of the Grove Investors LLC Operating Agreement, the
issuance of additional Class B Membership Interests will not result in
dilution to the holders of the Class A Membership Interests.
(3) The general partner of FW Grove Coinvestors, L.P. is FW Group Genpar, Inc.
("Group Genpar"). David G. Brown is the sole stockholder of Group Genpar.
Accordingly, Mr. Brown may be deemed to be the beneficial owner of the
membership interests of FW Grove Coinvestors, L.P. Mr. Brown disclaims
beneficial ownership of these membership interests.
(4) GGEP-Grove, L.P., is an entity formed by certain employees of George Group.
M. George, the Chief Executive Officer and Chairman of the Board and
majority stockholder of George Group, is a member of the Company Management
Committee.
(5) Represents Class A Membership Interests.
Certain members of senior management of the Company have purchased
approximately 5.8% of the membership interests of Grove Investors. The purchase
price of such interests was partially financed through approximately $3.5
million in loans from the Company. Certain members of the senior management
have also been granted options to purchase membership interests of Grove
Investors under the Option Plan. See "Item 11. Executive
Compensation--Description of Management Option Plan." Grove Investors membership
interests held by such senior management members are subject to calls by Grove
Investors upon a termination of employment. See "Item 11. Executive
Compensation--Description of Management Option Plan."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OPERATING AGREEMENTS
GROVE WORLDWIDE LLC OPERATING AGREEMENT
The Company is wholly owned by Grove Holdings, which is also the
managing member. As managing member, Grove Holdings has delegated the management
of the Company to the Company Management Committee. Subject to restrictions
contained in the New Credit Facility and the Indenture relating to the Senior
Subordinated Notes, all distributions in respect of membership interests of the
Company will be made to Grove Holdings.
33
<PAGE>
GROVE HOLDINGS LLC OPERATING AGREEMENT
Grove Holdings is wholly owned by Grove Investors, which is also the
managing member of Grove Holdings. As managing member, Grove Investors has
delegated the management of the Company to the Holdings Management Committee,
which is identical in composition to the Company Management Committee. Subject
to restrictions contained in the Indenture relating to the Debentures, all
distributions in respect of membership interests of Grove Holdings will be made
to Grove Investors.
AGREEMENTS WITH GEORGE GROUP INC. FOR MANAGEMENT CONSULTING SERVICES
George Group provides consulting services to facilitate the Company's
development and achievement of its business plan, including services with
respect to the Operations Improvement Program, strategic planning, operations
and financial matters. For such services, George Group is paid cash fees
equivalent to its costs and is reimbursed for its out-of-pocket expenses. George
Group has advised the Company that it estimates its engagement will be completed
within 42 months and that the total cash fees and expenses would approximate
$14.0 million, including approximately $2.7 million it received in fiscal 1998.
In addition, if the Company achieves certain defined levels of performance in
fiscal 1999, 2000, 2001 and 2002, George Group will be entitled to receive
additional ownership interests in Grove Investors for each year the defined
levels of performance are achieved. The Company has agreed to indemnify George
Group, its owners, employees, and agents from liabilities and claims relating to
or arising from the engagement of George Group, other than those resulting from
gross negligence or willful misconduct of George Group. Michael L. George, a
member of the Company Management Committee, is Chief Executive Officer and
Chairman of the Board and majority stockholder of George Group. See "Item 1.
Business--Significant Developments."
AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS
The Company has entered into certain agreements with Messrs. Bonanno,
Stift, Heidinger, Simmons, Urbanek, Kolinski and Shull, and made payments to
Messrs. Stift, Heidinger and Kolinski under their change of control agreements.
See "Item 11. Executive Compensation--Employment Arrangements" and "Termination
and Change of Control Agreements." In addition, the Company has entered into an
executive agreement with Mr. Shull. See "Item 11. Executive Compensation--
Employment Arrangements."
LOANS TO CERTAIN EXECUTIVE OFFICERS
The Company has provided approximately $3.5 million in loans to
certain executive officers of the Company to finance their investment in the
membership interest of Grove Investors. These loans are evidenced by promissory
notes which bear interest at a rate per annum equal to the prime rate of Wells
Fargo Bank and, except for the $912,000 note made by Mr. Bonanno, are secured by
a pledge of the executive's membership interests in Grove Investors. Except as
described in the next sentence, all of the notes are due ten years from their
date of issuance. The $912,000 note made by Mr. Bonanno is due in June 2005,
a $250,000 note made by Mr. Cripe is due in April 1999, and a $50,000 note made
by Mr. Mallo is due in October 1999. As of October 31, 1998, Messrs. Bonanno,
Bust, Kolinski, Wheeler, Mallo and Cripe were indebted to the Company in the
amount of approximately $1.9 million, $375,000, $250,000, $150,000, $150,000
and $687,000, respectively.
34
<PAGE>
CERTAIN TRANSACTIONS WITH HANSON PRIOR TO THE CLOSING DATE
Prior to the consummation of the Transactions, the Company and its
subsidiaries were affiliates of Hanson. Hanson provided the Company and its
subsidiaries with various services, including, without limitation, cash
management, tax reporting and risk management services and charged a management
fee for such services. See "Item 7. Management's Discussion and Analysis of
Financial Condition Operations--Results of Operations." Prior to the
consummation of the Transactions, Hanson also purchased small quantities of the
Company's products on an arms-length basis.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (1) List of Financial Statements.
The following Combined and Consolidated Financial Statements of the
Company and the Report of Independent Accountants set forth on pages F-1 through
F-47 respectively, are incorporated by reference into this Item 14 of Form 10-K
by Item 8 hereof:
See Index to Combined and Consolidated Financial Statements and
Financial Statement Schedule on page F-1.
(a) (2) Financial Statement Schedules.
The following is a list of all financial statement schedules filed
as part of this Report:
See Index to Combined and Consolidated Financial Statements and
Financial Statement Schedule on page F-1.
Schedules other than those listed in the Index to Combined and
Consolidated Financial Statements and Financial Statement Schedule on page
F-1 have been omitted because they are not required or are not applicable, or
the required information has been included in the Combined and Consolidated
Financial Statements or the Notes thereto.
(a) (3) Exhibits.
Exhibit No. Description of Exhibit
- ----------- -----------------------------------------------------------------
3.1 Second Amended and Restated Limited Liability Company Agreement
of Grove Worldwide LLC ("Grove").
4.1* Indenture dated as of April 29, 1998, by and among Grove, Grove
Capital, Inc. ("Grove Capital"), the Subsidiary Guarantors and
the United States Trust Company of New York.
4.2* Form of 9 1/4% Senior Subordinated Notes due 2008.
4.3* Credit Agreement dated April 29, 1998, by and among Grove, Grove
Capital and Chase Bank of Texas, National Association, as
administrative agent, Donaldson, Lufkin & Jenrette Securities
Corporation, as documentation agent, and BankBoston, N.A., as
syndication agent.
4.4* Registration Rights Agreement dated as of April 29, 1998, by and
among Grove, Grove Capital, the Subsidiary Guarantors and Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and BankBoston Securities Inc.
10.1* Stock and Asset Purchase Agreement, dated March 10, 1998 (the
"Acquisition Agreement"), by and among Grove and Hanson Funding
(G) Limited, Deutsche Grove Corporation, Hanson America Holdings
(4) Ltd., Grove France SA, Kidde Industries, Inc. and Hanson
Finance PLC (collectively, the "Sellers").
10.2* Amendment to the Acquisition Agreement, dated April 29, 1998, by
and among the Grove and the Sellers.
10.3* George Group Consulting Agreement dated as of April 29, 1998 by
and between Grove and George Group Inc.
10.4* Employment Agreement dated as of March 5, 1998 by and between
Grove and Salvatore J. Bonanno.
10.5* Change of Control Agreement dated July 24, 1997 by and between
Grove and James A. Kolinski.
10.6* Change of Control Agreement dated July 24, 1997 by and between
Grove and Joseph A. Shull.
10.7 Change of Control Agreement dated July 24, 1997 by and between
Grove and Robert Stift.
35
<PAGE>
Exhibit No. Description of Exhibit
- ----------- -----------------------------------------------------------------
10.8* Change of Control Agreement dated July 24, 1997 by and between
Grove and Keith R. Simmons.
10.9* Change of Control Agreement dated July 24, 1997 by and between
Grove and Theodore J. Urbanek.
10.10* Change of Control Agreement dated July 24, 1997 by and between
Grove and G. Fred Heidinger.
10.11* Grove Investors LLC Management Option Plan.
10.12* Grove Worldwide LLC Short-Term Incentive Plan.
10.13* Guarantee and Collateral Agreement by Grove Holdings LLC, Grove,
Grove Capital and certain of their subsidiaries in favor of Chase
Bank of Texas, National Association, as administrative agent.
10.14* Software License and Support Agreement, dated June 29, 1996,
between Baan U.S.A. Inc. and Grove North America, Division of
Kidde Industries, Inc., and amended by Addendum No. One, dated
June 29, 1996.
10.15* Professional Services Agreement, dated June 26, 1996, between
Baan U.S.A. Inc. and Grove North America, Division of Kidde
Industries, Inc., and amended by Addendum No. One, dated June 29,
1996.
10.16* Consent Letter, dated April 27, 1998 from Grove to Baan U.S.A.
Inc.
10.17* Form of Grove Investors LLC Option Agreement.
10.18* First Amendment, dated June 23, 1998, to Employment Agreement of
Salvatore J. Bonanno.
10.19* Promissory Note dated June 27, 1998 by and between Grove and
Salvatore J. Bonanno.
10.21* Promissory Noted dated June 27, 1998 by and between Grove and
Jeffrey D. Bust.
10.22* Promissory Note dated June 27, 1998 by and between Grove and
James A. Kolinski.
10.23* Promissory Note dated June 27, 1998 by and between Grove and John
Wheeler.
10.24 Promissory Note dated October 27, 1998 by and between Grove and
Stephen L. Cripe.
10.25 Promissory Note dated October 27, 1998 by and between Grove and
Stephen L. Cripe.
10.26 Promissory Note dated October 27, 1998 by and between Grove and
Donald Mallo.
10.27 Promissory Note dated October 27, 1998 by and between Grove and
Donald Mallo.
21.1* Subsidiaries of the Company.
27.1 Financial Data Schedule.
- ------------------
* Incorporated herein by reference from the Registration Statement on Form
S-4 filed by the Company, Grove Capital, Inc. and the Subsidiary Guarantors
(Commission File Number 333-57611).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
October 3, 1998.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on December 31, 1999.
GROVE WORLDWIDE LLC
BY /s/ Salvatore J. Bonanno
------------------------------------------
SALVATORE J. BONANNO
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on December 31, 1999.
SIGNATURES TITLE
---------- -----
/s/ Salvatore J. Bonanno Chairman and Chief Executive Officer and
- ---------------------------- Member (Principal Executive Officer)
Salvatore J. Bonanno
/s/ Stephen L. Cripe Chief Financial Officer (Principal
- ---------------------------- Financial and Accounting Officer)
Stephen L. Cripe
/s/ J Taylor Crandall Member
- ----------------------------
J Taylor Crandall
/s/ Michael L. George Member
- ----------------------------
Michael L. George
/s/ Gerald Grinstein Member
- ----------------------------
Gerald Grinstein
/s/ Steven B. Gruber Member
- ----------------------------
Steven B. Gruber
/s/ Robert B. Henske Member
- ----------------------------
Robert B. Henske
/s/ Gerard E. Holthaus Member
- ----------------------------
Gerard E. Holthaus
/s/ Anthony P. Scotto Member
- ----------------------------
Anthony P. Scotto
37
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
The registrant has not sent the following to security holders: (i) any
annual report to security holders covering the registrant's last fiscal year;
or (ii) any proxy statement, form of proxy or other proxy soliciting material
with respect to any annual or other meeting of security holders.
38
<PAGE>
INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
GROVE WORLDWIDE LLC AND SUBSIDIARIES
<TABLE>
<CAPTION>
Page
<S> <C>
Financial Statements
- --------------------
Independent Auditors' Reports......................................................................................F-2
Combined Balance Sheet as of September 27, 1997 and
Consolidated Balance Sheet as of October 3, 1998.............................................................F-4
Combined Statements of Operations for the years ended September 28, 1996 and
September 27, 1997 and for the seven months ended April 28, 1998 and
Consolidated Statement of Operations for the five months ended October 3,
1998.........................................................................................................F-5
Combined Statements of Predecessor Capital for the years ended September 28,
1996 and September 27, 1997 and for the seven months ended April 28, 1998
and Consolidated Statement of Member's Equity for the
five months ended October 3, 1998............................................................................F-6
Combined Statements of Cash Flows for the years ended September 28, 1996 and
September 27, 1997 and for the seven months ended April 28, 1998 and
Consolidated Statement of Cash Flows for the five months ended October 3, 1998...............................F-7
Notes to Combined and Consolidated Financial Statements............................................................F-8
Financial Statement Schedule
- ----------------------------
Schedule II-Valuation and Qualifying Accounts......................................................................S-1
</TABLE>
F-1
<PAGE>
Independent Auditors' Report
The Management Committee of
Grove Worldwide LLC:
We have audited the accompanying consolidated balance sheet of Grove Worldwide
LLC and subsidiaries as of October 3, 1998 and the related consolidated
statements of operations, member's equity and cash flows for the five months
ended October 3, 1998 (Successor Period) and the combined statements of
operations, predecessor capital and cash flows for the seven months ended April
28, 1998 (Predecessor Period). In connection with our audit of the consolidated
and combined financial statements, we have also audited the consolidated and
combined financial statement schedule listed under Item 14(a)(2). These
consolidated and combined financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated and combined financial statements and
financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Grove Worldwide LLC
and subsidiaries as of October 3, 1998, and the results of their operations and
their cash flows for the Successor Period, in conformity with generally accepted
accounting principles. Furthermore, in our opinion, the aforementioned combined
financial statements present fairly, in all material respects, the results of
operations and cash flows of The Grove Companies for the Predecessor Period, in
conformity with generally accepted accounting principles. Also in our opinion,
the related combined and consolidated financial statement schedule, when
considered in relation to the basic consolidated and combined financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in note 2 to the combined and consolidated financial statements, on
April 28, 1998 Grove Worldwide LLC acquired The Grove Companies in a business
combination accounted for as a purchase. As a result of the acquisition, the
consolidated information as of October 3, 1998 and for the five months then
ended is presented on a different cost basis than that for the periods before
the acquisition and, therefore is not comparable.
KPMG Peat Marwick LLP
Baltimore, Maryland
December 1, 1998
F-2
<PAGE>
Independent Auditors' Report
The Shareholder of
The Grove Companies:
We have audited the accompanying combined balance sheet as of September 27, 1997
of the Grove Companies (as listed in Note 1), and the related combined
statements of operations, predecessor capital, and cash flows for each of the
two years in the period ended September 27, 1997. Our audits also included the
financial statement schedules listed in the Index at Item 14(a)(2). These
financial statements and schedules are the responsibility of the Companies'
management. Our responsibility is to express an opinion on the financial
statements and schedules 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 combined financial position at September 27, 1997, of
the Grove Companies, and the combined results of their operations and their cash
flows for each of the two years in the period ended September 27, 1997, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedules, when considered in relation to the
basis financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
ERNST & YOUNG LLP
December 15, 1997
except for Note 21, as to which the date is
April 29, 1998
Baltimore, Maryland
F-3
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Combined Balance Sheet as of September 27, 1997 and
Consolidated Balance Sheet as of October 3, 1998
(in thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Predecessor Company
----------- -------
1997 1998
- -----------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,024 $ 34,289
Trade receivables, net 149,164 129,833
Due from Hanson PLC -- 10,500
Notes receivable 68,450 5,887
Inventories (note 5) 215,332 207,248
Prepaid expenses and other current assets 22,569 8,893
- -----------------------------------------------------------------------------------
Total current assets 460,539 396,650
Property, plant and equipment, net (note 6) 147,588 207,175
Goodwill, net (note 7) 254,728 288,499
Other assets 18,641 18,024
- -----------------------------------------------------------------------------------
$ 881,496 $ 910,348
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Liabilities and Member's Equity/Predecessor Capital
Current liabilities:
Current maturities of long-term debt (note 10) $ -- $ 7,000
Short-term borrowings (note 8) 7,265 15,027
Accounts payable 70,327 79,470
Accrued expenses and other current liabilities
(note 9) 90,734 104,951
- -----------------------------------------------------------------------------------
Total current liabilities 168,326 206,448
Deferred revenue (note 3) 46,509 67,306
Long-term debt (note 10) -- 408,000
Other liabilities (note 11) 38,169 82,733
- -----------------------------------------------------------------------------------
Total liabilities 253,004 764,487
- -----------------------------------------------------------------------------------
Member's equity/predecessor capital:
Predecessor capital 628,492
Invested capital -- 164,560
Accumulated deficit -- (23,981)
Minimum pension liability (note 12) -- (2,059)
Cumulative translation adjustment -- 7,341
- -----------------------------------------------------------------------------------
Total member's equity/predecessor capital 628,492 145,861
- -----------------------------------------------------------------------------------
Commitments and contingencies (notes 16, 17, 18 and 19)
- -----------------------------------------------------------------------------------
$ 881,496 $ 910,348
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-4
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Combined Statements of Operations for the years ended September 28, 1996 and
September 27, 1997 and the seven months ended April 28, 1998 and Consolidated
Statement of Operations for the five months ended October 3, 1998
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Predecessor Company
---------------------------------------- ----------
September 28, September 27, April 28, October 3,
1996 1997 1998 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $794,209 $856,812 $476,200 $393,779
Cost of goods sold (note 5) 609,130 653,539 377,337 335,764
- --------------------------------------------------------------------------------------------------------------
Gross profit 185,079 203,273 98,863 58,015
Selling, engineering, general
and administrative expenses 119,619 122,192 73,664 58,098
Amortization of goodwill 9,185 9,054 5,215 3,091
Management fees paid to Hanson PLC (note 19) 5,655 2,176 162 --
Restructuring charges (note 15) -- 1,960 -- --
- --------------------------------------------------------------------------------------------------------------
Income (loss) from operations 50,620 67,891 19,822 (3,174)
Interest income (expense), net (note 10) (2,791) 43 1,048 (15,916)
Other income (expense), net (193) 535 (9,524) (554)
- --------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 47,636 68,469 11,346 (19,644)
Income taxes (note 14) 22,188 26,249 11,741 4,337
- --------------------------------------------------------------------------------------------------------------
Net income (loss) $ 25,448 $ 42,220 $ (395) $(23,981)
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-5
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Combined Statements of Predecessor Capital
for the years ended September 28, 1996 and September 27, 1997 and
the seven months ended April 28, 1998 and Consolidated Statement
of Member's Equity for the five months ended October 3, 1998
(in thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Company
-------------------------------------------------------------
Minimum Cumulative Total
Predecessor Invested Accumulated pension translation member's
capital capital deficit liability adjustment equity
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1995 $ 467,306 $ -- $ -- $ -- $ -- $ --
Net income 25,448 -- -- -- -- --
Dividends paid to parent (30,057) -- -- -- -- --
Net transactions with affiliates 42,394 -- -- -- -- --
Change in minimum pension liability (162) -- -- -- -- --
Change in foreign currency translation (2,375) -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Balance, September 28, 1996 502,554 -- -- -- -- --
Net income 42,220 -- -- -- -- --
Net transactions with affiliates 88,524 -- -- -- -- --
Change in minimum pension liability 601 -- -- -- -- --
Change in foreign currency translation (5,407) -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Balance, September 27, 1997 628,492 -- -- -- -- --
Net loss (395) -- -- -- -- --
Net transactions with affiliates (111,216) -- -- -- -- --
Change in minimum pension liability (1,371) -- -- -- -- --
Change in foreign currency translation (5,764) -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Balance, April 28, 1998 509,746 -- -- -- -- --
Elimination of predecessor capital (509,746) -- -- -- -- --
Initial capitalization 168,209 -- -- -- 168,209
Advances to Grove Holdings LLC (note 19) -- (3,649) -- -- (3,649)
Net loss -- (23,981) -- (23,981)
Minimum pension liability -- -- (2,059) -- (2,059)
Cumulative translation adjustment -- -- -- -- 7,341 7,341
- -------------------------------------------------------------------------------------------------------------------
Balance, October 3, 1998 $ -- $164,560 $ (23,981) $ (2,059) $7,341 $ 145,861
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-6
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Combined Statements of Cash Flows for the years ended September 28, 1996
and September 27, 1997 and the seven months ended April 28, 1998 and
Consolidated Statement of Cash Flows for the five months ended October 3, 1998
(in thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Predecessor Company
------------------------------------------ ----------
September 28, September 27, April 28, October 3,
1996 1997 1998 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $25,448 $42,220 $ (395) $(23,981)
Adjustments to reconcile to net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 17,313 17,985 11,399 8,213
Depreciation of equipment held for rent 3,805 8,352 5,501 7,400
Amortization of deferred financing costs -- -- -- 722
Write-off of amount assigned to inventory
in purchase accounting -- -- -- 27,707
Gain (loss) on sales of property,
plant and equipment 5 (600) 6,256 --
Deferred income tax expense 126 1,969 2,358 1,249
Changes in operating assets and liabilities:
Trade receivables, net (48,405) (23,266) 32,096 (6,790)
Notes receivable -- (68,450) 28,409 (3,607)
Inventories (27,528) (162) (8,828) 17,936
Accounts payable and accrued expenses 21,559 564 7,542 2,489
Other assets and liabilities, net 17,503 33,383 8,759 25,962
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 9,826 11,995 93,097 57,300
- ---------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (19,443) (32,491) (19,521) (7,230)
Investment in equipment held for rent (22,527) (37,904) (16,380) (20,751)
Acquisition of business from Hanson, PLC including
transaction costs of $5,783 net of cash acquired
of $9,242 and post-closing adjustment received
of $16,818 -- -- -- (562,723)
Other investing activities (3,271) 1,603 2,071 1,302
- ---------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (45,241) (68,792) (33,830) (589,402)
- ---------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from short-term borrowings 7,443 204 6,821 941
Proceeds from issuance of long-term debt -- -- -- 450,200
Repayments of long-term debt -- -- -- (35,200)
Equity investment from Grove Holdings LLC -- -- -- 168,209
Advances to Grove Holdings LLC -- -- -- (3,649)
Deferred financing costs -- -- -- (14,453)
Other financing activities 18,309 54,145 (62,087) --
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 25,752 54,349 (55,266) 566,048
- ---------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (838) (712) 217 343
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (10,501) (3,160) 4,218 34,289
Cash and cash equivalents, beginning of period 18,685 8,184 5,024 --
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 8,184 $ 5,024 $ 9,242 $34,289
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-7
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(1) Organization, Description of Business, and Basis of Presentation
Grove Worldwide LLC (the "Company") is primarily engaged in the design,
production, sale, and after-sale support of mobile hydraulic cranes,
aerial work platforms and truck-mounted cranes. The Company's domestic
manufacturing plants and related facilities are located in Shady Grove
and Chambersburg, Pennsylvania and Waverly, Nebraska. The Company's
foreign manufacturing plants and related facilities are located in
Sunderland, United Kingdom; Wilhelmshaven and Langenfeld, Germany; and
Tonneins and Cergy, France. The majority of the Company's sales are to
independent distributors, rental companies, and end users which serve
the heavy industrial and construction industries in the United States
and Europe.
The Company is a sole member limited liability company formed in
December 1997 pursuant to the provisions of the Delaware Limited
Liability Company Act. The Company had no substantive operations prior
to its initial capitalization and the acquisition of The Grove
Companies (as defined below) on April 28, 1998 (see note 2). Grove
Holdings LLC ("Holdings") is the sole member of the company. All
earnings of the Company are available for distribution to Holdings
subject to restrictions contained in the Company's debt agreements (see
note 10). Holdings is a sole member limited liability company that is
owned by Grove Investors LLC ("Investors").
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Combined financial statements for the periods prior to April 29, 1998
consist of the combined operations and substantially all of the assets
and liabilities of Kidde Industries, Inc. and the following legal
entities: Grove Europe Ltd., Crane Holdings, Inc., Delta Manlift SAS,
Grove France SA, Deutsche Grove GmbH, and Grove Manlift Pty. Ltd.
(together "The Grove Companies" or "Predecessor"). All of the Grove
Companies were either directly or indirectly owned by Hanson PLC, a
United Kingdom company.
F-8 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(2) Acquisition
On April 29, 1998, the Company acquired (the "Acquisition") from Hanson PLC
("Hanson") and certain of its subsidiaries, substantially all of the assets
of Hanson's U.S. mobile hydraulic crane and aerial work platform
operations, the capital stock of Hanson's U.S. truck-mounted crane
operation and the capital stock of Hanson's British, French, German, and
Australian crane and aerial work platform subsidiaries for an aggregate
purchase price of $583 million. The purchase price was subject to a post
closing adjustment for which the Company received $16.8 million in fiscal
1998 and an additional $10.5 million in November 1998. Funds required by
the Company to consummate the Acquisition, including the payment of related
fees and expenses, were as follows:
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------
Sources:
Issuance of the Senior Subordinated Notes $225,000
Borrowings under Revolving Credit Facility 10,106
Borrowings under Term Loan Facility 200,000
Equity investment by Holdings 168,209
- ----------------------------------------------------------------------------
$603,315
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Uses:
Acquisition price $583,000
Transaction Costs 5,783
- ----------------------------------------------------------------------------
Aggregate purchase price 588,783
Debt financing costs 14,532
- ----------------------------------------------------------------------------
$603,315
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
</TABLE>
Proceeds from the equity investment by Holdings of $168,209 were generated
by Holdings through the issuance of 100% of its equity in exchange for
$120,000 and net proceeds of $48,209 from the issuance of $88,000 of
11-5/8% Senior Discount Debentures due May 2009. Such Debentures have no
cash interest requirement prior to May, 2003. On May 1, 2003, the
Debentures will have accreted to $88,000 and will require semi-annual
payments of interest based on a per annum rate of 11 5/8%. The cash
interest payments are expected to be generated by distributions from the
Company.
F-9
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(2) Continued
The Acquisition was accounted for using the purchase method. The estimated
total purchase price of $583 million and related acquisition fees and
expenses of approximately $5.8 million have been allocated to the assets
and liabilities of the Company based upon an estimate of their respective
fair values, with the remainder being allocated to goodwill. The Company
intends to amortize goodwill over a 40 year period based on the strong
brand name of the Company and the longevity of the business and the
industry in which it operates. The estimated fair values of the assets
acquired and liabilities assumed in the Acquisition are summarized as
follows:
<TABLE>
<CAPTION>
<S> <C>
- ---------------------------------------------------------------------------------
Cash and cash equivalents $ 9,241
Due from Hanson for post-closing adjustment 27,300
Trade receivables 122,616
Notes receivable 2,280
Inventories 248,381
Other current assets 10,602
Property, plant and equipment 189,703
Goodwill 294,877
Other non-current assets 2,966
Short-term borrowings (14,086)
Trade accounts payable (79,493)
Accrued expenses and other current liabilities (103,664)
Other non-current liabilities (121,940)
- ---------------------------------------------------------------------------------
Aggregate purchase price $588,783
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
As a result of the Acquisition, the carrying value of assets and
liabilities of the Company are not comparable to the carrying value of such
assets and liabilities by the Predecessor. The allocation of the purchase
price to certain property, plant and equipment is based on fair market
value appraisals which have not been finalized.
(3) Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company defines cash equivalents as highly liquid investments with
initial maturities of three months or less.
Trade Receivables and Notes Receivable
Trade receivables are net of allowance for doubtful accounts
of $2,717 and $3,075 as of September 27, 1997 and October 3, 1998,
respectively.
F-10 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(3) Continued
Notes receivable relate to sales of new equipment to North American
distributors on terms of up to one year. Payment of interest and principal
are due at the maturity of the note unless the dealer sells the equipment
prior to maturity in which case the notes must be repaid immediately along
with any interest accrued thereon.
Inventories
Inventories are valued at the lower of cost or market, as determined
primarily under the first-in, first-out method.
Property, Plant and Equipment
Property, plant, and equipment are stated at cost. Maintenance and repairs
are charged to operations when incurred, while expenditures having the
effect of extending the useful life of an asset are capitalized.
Depreciation is computed primarily using the straight-line method. The
useful lives by asset category are as follows:
Land improvements 3-20 years
Buildings and improvements 10-30 years
Machinery and equipment 3-12 years
Equipment held for rent Lease term
Furniture and fixtures 3-10 years
Goodwill
The excess of the purchase price of the Company and its subsidiaries over
the fair value of the net assets acquired was recorded as goodwill.
Amortization expense is recorded on the straight-line method over 40 years.
The Company assesses the recovery of goodwill by determining whether
amortization of the goodwill over its remaining life can be recovered
through undiscounted cash flows of the acquired operations. Goodwill
impairment, if any, is measured by determining the amount by which the
carrying value of the goodwill exceeds its fair value based upon
discounting of future cash flows.
Impairment of Long-Lived Assets
The Company records impairment losses on long-lived assets when events and
circumstances indicate that the assets might be impaired. No such losses
have been recorded in the accompanying financial statements.
F-11 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(3) Continued
Derivative Financial Instruments
Derivative financial instruments are utilized by the Company to reduce
interest and foreign currency exchange risks and consist primarily of
interest rate collars and forward foreign exchange contracts. The Company
does not hold or issue derivative financial instruments for trading
purposes. Gains and losses on foreign currency transaction hedges are
recognized in income and offset the foreign exchange gains and losses of
the underlying transactions. Gains and losses on foreign currency firm
commitment hedges are deferred and included in the basis of the
transactions underlying the commitments.
The Company has an interest rate collar contract to manage its exposure to
fluctuations in interest rates. The interest rate differential on the
interest rate contract is reflected as an adjustment to interest expense
over the life of the contract. Upon early termination of an interest rate
contract, the gains or losses on termination are deferred and amortized as
an adjustment to the interest expense on the related debt instrument over
the remaining period originally covered by the contract.
Revenue Recognition
Revenue is generally recognized as products are shipped to customers.
However, for certain transactions, the Company provides guarantees of the
residual value of the equipment to third party leasing companies. Such
guarantees generally, given for periods of up to five years, take the form
of end-of-term residual value guarantees or reducing residual value
guarantees that decline with the passage of time. The Company records these
transactions in accordance with the lease principles established by
Statement of Financial Accounting Standards (SFAS) No. 13. If the
transaction qualifies as an operating lease, the Company records deferred
revenue for the amount of the net proceeds received upon the equipment's
initial transfer to the customer. The liability is then subsequently
reduced on a pro rata basis over the period to the first exercise date of
the guarantee, to the amount of the guaranteed residual value at that date,
with corresponding credits to revenue in the Company's statement of
operations. Any further reduction in the guaranteed residual value
resulting from the purchaser's decision to continue to use the equipment is
recognized in a similar manner. Depreciation of equipment held for rent is
recognized in a similar manner over the term of the lease agreement. As of
September 27, 1997 and October 3, 1998, the amount of deferred revenue
relating to transactions involving residual value guarantees which is
included in other current or noncurrent liabilities was $53,150 and
$80,658, respectively.
Product Warranties
Product warranty expenses are provided for estimated normal warranty costs
at the time of sale. Additional warranty expense is provided for specific
performance issues when identified. Specific performance issues relate to
situations in which the Company issues a part replacement notice for models
that are experiencing a particular problem.
F-12 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(3) Continued
Foreign Currency Translation
The financial statements of subsidiaries located outside the United States
are measured using the local currency as the functional currency. Assets,
including goodwill, and liabilities are translated at the rates of exchange
at the balance sheet date. The resulting translation gains and losses are
included as a separate component of member equity. Income and expense items
are translated at average monthly rates of exchange. Gains and losses from
foreign currency transactions of these subsidiaries are included in net
income. Aggregate gains (losses) on foreign currency transactions are not
material.
Research and Development
Research and development expenditures are charged to operations as
incurred. Research and development costs were $14,976, $15,427, $8,242 and
$5,878 for the years ended September 28, 1996 and September 27, 1997, the
seven months ended April 28, 1998 and the five months ended October 3,
1998, respectively.
Advertising
All costs associated with advertising and promoting products are expensed
when incurred. Advertising expense amounted to $3,887, $4,802, $2,324 and
$1,568 for the years ended September 28, 1996 and September 27, 1997, the
seven months ended April 28, 1998 and the five months ended October 3,
1998, respectively.
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations
in accounting for its stock-based employee compensation arrangements.
Fair Value of Financial Instruments
The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than a forced sale or liquidation. Significant differences
can arise between the fair value and carrying amount of financial
instruments that are recognized at historical cost amounts.
The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial instruments:
Cash, trade receivables, notes receivable, trade accounts payable and
short-term borrowings: The amounts reported in the consolidated
balance sheets approximate fair value.
F-13 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(3) Continued
Foreign currency contracts: The fair value of forward exchange
contracts is estimated using prices established by financial
institutions for comparable instruments. (See note 17)
Long-term debt: For bank borrowings, the amount reported in the
consolidated balance sheet approximates fair value. The fair value of
the Senior Subordinated Notes is based on quoted market prices. (See
note 10)
Adoption of New Accounting Standards
In 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 130, Reporting of Comprehensive Income. This Statement
requires the reporting of comprehensive income in interim and annual
financial statements. Net income together with periodic adjustments
with respect to foreign currency translation and minimum pension
liabilities will result in comprehensive income. The Company intends
to adopt the pronouncement in the first quarter of fiscal year 1999.
In 1997, the FASB issued Statement No. 131, Disclosures about Segments
of an Enterprise and Related Information. This Statement requires that
public business enterprises disclose information about their products
and services, operating segments, the geographic areas in which they
operate, and their major customers. The Company intends to adopt the
pronouncement in fiscal year 1999.
In 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes
accounting and reporting standards for derivative instruments and for
hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities measured at fair value.
Management has not yet evaluated this statement's impact on the
Company's financial condition or results of operations. The Company
intends to adopt the pronouncement in fiscal year 2000.
Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ significantly from those
estimates.
F-14 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(3) Continued
Reclassification
Certain amounts in the 1996 and 1997 combined financial statements have
been reclassified to conform to the presentation in the October 3, 1998
consolidated financial statements.
(4) Accounts and Notes Receivable
Trade receivables subject the Company to concentration of credit risk,
because they are concentrated in distributors and rental companies that
serve the heavy industrial and construction industries, which are subject
to business cycle variations. For the years ended September 28, 1996 and
September 27, 1997, revenues generated from six major customers, were
approximately 20% and 19% of net sales, respectively, with no one customer
accounting for more than 5% of total revenue. Approximately 31% of the
outstanding trade and notes receivable balance as of September 27, 1997
were due from these customers. For the seven months ended April 28, 1998
and the five months ended October 3, 1998, approximately 23% and 24%,
respectively, of revenues were generated from five major customers, with no
one customer accounting for more than 10% of total revenue. Approximately,
11% of the outstanding trade and notes receivable balance as of October 3,
1998 were due from these customers.
The Company generally offers terms of up to 30 days to its customers and
generally obtains a security interest in the underlying machinery sold. In
addition, the Company offered a special financing program primarily to its
U.S. distributors which provides credit terms of periods up to one year in
exchange for an interest-bearing note. The Company generally retains a
security interest in the machinery sold.
Prior to the Acquisition, Hanson entered into an agreement to sell certain
notes receivable to a third-party bank on a 90% non-recourse basis. In
addition, substantially all notes receivable outstanding at the date of the
Acquisition that had not been sold to the third party bank were retained by
Hanson. Following the Acquisition, the Company is responsible for
administrative and collection activities with respect to such receivables
but Hanson is responsible for all remaining credit risk. The cost of
providing administrative support is immaterial.
Following the Acquisition, the Company entered into an agreement with a
third-party bank to sell up to $50 million of notes receivable generated
from sales of mobile hydraulic cranes and aerial work platforms on credit
terms of up to one year on a revolving basis. The third-party bank
purchases the notes receivable at face value on a 90% non-recourse basis.
The agreement provides that the Company purchase credit insurance on behalf
of the third-party bank to insure the 90% risk assumed by the third-party
bank. The Company retains 10% of the credit risk on a first loss basis.
F-15 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(4) Continued
The Company is responsible for administrative and collection activities.
The cost of administrative and collection activities is immaterial. Cash
collections on the notes are deposited directly into an account for the
benefit of the third-party bank. The third-party bank has the power to sell
or pledge the notes receivable purchased at any time and the Company has no
rights of repurchase of the notes receivable.
Notes receivable sold under this arrangement meet the criteria for sale
under FASB Statement No. 125 and, accordingly, are removed from the
Company's balance sheet upon sale. At October 3, 1998, the Company had
credit risk of up to $3.8 million with respect to notes receivable that had
been sold under the arrangement.
(5) Inventories
Inventories consist of the following as of September 27, 1997 and October
3, 1998:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Predecessor Company
----------- -------
1997 1998
- ---------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies $76,573 $ 61,910
Work in process 78,993 72,299
Finished goods 59,766 73,039
- ---------------------------------------------------------------------------------
$215,332 $207,248
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
In connection with the Acquisition, the Company assigned $27.7 million of the
purchase price to work in process and finished goods inventories in excess of
their historical carrying value. Such amounts were charged to costs of goods
sold in the five month period ended October 3, 1998.
F-16 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(6) Property, Plant and Equipment
Property, plant and equipment consist of the following as of September 27,
1997 and October 3, 1998:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Predecessor Company
----------- -------
1997 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Land and improvements $12,765 $7,446
Buildings and improvements 63,052 62,709
Machinery and equipment 71,864 55,276
Equipment held for rent 58,455 79,997
Furniture and fixtures 17,016 5,264
Construction in progress 20,329 9,078
- ------------------------------------------------------------------------------------------------
243,481 219,770
Less accumulated depreciation and amortization 95,893 12,595
- ------------------------------------------------------------------------------------------------
$147,588 $207,175
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
Depreciation expense (including depreciation expense on equipment held for
rent) for the years ended September 28, 1996, September 27, 1997, the seven
months ended April 28, 1998 and the five months ended October 3, 1998 was
$11,933, $17,283, $11,685 and $12,522, respectively.
(7) Goodwill
Goodwill consists of the following as of September 27, 1997 and October 3,
1998:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Predecessor Company
----------- -------
1997 1998
- --------------------------------------------------------------------------
<S> <C> <C>
Goodwill $337,443 $291,590
Less accumulated amortization 82,715 3,091
- --------------------------------------------------------------------------
$254,728 $288,499
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
F-17 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(8) Short-term Borrowings
The Company's German operation maintains a DM33 million (approximately $20
million) credit facility available for discounting certain accounts
receivable. As of September 27, 1997 and October 3, 1998, $7,265 and
$15,027 were drawn against this facility. The interest rate charged on the
outstanding borrowings was 3.0% and 4.5% at September 27, 1997 and October
3, 1998, respectively. This arrangement does not have a termination date
and is reviewed periodically. No material commitment fees are required to
be paid on the undrawn portion of the credit facility.
(9) Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following as
of September 27, 1997 and October 3, 1998:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Predecessor Company
----------- -------
1997 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Salaries and wages $21,036 $20,413
Employee benefits 8,603 1,092
Accrued warranty 18,044 16,522
Deferred revenue associated with equipment held for rent 6,641 13,352
Product, workers' compensation and general liability 12,757 4,125
Accrued interest -- 9,907
Sunderland, U.K. shut-down costs (note 15) -- 18,500
Other 23,653 21,040
- --------------------------------------------------------------------------------------------------------
$90,734 $104,951
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
(10) Long-Term Debt
Long-term debt consists of the following at October 3, 1998:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
<S> <C>
Term loan facility $190,000
Senior subordinated notes 225,000
- --------------------------------------------------------------------------------------------------------
415,000
Less current maturities 7,000
- --------------------------------------------------------------------------------------------------------
Long-term debt $408,000
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
F-18 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(10) Continued
Bank Credit Facility -- The Company entered into a bank credit facility
(the "Bank Credit Facility") on April 29, 1998, which consists of a
$200,000 term loan facility ("Term Loan Facility") and a $125,000
revolving credit facility ("Revolving Credit Facility"). To consummate the
Acquisition, the Company borrowed $200,000 under the Term Loan Facility and
approximately $9,500 under the Revolving Credit Facility. The Revolving
Credit Facility enables the Company to obtain revolving credit loans and to
issue letters of credit for working capital, acquisitions and general
corporate purposes. A portion of the Revolving Credit Facility is available
for borrowings by the Company in the Eurocurrency markets of British pounds
sterling, German marks, French francs and certain other currencies.
At the Company's option, loans under the Bank Credit Facility bear interest
(a) in the case of loans in U.S. dollars, at the highest of (x) 1/2 of 1%
in excess of the Federal Funds Effective Rate (as defined in the Bank
Credit Facility), (y) 1.0% in excess of a certificate of deposit rate and
(z) the bank's prime rate, plus the applicable margin (as defined in the
Bank Credit Facility), or (b) in the case of all loans, the relevant
Eurocurrency Rate (as defined in the Bank Credit Facility) as determined by
the Lender, plus the applicable margin. The applicable margin will vary
based upon the Company's operating results and will range between 1.25% and
2.25% for borrowings under the Revolving Credit Facility and between 2.0%
and 2.5% for borrowings under the Term Loan Facility. The interest rate on
borrowings under the Term Loan Facility at October 3, 1998 is based on
LIBOR plus an applicable margin of 2.5% (8.04% at October 3, 1998). The
Company will also pay a 0.375% fee on the unused portion of the Bank Credit
Facility. There were no borrowings outstanding at October 3, 1998 under the
revolving credit facility.
The Term Loan Facility has a term of eight years and must be repaid in
semi-annual installments in April and October of each year in an aggregate
amount of (i) $2,000 for the first six years, (ii) $88,000 during the
seventh year and (iii) $100,000 during the eighth year. The Revolving
Credit Facility has a term of seven years. Commencing with the fiscal year
ended September 30, 1999, the Company will be required to make annual
payments, in excess of the schedule principal payments, on the Term Loan
Facility of up to 75% of the Company's "excess cash flow" as defined in the
Bank Credit Facility. In addition, the Bank Credit Facility requires
mandatory prepayments upon the occurrence of certain events including the
change of control of Holdings. At October 3, 1998, the Company had
outstanding letters of credit of $938 and available borrowings of $124,062
under the Revolving Credit Facility.
The obligations of the Company under the Bank Credit Facility are
guaranteed by Holdings and each of the Company's domestic subsidiaries (the
"Guarantors"). The obligations of the Company under the Bank Credit
Facility are secured by a first priority lien (subject to permitted
encumbrances) on substantially all of the Company's and each Guarantor's
real, personal, and intellectual property and on the capital stock of the
Company and all of the capital stock of the Company's domestic and
certain of its foreign subsidiaries.
F-19 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(10) Continued
In addition, the Bank Credit Facility contains various covenants that
restrict the Company from taking various actions and that require the
Company to achieve and maintain certain financial ratios.
Senior Subordinated Notes -- The Senior Subordinated Notes bear interest at
a rate of 9 1/4% per annum payable semi-annually on May 1 and November 1 of
each year commencing November 1, 1998. The Senior Subordinated Notes are
general unsecured obligations of the Company and its co-issuer, Grove
Capital, Inc., and are guaranteed by all of the Company's domestic
subsidiaries. (See note 21.) The Senior Subordinated Notes are redeemable
at the option of the Company, in whole or in part, at any time on or after,
May 1, 2003, at a declining redemption price and mature on May 1, 2008.
In addition, at any time prior to May 1, 2001, the Company may redeem up to
35% of the originally issued aggregate principal amount of the Senior
Subordinated Notes at 109.25% of the principal amount thereof, plus accrued
and unpaid interest and liquidated damages, if any, with net proceeds of
one or more public offerings of the Company's equity (or that of Investors
or Holdings), provided at least 65% of the principal amount of the
originally issued Senior Subordinated Notes remain outstanding. Upon the
occurrence of a change of control, as defined in the Indenture governing
the Senior Subordinated Notes (the "Indenture"), each holder of the Senior
Subordinated Notes will have the right to require the Company to repurchase
such holder's notes at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
liquidated damages, if any, thereon to the date of purchase.
The Indenture contains certain covenants that limit, among other things,
the ability of the Company to (i) pay dividends, redeem capital stock or
make certain other restricted payments, (ii) incur additional indebtedness
or issue certain preferred equity interests, (iii) merge into or
consolidate with certain other entities or sell all or substantially all of
its assets, (iv) create liens on assets and (v) enter into certain
transactions with affiliates or related persons.
The Company expects that cash flows from foreign operations will be
required to meet its domestic debt service requirements. Such cash flows
are expected to be generated from intercompany interest expense on loans
the Company has made to certain of its foreign subsidiaries to consummate
the acquisition of Hanson's crane and aerial work platform subsidiaries in
the U.K., Germany and France and for working capital requirements. The
loans have been established with amounts and interest rates to allow for
repatriation without restriction or additional tax burden. However, there
is no assurance that the foreign subsidiaries will generate the cash flow
required to service the loans or that the laws in the foreign jurisdictions
will not change to limit repatriation or increase the tax burden of
repatriation.
F-20 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(10) Continued
The estimated fair value of the Company's long-term debt at October 3, 1998
was $388,000.
Aggregate annual scheduled maturities of long-term debt at October 3, 1998
are $2,000 during each of the next five fiscal years. In November 1998, the
Company made an optional prepayment of $5 million on the Term Loan
Facility.
Interest Expense - Interest income (expense), net consists of the following
for the years ended September 26, 1996, September 27, 1997, the seven
months ended April 28, 1998 and the five months ended October 3, 1998.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Presdecessor Company
---------------------------------- ------------
April 28, October 3,
1996 1997 1998 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest expense $ (716) $ (638) $ (263) $(17,410)
Interest expense paid to Hanson (2,610) (1,404) (2,174) --
Amortization of deferred financing costs -- -- -- (722)
Interest income 535 2,085 3,485 2,216
- --------------------------------------------------------------------------------------------------
$ (2,791) $ 43 $ 1,048 $(15,916)
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
The Company paid interest of $7,503 for the five months ended October 3,
1998.
In July 1998, the Company entered into an interest rate agreement with a
commercial bank to collar the interest rate on approximately $100 million
of the Company's floating rate borrowings for the three years ended
September 2001. The contract does not require collateral. If the contract
was terminated at October 3, 1998, the Company would have had a loss of
approximately $1.9 million.
(11) Other Liabilities
Other liabilities consist of the following as of September 27, 1997 and
October 3, 1998:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Predecessor Company
----------- -------
1997 1998
- ---------------------------------------------------------------------------------
<S> <C> <C>
Accrued liability for defined benefit pension plans $11,068 $29,278
Accrued liability for postretirement benefit plan 18,859 28,293
Other 8,242 25,162
- ---------------------------------------------------------------------------------
$38,169 $82,733
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
F-21 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(12) Employee Benefit Plans
The Company has several defined benefit pension plans covering
substantially all of its employees. Plans covering salaried employees
provide pension benefits that are based on the participant's final average
salary and credited service. Plans covering hourly employees provide
benefits based on the participant's career earnings and service with the
Company. The Company's funding policy for all plans is to make the minimum
annual contributions required by applicable regulations, plus such
additional amounts as the Company may determine to be appropriate from time
to time.
The components of the net periodic pension costs for all U.S. defined
benefit plans for the fiscal years ended September 28, 1996 and September
27, 1997, for the seven months ended April 28, 1998 and for the five months
ended October 3, 1998 are summarized below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Predecessor Company
---------------------- ----------
April 28, October 3,
1996 1997 1998 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service cost $1,787 $2,172 $1,542 $1,322
Interest cost 2,482 3,128 2,163 1,621
Actual return on assets (1,895) (2,748) (1,898) (1,528)
Net amortization and deferral 341 539 465 --
- ---------------------------------------------------------------------------------------------
Net periodic pension costs $2,715 $3,091 $2,272 $1,415
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
F-22 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(12) Continued
The following tables set forth the U.S. plans' funded status at September
27, 1997 and October 3, 1998:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Plans whose Plans whose
assets exceed accumulated
accumulated benefits exceed
benefits assets
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
As of September 27, 1997:
Actuarial present value of accumulated benefit
obligation, including vested benefits of $18,574
and $16,776, respectively $ 18,859 $ 17,259
- ----------------------------------------------------------------------------------------------------------
Projected benefit obligation for service rendered
to date $(29,550) $(17,259)
Plan assets at fair value, primarily marketable
securities 22,519 15,523
- ----------------------------------------------------------------------------------------------------------
Underfunded projected benefit obligation (7,031) (1,736)
Unrecognized net loss 933 2,520
Unrecognized prior service cost 3,128 4,312
Adjustment to recognize the required minimum
pension liability - (6,832)
-------
Pension liability recognized in the balance sheets $(2,970) $(1,736)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
As of October 3, 1998:
Actuarial present value of accumulated benefit
obligation, including vested benefits of $46,812 $ - $47,932
- ----------------------------------------------------------------------------------------------------------
Projected benefit obligation for service rendered
to date $ - $(62,062)
Plan assets at fair value, primarily marketable
securities - 44,641
------
Underfunded projected benefit obligation - (17,421)
Unrecognized net loss - 4,159
Adjustment to recognize the required minimum
pension liability - (2,051)
-------
Pension liability recognized in the balance sheets $ - $(15,313)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
F-23 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(12) Continued
The components of the net periodic pension costs for all foreign defined
benefit plans for the years ended September 28, 1996 and September 27,
1997, for the seven months ended April 28, 1998 and for the five months
ended October 3, 1998 are summarized below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Predecessor Company
--------------------- ----------
April 28, October 3,
1996 1997 1998 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service cost $ 1,804 $ 1,978 $1,169 $927
Interest cost 1,481 1,782 1,289 933
Actual return on assets (2,176) (3,038) (904) (667)
Net amortization and deferral 80 802 536 --
- -------------------------------------------------------------------------------------------
Net periodic pension costs $1,189 $1,524 $2,090 $ 1,193
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth the foreign plans' unfunded status at
September 27, 1997 and October 3, 1998:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Predecessor Company
----------- -------
1997 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation,
including vested benefits of $22,792 and $38,637,
respectively $ 23,449 $ 39,247
- ---------------------------------------------------------------------------------------------------
Projected benefit obligation for service rendered to date $(25,906) $(38,128)
Plan assets at fair value, primarily marketable securities 19,911 23,886
- ---------------------------------------------------------------------------------------------------
Underfunded projected benefit obligation (5,995) (14,242)
Unrecognized net loss (gain) (367) 277
- ---------------------------------------------------------------------------------------------------
Pension liability recognized in the balance sheets $(6,362) $(13,965)
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
F-24 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(12) Continued
Assumptions used in determining the actuarial present value of projected
pension obligations at September 27, 1997 and October 3, 1998 are as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Predecessor Company
--------------- -------
<S> <C> <C>
Domestic Pension Plans:
Return on plan assets 9.00% 9.00%
Weighted average discount rate 7.50% 6.50%
Rate of increase in future compensation level 4.25% 4.25%
Foreign Pension Plans:
Return on plan assets 9.00% N/A
Weighted average discount rate 6.50% to 8.00% 6.00% to 6.50%
Rate of increase in future compensation level 6.00% 2.25% to 4.5 %
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
Assets of domestic and foreign defined benefit plans consist principally of
investments in equity securities, debt securities, and cash equivalents.
The Company also has several defined contribution plans covering
substantially all of its U.S. employees. Eligible employees may contribute
a portion of their base compensation to the plan and their contributions
are matched by the Company at rates specified in the plan documents.
Contributions by the Company for the years ended September 28, 1996 and
September 27, 1997, for the seven months ended April 28, 1998 and for the
five months ended October 3, 1998 were approximately $1,797, $1,902, $1,169
and $835, respectively.
In addition to providing pension benefits, the Company provides certain
health care and prescription drug benefits to certain retirees.
Substantially all of the Company's domestic eligible employees may qualify
for benefits if they reach normal retirement age while working for the
Company. The Company funds benefits on a pay-as-you-go basis, while
retirees pay monthly premiums. These benefits are subject to deductibles,
co-payment provisions and other limitations.
F-25 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(12) Continued
Net periodic postretirement benefit expense included the following
components as of September 28, 1996 and September 27, 1997, and the seven
months ended April 28, 1998 and the five months ended October 3, 1998:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Predecessor Company
---------------------- ----------
April 28, October 3,
1996 1997 1998 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service expense $ 797 $ 833 $ 622 $ 511
Interest expense 1,423 1,464 1,096 725
Net amortization and deferral 550 458 74 --
- ------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $2,770 $2,755 $1,792 $1,236
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
The reconciliation of the accumulated postretirement benefit obligation to
the liability recognized in the consolidated balance sheet at September 27,
1997 and October 3, 1998 is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Predecessor Company
----------- -------
1997 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 5,542 $ 5,178
Fully eligible active participants 5,214 5,474
Other active participants 14,503 17,715
- ------------------------------------------------------------------------------------------------------
Total 25,259 28,367
Unrecognized prior service benefit 3,407 -
Unrecognized net loss (9,807) (74)
- ------------------------------------------------------------------------------------------------------
Net postretirement benefit liability recognized in the balance sheets $18,859 $28,293
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.5% and 6.5% for 1997 and 1998, respectively. The
assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 9.0% for 1997 and 1998, with
subsequent annual decrements of 0.5% to an ultimate trend rate of 5.5%. A
one percentage point increase in the assumed health care cost trend rate
for each year would increase the accumulated postretirement benefit
obligation by approximately 13% as of October 3, 1998 and the net
postretirement benefit cost by approximately 15% for the five months ended
October 3, 1998.
F-26 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(13) Management Option Plan
In connection with the Acquisition, Investors established a management
option plan whereby the Investor Management Committee can grant options
to purchase equity units of Investors to key employees of the Company at
fair market value. The options generally vest over a five-year period
only upon the achievement of certain earning targets. As of October 3,
1998, Investors has granted options to employees to purchase 2,700 Class
A units of Investors with an exercise price of 1,000 dollars per unit
which will expire in 2008. No amounts were vested at October 3, 1998.
The estimated weighted average fair value of options granted during the
five months ended October 3, 1998 was 275 dollars per unit assuming an
option life of six years, a risk free interest rate of 5.5% and no
dividends or volatility rate. Had the Company accounted for the options
in accordance with the provisions of FASB Statement No. 123 compensation
expense with respect to options granted in the five months ended October
3, 1998 would have been immaterial.
(14) Income Taxes
As a result of the Acquisition, a significant portion of the Company's
business is operated as a limited liability company organized under the
laws of Delaware. Accordingly, earnings of the Company's U.S. mobile
hydraulic crane and aerial work platform businesses, as well as, earnings
from its foreign and subsidiaries will not be directly subject to U.S.
income taxes. Such taxable income will be allocated to the equity holders
of Investors and they will be responsible for U.S. income taxes on such
taxable income. The Company intends to make distributions, in the form of
dividends, to enable the equity holders of Investors to meet their tax
obligations with respect to income allocated to them by the Company.
The provision for income taxes following the Acquisition, will be limited
to foreign taxes with respect to earnings of the Company's foreign
subsidiaries and U.S. state and local taxes with respect to the earnings of
the Company's truck-mounted crane business.
For periods prior to the Acquisition, each of the Grove Companies filed
their own income tax returns or were part of a consolidated group return
with other Hanson entities. Income tax expense for such periods was
determined as if the Grove Companies were a stand alone entity. In
connection with the Acquisition, Hanson has indemnified the Company with
respect to certain tax obligations arising from activities occurring prior
to the Acquisition.
F-27 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(14) Continued
Domestic and foreign income (loss) before income taxes were as follows for
the fiscal years ended September 28, 1996 and September 27, 1997, for the
seven months ended April 28, 1998 and for the five months ended October 3,
1998:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Predecessor Company
----------- -------
April 28, October 3,
1996 1997 1998 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States $47,535 $66,721 $30,446 $ (7,371)
Other countries 101 1,748 (19,100) (12,273)
- ----------------------------------------------------------------------------------------------
$47,636 $68,469 $11,346 $(19,644)
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
The provision for income taxes consisted of the following for the fiscal
years ended September 28, 1996 and September 27, 1997, for the seven months
ended April 28, 1998 and for the five months ended October 3, 1998:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Predecessor Company
------------------------------- ----------
April 28, October 3,
1996 1997 1998 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current:
United States $21,623 $23,979 $ 8,780 $2,958
Other countries 439 301 - 130
- -----------------------------------------------------------------------------------------------
22,062 24,280 8,780 3,088
- -----------------------------------------------------------------------------------------------
Deferred:
United States 126 1,969 2,961 (1,551)
Other countries - - - 2,800
- -----------------------------------------------------------------------------------------------
126 1,969 2,961 1,249
- -----------------------------------------------------------------------------------------------
$22,188 $26,249 $11,741 $4,337
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
The Company paid income taxes of $272 for the five months ended October 3,
1998.
F-28 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(14) Continued
Significant components of the Company's deferred tax liabilities and assets
are as follows as of September 27, 1997 and October 3, 1998:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Predecessor Company
------- -------
1997 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Allowance for doubtful accounts $ -- $ 106
Inventory obsolescence reserve 1,881 100
Inventory capitalization -- 220
Tax deductible goodwill 5,074 --
Accrued general liability -- 1,847
Accrued product liability -- 1,105
Other accrued expenses 12,221 1,290
Foreign net operating losses and AMT credits 6,323 --
Other 7,755 --
Intercompany basis differences (7,557) --
Depreciation expense 6,977 (2,240)
- --------------------------------------------------------------------------------------------
Total deferred tax asset 32,674 2,428
Valuation allowance 6,323 --
- --------------------------------------------------------------------------------------------
Net deferred tax asset included in other assets $26,351 $ 2,428
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
Deferred taxes at October 3, 1998 relate to the Company's National Crane
Corporation subsidiary which is incorporated as a C-Corporation and the
Company's foreign subsidiaries.
At October 3, 1998 the Company's foreign subsidiaries have net operating
loss carryforwards of $7,300 which expire in various amounts through 2013.
The benefit from future utilization, if any, of such amounts will be
credited to goodwill as realized. In the five months ended October 3, 1998,
the Company's German subsidiary utilized net operation losses of
approximately $4,600. The tax benefit of such utilization of $2,800 was
credited to goodwill.
F-29 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(14) Continued
The reasons for the differences between applicable income taxes and the
amount computed by applying the statutory federal income tax rate of 35% to
income before taxes were as follows for the fiscal years ended September
28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Predecesor
----------------
1996 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Applicable income taxes based on federal statutory tax rate $16,673 $23,964
State taxes, net of federal tax benefit 1,130 2,520
Goodwill amortization 2,955 333
Foreign operating loss benefits not previously recognized (1,020) (1,409)
Foreign operating loss valuation allowances 2,182 1,405
Other 268 (564)
- --------------------------------------------------------------------------------------------
$22,188 $26,249
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
The income tax rate reconciliation for the seven months ended April 28,
1998 was not presented since the information was deemed not meaningful. The
income tax provision for the seven months ended April 28, 1999 includes no
benefit for approximately $19,000 of losses incurred by the Company's
foreign subsidiaries. Income taxes for the five months ended October 3,
1998 relate principally to the Company's subsidiary in Waverly, Nebraska,
which is incorporated as a C-corporation, and the Company's German
subsidiary.
(15) Restructuring and Plant Shutdown
In 1997, the Company recorded a restructuring charge of approximately
$1,960 related to the gradual phase-out of crane production at its
Sunderland, United Kingdom location. All amounts have been expended as of
October 3, 1998.
The Company plans to close its Sunderland UK manufacturing facility as the
result of recurring operating losses. Management believes closing the
facility will improve operating earnings as well as provide the opportunity
for additional cost reductions through product rationalization, reduced
selling, general and administrative expenses and reduced manufacturing
costs. Management has estimated total closure costs to be approximately
$18.5 million, consisting of approximately $11.5 million of employee
severance and $7 million of plant shut-down costs (asset disposal and plant
clean-up costs), all of which are expected to be expended in the next
twelve months.
F-30 (Continued)
<PAGE>
(16) Leases
The Company and its subsidiaries lease office space, machinery and other
equipment under noncancelable operating leases with varying terms, some of
which contain renewal and/or purchase options.
The following is a schedule of future minimum lease payments required under
operating leases that have initial or remaining noncancelable lease terms
in excess of one year:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
<S> <C>
1999 $5,466
2000 4,034
2001 764
2002 173
2003 58
Thereafter 270
- ---------------------------------------------------------------------------------
$10,765
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
Rental expense associated with operating leases was approximately $2,809,
$3,489, $2,496 and $1,795 for the years ended September 28, 1996 and
September 27, 1997 and the seven months ended April 28, 1998 and the five
months ended October 3, 1998, respectively. It is expected that, in the
normal course of business, leases that expire will be renewed or replaced
by leases on other property and equipment.
(17) Foreign Exchange Risk
Through its foreign currency hedging activities, the Company seeks to
minimize the risk that cash flows resulting from the sales of products
manufactured in a currency different from that of the selling company will
be affected by changes in exchange rates. Management responds to foreign
exchange movements through various means, such as pricing actions, changes
in cost structure, and changes in hedging strategies.
The Company may hedge its foreign currency transactions and firm sales
commitment exposures, based on management's judgment, through forward
exchange contracts. These forward exchange contracts are purchased from
local banks. Some of the contracts involve the exchange of two foreign
currencies according to the local needs of the companies.
F-31 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(17) Continued
The following table summarizes the contractual amounts of the Company's
forward exchange contracts as of September 27, 1997 and October 3, 1998,
including details by major currency as of October 3, 1998. Foreign currency
amounts were translated at the current rate as of the reporting date. The
"sell" amounts represent the U.S. dollar equivalent of commitments to sell
foreign currencies, and the "buy" amounts represent the U.S. dollar
equivalent of commitments to purchase foreign currencies.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Buy Sell
- -------------------------------------------------------------------------------------
<S> <C> <C>
As of September 27, 1997 $20,117 $(20,393)
- -------------------------------------------------------------------------------------
As of October 3, 1998:
United States Dollars $2,000 $ -
Austrailian Dollars - (339)
Pounds Sterling 244 (4,105)
- -------------------------------------------------------------------------------------
$2,244 $(4,444)
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
The Company's credit exposure on its foreign currency derivatives was $259
and $192 as of September 27, 1997 and October 3, 1998, respectively. Gross
deferred realized gains and losses on firm commitments were not significant
as of September 27, 1997 and October 3, 1998. Substantially all of the
amounts deferred at October 3, 1998 are expected to be recognized in income
during fiscal year 1999, when the gains or losses on the underlying
transactions will also be recognized.
(18) Other Commitments and Contingencies
The Company is involved in various lawsuits and administrative proceedings
arising in the ordinary course of business. These matters primarily involve
claims for damages arising out of the use of the Company's products as well
as employment matters and commercial disputes. Some of these lawsuits
include claims for punitive as well as compensatory damages. The Company is
insured for product liability and workers' compensation claims for amounts
in excess of established deductibles and accrues for the estimated
liability up to the limits of the deductibles. The Company accrues for all
other claims and lawsuits on a case-by-case basis. The Company's estimate
of the undiscounted costs associated with legal and environmental exposures
is accrued if, in management's judgment, the likelihood of a loss is
probable. The Company's policy is to also accrue the probable legal costs
to be incurred in defending the Company against such claims. The Company
has followed this policy during each of the periods in the three year
period ended October 3, 1998, with respect to all investigations, claims
and litigation. Insurance recoveries for environmental and certain general
liability claims are not recognized until realized.
F-32 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(18)Continued
In the opinion of management, while the ultimate results of lawsuits or
other proceedings against the Company cannot be predicted with certainty,
the amounts accrued for awards or assessments in connection with these
matters are adequate and, accordingly, management believes that the
ultimate resolution of these matters will not have a material effect on the
Company. As of October 3, 1998, the Company had no known probable but
inestimable exposures that could have a material effect on the Company.
Product liability and workers' compensation - Hanson, on behalf of the
Company, purchased an insurance policy which effectively indemnifies the
Company against North American product liability and workers' compensation
claims arising prior to October 1, 1997 up to an aggregate loss limit of
$85,000. Losses in excess of that amount, if any, are the responsibility of
the Company. For product liability claims arising on or after October 1,
1997, the Company is self-insured for losses up to $2,000 per occurrence,
with a $15,000 annual aggregate loss limit. For workers' compensation
claims arising on or after such date, the Company is self-insured for
losses up to $250 per occurrence with a $1,000 annual aggregate loss limit.
Losses over the loss limits are covered by umbrella insurance coverage up
to $100,000. The Company accrues a reserve for the estimated amount of
claims which will be self-insured. The estimates are provided by a third
party actuary based upon historical trends. The reserve for claims includes
estimates of legal and administrative costs to be incurred.
Environmental matters - The Company is also involved in lawsuits and
administrative proceedings with respect to claims involving the discharge
of hazardous substances into the environment. Certain of these claims
assert damages and liability for remedial investigations and cleanup costs
with respect to sites at which the Company has been identified as a
potentially responsible party under federal and state environmental laws
and regulations (off-site). Other matters involve sites that the Company
currently owns and operates or has previously sold (on-site). For off-site
claims, the Company makes an assessment of the costs involved based on
environmental studies, prior experience at similar sites, and the
experience of other named parties. The Company also considers the ability
of other parties to share costs, the percentage of the Company's exposure
relative to all other parties, and the effects of inflation on these
estimated costs. For on-site matters associated with properties currently
owned, the Company makes an assessment as to whether an investigation and
remediation effort is necessary and estimates other potential costs
associated with the site.
Other - The Company provides conditional loss guarantees to certain
financing companies on behalf of their customers. As of October 3, 1998,
the Company had outstanding guarantees of approximately $3,900. These
guarantees mature at various dates ranging from April 1999 through August
2002. The Company has not and does not expect to incur losses as a result
of these guarantees.
F-33 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(18) Continued
In addition, the Company provides guarantees of residual value to third
party financing companies in support of certain customers' financing
arrangements. These guarantees are only exercisable should the Company's
customer default on their financing agreements. The Company has not and
does not expect to incur losses under these guarantees. Exercises of these
guarantees have not been significant for the periods in the three years
ended October 3, 1998. Aggregate residual value guarantees were
approximately $81 million at October 3, 1998.
(19) Transactions with Related Parties
Prior to the Acquisition, the Company received certain services provided by
Hanson PLC and its affiliates, including cash management, tax reporting,
and risk management, and was charged a management fee for such services.
The allocation of these management fees was based on percentage of total
group sales in 1996 and on total group operating profits in 1997. In the
opinion of management, these methods of allocation were reasonable.
The amount of predecessor capital included in the combined balance sheet
represents a net balance as the result of various transactions between the
Company and its parent, Hanson PLC. There were no terms of settlement
associated with the account balance and generally, there were no interest
charges associated with these balances. The balance is primarily the result
of various equity transactions, as well as the Company's participation in
Hanson's central cash management program, wherein all the Company's cash
receipts were remitted to Hanson and all cash disbursements are funded by
Hanson. Other transactions included in predecessor capital are management
fees, taxes, insurance, employee benefits, and miscellaneous other
administrative expenses incurred by Hanson on behalf of the Company.
Intercompany interest expense for the fiscal years ended September 28, 1996
and September 27, 1997 and for the seven months ended April 28, 1998 was
$2,610, $1,404, and $2,174, respectively. Substantially all of the interest
expense related to borrowings by one of the Company's subsidiaries from
Hanson which are classified as invested capital in the combined balance
sheet. Such borrowings averaged $24,540, $19,000, and $19,000 for the years
ended September 28, 1996 and September 27, 1997 and for the seven months
ended April 28, 1998.
In 1996, the Company had an arrangement with a Hanson PLC affiliated
company, whereby the affiliated company acted as a sales agent on behalf of
the Company. The Company recorded commission expense in the amount of
$3,209 for the fiscal year ended September 28, 1996.
F-34 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(19) Continued
During the five months ended October 3, 1998, the Company made advances
of $3,649. Such amount included loans to the Company's executive
officers to purchase certain equity interest in Investors and
transactions costs incurred by Holdings and Investors to consummate the
Acquisition and related financing. Such amounts have been accounted for
as a reduction of members' equity.
The Company has engaged a consulting group, controlled by one of Investor's
minority owners, to help the Company during the next four years develop and
achieve its business plan. For such services the consulting group is
expected to be paid $14 million plus out-of-pocket expenses. As of October
3, 1998, the consulting group had been paid $2.7 million for services
rendered. In addition, if the Company achieves certain defined levels of
performance in fiscal 1999, 2000, 2001 and 2002, the consulting group will
be entitled to receive additional ownership interest in Investors for each
year the defined levels of performance are achieved. The Company will
recognize as expense the fair value of each equity award when earned.
(20) Business Segment and Geographic Areas
The Company markets to heavy industrial and construction industries,
primarily in the United States and Europe through the production and
support of mobile hydraulic cranes, aerial work platforms and truck-mounted
cranes. For financial reporting purposes, the Company considers the heavy
industrial and construction industries as one segment. Transfers between
geographic areas primarily represent intercompany export sales and are
accounted for based on established sales prices between the related
companies. In computing income from operations, no allocations of general
corporate expenses have been made. Identifiable assets are those assets
identified with the operation of legal entities domiciled within the
geographic area. General corporate assets were not material at September
27, 1997 and October 3, 1998.
Information relating to operations by geographic area is as follows as of
and for the fiscal years ended September 28, 1996, September 27, 1997, and
the seven months ended April 28, 1998 and the five months ended October 3,
1998:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Corporate
United and
States Europe eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Sales to unaffiliated customers $562,331 $231,878 $ - $794,209
Transfers between geographic areas 37,685 83,330 (121,015) -
- ------------------------------------------------------------------------------------------------------------------
Net sales $600,016 $315,208 $(121,015) $794,209
- ------------------------------------------------------------------------------------------------------------------
Operating profit $ 58,653 $ 72 $ (8,105) $ 50,620
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
F-35 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(20) Continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Corporate
United Other and
States Europe countries eliminations Consolidated
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
- -------------------------------------------------------------------------------------------------------------
Sales to unaffiliated
customers $ 606,003 $ 248,532 $ 2,277 $ -- $ 856,812
Transfers between
geographic areas 35,225 63,834 -- (99,059) --
- -------------------------------------------------------------------------------------------------------------
Net sales $ 641,228 $ 312,366 $ 2,277 $ (99,059) $ 856,812
- -------------------------------------------------------------------------------------------------------------
Operating profit $ 69,284 $ 670 $ (100) $ (1,963) $ 67,891
Identifiable assets $ 648,578 $ 261,768 $ 3,548 $ (32,398) $ 881,496
- -------------------------------------------------------------------------------------------------------------
April 28, 1998
- -------------------------------------------------------------------------------------------------------------
Sales to unaffiliated
customers $ 339,151 $ 135,793 $ 1,256 $ -- $ 476,200
Transfers between
geographic areas 15,722 29,731 -- (45,453) --
- -------------------------------------------------------------------------------------------------------------
Net sales $ 354,873 $ 165,524 $ 1,256 $ (45,453) $ 476,200
- -------------------------------------------------------------------------------------------------------------
Operating profit $ 31,671 $ (11,505) $ (344) $ -- $ 19,822
- -------------------------------------------------------------------------------------------------------------
October 3, 1998
- -------------------------------------------------------------------------------------------------------------
Sales to unaffiliated
customers $ 290,696 $ 101,801 $ 1,282 $ -- $ 393,779
Transfers between
geographic areas 17,901 21,741 -- (39,642) --
- -------------------------------------------------------------------------------------------------------------
Net sales $ 308,597 $ 123,542 $ 1,282 $ (39,642) $ 393,779
- -------------------------------------------------------------------------------------------------------------
Operating profit $ 6,622 $ (9,532) $ (264) $ -- $ (3,174)
Identifiable assets $1,505,635 $ 298,266 $ 4,840 $ (898,393) $ 910,348
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Information with respect to Europe includes Africa and the Middle East. Net
sales to customers in Africa and the Middle East were less than 5% of the
consolidated net sales of the Company during each of the years in the three
year period ended October 3, 1998.
Net sales by the Company's U.S. operations to foreign customers were less
than 10% of the consolidated net sales of the Company during each of the
periods presented in the three year period ended October 3, 1998.
F-36 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(21) Supplemental Condensed Combined and Consolidated Financial Information
The Company's payment obligations under the senior subordinated notes
(see note 10) are guaranteed by all of the Company's domestic
subsidiaries other than Grove Capital, Inc. (the "Subsidiary
Guarantors"). Such guarantees are full, unconditional and joint and
several. The Subsidiary Guarantors are wholly owned by the Company.
Grove Capital, Inc. is a wholly owned subsidiary of the Company. Grove
Capital, Inc. and the Company are co-obligors of the Senior Subordinated
Notes and are jointly and severally liable for such indebtedness.
Separate financial statements of Grove Capital, Inc. and the Subsidiary
Guarantors are not presented because the Company's management has
determined that they would not be material to investors. The ability of
the Company's subsidiaries to make cash distributions and loans to the
Company and the Subsidiary Guarantors is not significantly restricted
under the terms of the Company's debt obligations. The following
supplemental financial information sets forth, on a combined and
consolidated basis, balance sheets, statements of operations and
statements of cash flows information for the Subsidiary Guarantors, the
Company's non-guarantor subsidiaries and the Company and its
subsidiaries on a combined and consolidated basis. A separate column for
Grove Capital, Inc. has not been provided because Grove Capital, Inc.
has no assets or operations and accordingly, such information would not
be meaningful.
F-37 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(21) Continued
Condensed Combining Balance Sheets as of September 27, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Guarantor Other Combined
subsidiaries subsidiaries Eliminations totals
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ (492) $ 5,516 $ -- $ 5,024
Trade receivables, net 65,823 83,341 -- 149,164
Notes receivable 68,450 -- -- 68,450
Inventories 123,621 94,395 (2,684) 215,332
Prepaid expenses and other current assets 18,859 3,710 -- 22,569
- --------------------------------------------------------------------------------------------------------
Total current assets 276,261 186,962 (2,684) 460,539
Property, plant, and equipment, net 75,884 71,704 -- 147,588
Goodwill 248,620 6,108 -- 254,728
Due from Grove Companies 29,272 442 (29,714) --
Other assets 18,541 100 -- 18,641
- --------------------------------------------------------------------------------------------------------
Total assets $648,578 $ 265,316 $ (32,398) $ 881,496
- --------------------------------------------------------------------------------------------------------
Liabilities and predecessor capital
Current liabilities:
Short-term borrowings $ -- $ 7,265 $ -- $ 7,265
Accounts payable 45,072 25,255 -- 70,327
Accrued expenses and other current
liabilities 51,045 39,689 -- 90,734
- --------------------------------------------------------------------------------------------------------
Total current liabilities 96,117 72,209 -- 168,326
Due to Grove Companies 442 29,272 (29,714) --
Deferred revenue -- 46,509 -- 46,509
Other liabilities 27,781 10,388 -- 38,169
- --------------------------------------------------------------------------------------------------------
Total liabilities 124,340 158,378 (29,714) 253,004
Total predecessor capital 524,238 106,938 (2,684) 628,492
- --------------------------------------------------------------------------------------------------------
Total liabilities and predecessor capital $648,578 $ 265,316 $ (32,398) $ 881,496
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
F-38 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(21) Continued
Condensed Consolidating Balance Sheets as of October 3, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Guarantor Other Combined
Company subsidiaries subsidiaries Eliminations totals
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 16,376 $ 6,052 $ 11,861 $ -- $ 34,289
Trade receivables, net -- 54,342 75,491 -- 129,833
Due from Hanson PLC 10,500 -- -- -- 10,500
Notes receivable -- 5,887 -- -- 5,887
Inventories -- 118,715 88,533 -- 207,248
Prepaid expenses other current liabilities -- 3,532 5,361 -- 8,893
- --------------------------------------------------------------------------------------------------------------------------------
Total current assets 26,876 188,528 181 -- 396,650
Property, plant, and
equipment, net -- 112,522 94,653 -- 207,175
Goodwill -- 266,812 21,687 -- 288,499
Investment and due from
subsidiaries 642,643 250,810 4,940 (898,393) --
Other assets 10,082 7,362 580 -- 18,024
- --------------------------------------------------------------------------------------------------------------------------------
Total assets $ 679,601 $826,034 $ 303,106 $ (898,393) $ 910,348
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-39 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(21) Continued
Condensed Consolidating Balance Sheets as of October 3, 1998, continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Guarantor Other Combined
Company subsidiaries subsidiaries Eliminations totals
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Liabilities and invested capital
Current liabilities:
Current maturities of
long-term debt $ 7,000 $ -- $ -- $ -- $ 7,000
Short-term borrowings -- -- 15,027 -- 15,027
Accounts payable -- 49,017 30,453 -- 79,470
Accrued expenses and other
current liabilities 10,278 29,927 64,746 -- 104,951
- -----------------------------------------------------------------------------------------------------------------
Total current liabilities 17,278 78,944 110,226 -- 206,448
Deferred revenue -- -- 67,306 -- 67,306
Long-term debt 408,000 -- -- -- 408,000
Due to subsidiaries 98,701 583,015 103,043 (784,759) --
Other liabilities -- 72,171 10,562 -- 82,733
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 523,979 734,130 291,137 (784,759) 764,487
- -----------------------------------------------------------------------------------------------------------------
Member's equity:
Invested capital 164,560 92,892 20,742 (113,634) 164,560
Accumulated deficit (8,938) 1,071 (16,114) -- (23,981)
Minimum pension
liability -- (2,059) -- -- (2,059)
Cumulative translation
adjustiment -- -- 7,341 -- 7,341
- -----------------------------------------------------------------------------------------------------------------
Total member's equity 155,622 91,904 11,969 (113,634) 145,861
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and member's
equity $ 679,601 $826,034 $303,106 $(898,393) $ 910,348
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
F-40 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(21) Continued
Condensed Combining Statements of Operations for the Year Ended September
28, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Guarantor Other Combined
subsidiaries subsidiaries Eliminations totals
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $600,016 $315,208 $(121,015) $794,209
Cost of goods sold 458,629 269,066 (118,565) 609,130
Gross profit 141,387 46,142 (2,450) 185,079
Selling, engineering, general, and
administrative expenses 82,734 46,070 -- 128,804
Management fees paid to Hanson PLC 5,655 -- -- 5,655
- ------------------------------------------------------------------------------------------------------
Income (loss) from operations 52,998 72 (2,450) 50,620
Interest (expense) income, net (2,820) 29 -- (2,791)
Other expense, net (193) -- -- (193)
- ------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 49,985 101 (2,450) 47,636
Income taxes 21,749 439 -- 22,188
- ------------------------------------------------------------------------------------------------------
Net income (loss) $ 28,236 $ (338) $ (2,450) $ 25,448
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
F-41 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(21) Continued
Condensed Combining Statements of Operations for the Year Ended September
27, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Guarantor Other Combined
subsidiaries subsidiaries Eliminations totals
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 641,228 $ 314,643 $ (99,059) $ 856,812
Cost of goods sold 486,381 266,430 (99,272) 653,539
- ----------------------------------------------------------------------------------------------------
Gross profit 154,847 48,213 213 203,273
Selling, engineering, general, and
administrative expenses 85,563 45,683 -- 131,246
Management fees paid to Hanson PLC 2,176 -- -- 2,176
Restructuring charges -- 1,960 -- 1,960
- ----------------------------------------------------------------------------------------------------
Income from operations 67,108 570 213 67,891
Interest (expense) income, net 275 (232) -- 43
Other income, net 535 -- -- 535
- ----------------------------------------------------------------------------------------------------
Income before income taxes 67,918 338 213 68,469
Income taxes 25,948 301 -- 26,249
- ----------------------------------------------------------------------------------------------------
Net income $ 41,970 $ 37 $ 213 $ 42,220
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
Condensed Combining Statements of Operations for the Seven Months Ended
April 28, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Guarantor Other Combined
subsidiaries subsidiaries Eliminations totals
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 354,873 $ 166,780 $ (45,453) $ 476,200
Cost of goods sold 273,454 149,336 (45,453) 377,337
- --------------------------------------------------------------------------------------------------------
Gross profit 81,419 17,444 -- 98,863
Selling, engineering, general, and
administrative expenses 49,586 29,293 -- 78,879
Management fees paid to Hanson PLC 162 -- -- 162
- --------------------------------------------------------------------------------------------------------
Income (loss) from operations 31,671 (11,849) -- 19,822
Interest income, net 970 78 -- 1,048
Other expense, net 2,195 7,329 -- 9,524
- --------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 30,446 (19,100) -- 11,346
Income taxes 11,741 -- -- 11,741
- --------------------------------------------------------------------------------------------------------
Net income (loss) $ 18,705 $ (19,100) $ -- $ (395)
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
F-42 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(21) Continued
Condensed Consolidating Statements of Operations for the Five Months Ended
October 3, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Guarantor Other Combined
Company subsidiaries subsidiaries Eliminations totals
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 308,597 $ 124,824 $ (39,642) $ 393,779
Cost of goods sold -- 261,411 113,995 (39,642) 335,764
- ----------------------------------------------------------------------------------------------------------------
Gross profit -- 47,186 10,829 -- 58,015
Selling, engineering, general,
and administrative expenses 10,318 30,246 20,625 -- 61,189
Management fees paid to
Hanson PLC -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from operations (10,318) 16,940 (9,796) -- (3,174)
Interest (expense) income, net 1,370 (14,832) (2,454) -- (15,916)
Other income (expense), net 10 370 (934) -- (554)
- ----------------------------------------------------------------------------------------------------------------
Income (loss) before income
taxes (8,938) 2,478 (13,184) -- (19,644)
Income taxes -- 1,407 2,930 -- 4,337
- ----------------------------------------------------------------------------------------------------------------
Net income (loss) $ (8,938) $ 1,071 $ (16,114) $ -- $ (23,981)
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
F-43 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(21) Continued
Condensed Combining Statements of Cash Flows for the Year Ended September
28, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Guarantor Other Combined
subsidiaries subsidiaries totals
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net cash (used in) provided by operating activities $ 35,276 $ (25,450) $ 9,826
- ---------------------------------------------------------------------------------------------------------
Investing activities
Capital expenditures (16,522) (2,921) (19,443)
Investment in equipment held for rent -- (22,527) (22,527)
Other investing activities 432 (3,703) (3,271)
- ---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (16,090) (29,151) (45,241)
- ---------------------------------------------------------------------------------------------------------
Financing activities
Net proceeds from short-term borrowings 7,443 -- 7,443
Other financing activities (26,672) 44,981 18,309
- ---------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (19,229) 44,981 25,752
- ---------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash -- (838) (838)
- ---------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (43) (10,458) (10,501)
Cash and cash equivalents at beginning of year 513 18,172 18,685
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 470 $ 7,714 $ 8,184
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
F-44 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(21) Continued
Condensed Combining Statements of Cash Flows for the Year Ended September
27, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Guarantor Other Combined
subsidiaries subsidiaries totals
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net cash (used in) provided by operating activities $ (5,448) $ 17,443 $ 11,995
- ---------------------------------------------------------------------------------------------------------
Investing activities
Capital expenditures (25,521) (6,970) (32,491)
Investment in equipment held for rent -- (37,904) (37,904)
Other investing activities 1,587 16 1,603
- ---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (23,934) (44,858) (68,792)
- ---------------------------------------------------------------------------------------------------------
Financing activities
Net proceeds from short-term borrowings (7,443) 7,647 204
Net amounts received from parent 35,863 18,282 54,145
- ---------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 28,420 25,929 54,349
- ---------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash -- (712) (712)
- ---------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (962) (2,198) (3,160)
Cash and cash equivalents at beginning of year 470 7,714 8,184
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ (492) $ 5,516 $ 5,024
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
F-45 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(21) Continued
Condensed Combining Statements of Cash Flows for the Seven Months Ended
April 28, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Guarantor Other Combined
subsidiaries subsidiaries totals
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net cash provided by operating activities $ 44,125 $ 48,972 $ 93,097
- ----------------------------------------------------------------------------------------------------
Investing activities
Capital expenditures (9,918) (9,603) (19,521)
Investment in equipment held for rent -- (16,380) (16,380)
Other investing activities 242 1,829 2,071
- ----------------------------------------------------------------------------------------------------
Net cash used in investing activities (9,676) (24,154) (33,830)
- ----------------------------------------------------------------------------------------------------
Financing activities
Net proceeds from short-term borrowings -- 6,821 6,821
Other financing activities (29,944) (32,143) (62,087)
- ----------------------------------------------------------------------------------------------------
Net cash used in financing activities (29,944) (25,322) (55,266)
- ----------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash -- 217 217
Net change in cash and cash equivalents 4,505 (287) 4,218
Cash and cash equivalents at beginning of year (492) 5,516 5,024
- ----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 4,013 $ 5,229 $ 9,242
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
F-46 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements (in thousands)
- --------------------------------------------------------------------------------
(21) Continued
Condensed Consolidating Statements of Cash Flows for the Five Months Ended
October 3, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Guarantor Other Combined
Company subsidiaries subsidiaries Eliminations totals
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating activities
Net cash provided by
operating activities $ 2,062 $ 43,830 $ 11,408 $ -- $ 57,300
- -----------------------------------------------------------------------------------------------------------------------------
Investing activities
Capital expenditures -- (5,665) (1,565) -- (7,230)
Investment in equipment held
for rent -- -- (20,751) -- (20,751)
Acquisition of businesses from
Hanson PLC, including
transaction costs of $5,783,
net of cash acquired of
$9,242 and post-closing
adjustment of $16,818 -- (484,260) (78,463) -- (562,723)
Other investing activities (113,635) 84 1,218 113,635 1,302
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing
activities (113,635) (489,841) (99,561) 113,635 (589,402)
- -----------------------------------------------------------------------------------------------------------------------------
Financing activities
Net proceeds from short-term
borrowings -- -- 941 -- 941
Proceeds from issuance of
long-term debt 450,200 -- -- -- 450,200
Repayments of long-term debt (35,200) -- -- -- (35,200)
Equity investment from
Grove Holdings LLC 168,209 92,892 20,743 (113,635) 168,209
Advances to Grove
Holdings LLC (3,649) -- -- -- (3,649)
Deferred financing costs (14,453) -- -- -- (14,453)
Other financing activities (437,158) 359,171 77,987 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by
financing activities 127,949 452,063 99,671 (113,635) 566,048
- -----------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes
on cash -- -- 343 -- 343
- -----------------------------------------------------------------------------------------------------------------------------
Net increase in cash and
cash equivalents and
cash equivalents at
end of year $ 16,376 $ 6,052 $ 11,861 $ -- $ 34,289
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule II -Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Additions
-----------------------------------
Balance at Charged to costs Charged to Balance at
beginning of year and expenses other accounts(a) Deductions(b) end of year
----------------- ---------------- ----------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
(in thousands):
Year ended September 28, 1996 $1,891 688 (14) 12 $2,553
Year ended September 27, 1997 $2,553 538 (114) 260 $2,717
Seven months ended April 28, 1998 $2,717 880 12 146 $3,463
Five months ended October 3, 1998 $3,463 290 121 799 $3,075
</TABLE>
- ----------------
(a) Impact of exchange rates
(b) Write-offs
S-1
<PAGE>
Exhibit No. Description of Exhibit
- ----------- -----------------------------------------------------------------
3.1 Second Amended and Restated Limited Liability Company Agreement
of Grove Worldwide LLC ("Grove").
4.1* Indenture dated as of April 29, 1998, by and among Grove, Grove
Capital, Inc. ("Grove Capital"), the Subsidiary Guarantors and
the United States Trust Company of New York.
4.2* Form of 9 1/4% Senior Subordinated Notes due 2008.
4.3* Credit Agreement dated April 29, 1998, by and among Grove, Grove
Capital and Chase Bank of Texas, National Association, as
administrative agent, Donaldson, Lufkin & Jenrette Securities
Corporation, as documentation agent, and BankBoston, N.A., as
syndication agent.
4.4* Registration Rights Agreement dated as of April 29, 1998, by and
among Grove, Grove Capital, the Subsidiary Guarantors and Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and BankBoston Securities Inc.
10.1* Stock and Asset Purchase Agreement, dated March 10, 1998 (the
"Acquisition Agreement"), by and among Grove and Hanson Funding
(G) Limited, Deutsche Grove Corporation, Hanson America Holdings
(4) Ltd., Grove France SA, Kidde Industries, Inc. and Hanson
Finance PLC (collectively, the "Sellers").
10.2* Amendment to the Acquisition Agreement, dated April 29, 1998, by
and among the Grove and the Sellers.
10.3* George Group Consulting Agreement dated as of April 29, 1998 by
and between Grove and George Group Inc.
10.4* Employment Agreement dated as of March 5, 1998 by and between
Grove and Salvatore J. Bonanno.
10.5* Change of Control Agreement dated July 24, 1997 by and between
Grove and James A. Kolinski.
10.6* Change of Control Agreement dated July 24, 1997 by and between
Grove and Joseph A. Shull.
10.7 Change of Control Agreement dated July 24, 1997 by and between
Grove and Robert Stift.
<PAGE>
Exhibit No. Description of Exhibit
- ----------- -----------------------------------------------------------------
10.8* Change of Control Agreement dated July 24, 1997 by and between
Grove and Keith R. Simmons.
10.9* Change of Control Agreement dated July 24, 1997 by and between
Grove and Theodore J. Urbanek.
10.10* Change of Control Agreement dated July 24, 1997 by and between
Grove and G. Fred Heidinger.
10.11* Grove Investors LLC Management Option Plan.
10.12* Grove Worldwide LLC Short-Term Incentive Plan.
10.13* Guarantee and Collateral Agreement by Grove Holdings LLC, Grove,
Grove Capital and certain of their subsidiaries in favor of Chase
Bank of Texas, National Association, as administrative agent.
10.14* Software License and Support Agreement, dated June 29, 1996,
between Baan U.S.A. Inc. and Grove North America, Division of
Kidde Industries, Inc., and amended by Addendum No. One, dated
June 29, 1996.
10.15* Professional Services Agreement, dated June 26, 1996, between
Baan U.S.A. Inc. and Grove North America, Division of Kidde
Industries, Inc., and amended by Addendum No. One, dated June 29,
1996.
10.16* Consent Letter, dated April 27, 1998 from Grove to Baan U.S.A.
Inc.
10.17* Form of Grove Investors LLC Option Agreement.
10.18* First Amendment, dated June 23, 1998, to Employment Agreement of
Salvatore J. Bonanno.
10.19* Promissory Note dated June 27, 1998 by and between Grove and
Salvatore J. Bonanno.
10.21* Promissory Noted dated June 27, 1998 by and between Grove and
Jeffrey D. Bust.
10.22* Promissory Note dated June 27, 1998 by and between Grove and
James A. Kolinski.
10.23* Promissory Note dated June 27, 1998 by and between Grove and John
Wheeler.
10.24 Promissory Note dated October 27, 1998 by and between Grove and
Stephen L. Cripe.
10.25 Promissory Note dated October 27, 1998 by and between Grove and
Stephen L. Cripe.
10.26 Promissory Note dated October 27, 1998 by and between Grove and
Donald Mallo.
10.27 Promissory Note dated October 27, 1998 by and between Grove and
Donald Mallo.
21.1* Subsidiaries of the Company.
27.1 Financial Data Schedule.
- ------------------
* Incorporated herein by reference from the Registration Statement on Form
S-4 filed by the Company, Grove Capital, Inc. and the Subsidiary Guarantors
(Commission File Number 333-57611).
<PAGE>
Exhibit 3.1
THE SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
GROVE WORLDWIDE LLC
(a Delaware limited liability company)
_______________________________________
Dated as of July 31, 1998
_______________________________________
<PAGE>
TABLE OF CONTENTS
ARTICLE I FORMATION; NAME; TERM . . . . . . . . . . . . . . . . . . . . 1
1.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Effective Date; Term. . . . . . . . . . . . . . . . . . . . . 1
1.4 Principal Place of Business . . . . . . . . . . . . . . . . . 1
1.5 Registered Office . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Registered Agent. . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Authorized Person . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II INTERESTS; COMMITMENTS; CLOSING; CONTRIBUTIONS. . . . . . . . 4
2.1 Capital Contributions . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Distributions . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Management of the Company . . . . . . . . . . . . . . . . . . 5
4.2 Powers of the Management Committee. . . . . . . . . . . . . . 6
4.3 Governance. . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 No Management by Other Persons or Entities. . . . . . . . . . 8
4.5 By-laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 Reliance by Third Parties . . . . . . . . . . . . . . . . . . 8
ARTICLE V ACCOUNTING; FINANCIAL AND TAX MATTERS . . . . . . . . . . . . 9
5.1 Accounting Method . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Accounting Records. . . . . . . . . . . . . . . . . . . . . . 9
5.3 Fiscal Year and Taxable Year. . . . . . . . . . . . . . . . . 9
5.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . 9
5.5 Bank and Investment Accounts. . . . . . . . . . . . . . . . . 10
5.6 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . 10
5.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.8 Classification as a Disregarded Entity. . . . . . . . . . . . 11
5.9 Accounting Decisions. . . . . . . . . . . . . . . . . . . . . 11
ii
<PAGE>
ARTICLE VI LIABILITY; EXCULPATION; INDEMNIFICATION . . . . . . . . . . . 11
6.1 Liability of Members. . . . . . . . . . . . . . . . . . . . . 11
6.2 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Duties and Liabilities of Covered Persons . . . . . . . . . . 12
6.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 13
6.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII TERMINATION; DISSOLUTION; LIQUIDATION AND
WINDING-UP . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Events of Dissolution . . . . . . . . . . . . . . . . . . . . 14
7.2 Liquidation and Winding-Up. . . . . . . . . . . . . . . . . . 15
7.3 Survival of Rights, Duties and Obligations. . . . . . . . . . 15
7.4 Claims of the Member. . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 16
8.1 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.2 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.3 Admission of Additional Members . . . . . . . . . . . . . . . 16
8.4 Liability of Members. . . . . . . . . . . . . . . . . . . . . 16
8.5 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 16
iii
<PAGE>
THE SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
GROVE WORLDWIDE LLC
This Second Amended and Restated Limited Liability Company Agreement
(this "Agreement") of Grove Worldwide LLC, a Delaware limited liability company
(the "Company"), is made as of the 31st day of July 1998, by Grove Holdings LLC,
as member (the "Member" or "Managing Member").
WHEREAS, the Company was formed under the laws of the State of
Delaware by filing a certificate of formation with the Secretary of the State of
Delaware pursuant to an Operating Agreement dated as of January 15, 1998 (the
"Original Agreement"); and
WHEREAS, the Company was operating in accordance with the Amended and
Restated Limited Liability Company Agreement dated as of April 29, 1998 (the
"Amended Agreement"), and the Company wishes to amend and restate the Original
Agreement and the Amended Agreement as set forth below:
ARTICLE I
FORMATION; NAME; TERM
---------------------
1.1 FORMATION. The Company was formed on January 15, 1998,
pursuant to the provisions of the Delaware Limited Liability Company Act, as
amended from time to time (the "ACT") upon the filing of the Certificate of
Formation with the Secretary of State of Delaware. The Company shall be
governed by, and the rights, duties and liabilities of the Member shall be as
provided in, the Act and this Agreement.
1.2 NAME. The name of the Company shall be "Grove Worldwide LLC".
The business of the Company may be conducted upon compliance with all applicable
laws under any other name designated by the Management Committee (as defined in
Section 4.1).
1.3 EFFECTIVE DATE; TERM. This Agreement shall become effective
upon the execution of this Agreement by the Member. The Company shall continue
in existence until it is dissolved and its affairs wound up in accordance with
the Act and this Agreement or until it is terminated as provided in the Act or
this Agreement.
1.4 PRINCIPAL PLACE OF BUSINESS. The principal place of business
of the Company shall be at 1565 Buchanan Trail East, P.O. Box 21, Shady Grove,
PA 17256 or at
1
<PAGE>
such other or additional place or places as the Managing Member or Management
Committee shall determine from time to time. The Company may have other
offices, either within or outside of the State of Delaware, at such place or
places as the Managing Member or Management Committee may from time to time
designate or the business of the Company may require.
1.5 REGISTERED OFFICE. The address of the Company's registered
office in Delaware shall be c/o National Corporate Research, Ltd., 9 East
Loockerman Street, Dover, County of Kent, Delaware 19901.
1.6 REGISTERED AGENT. The name and address of the registered agent
of the Company for service of process on the Company in the State of Delaware
initially is National Corporate Research, Ltd., 9 East Loockerman Street, Dover,
County of Kent, Delaware 19901. The Management Committee may at any time and
from time to time designate another registered agent.
1.7 FILINGS. The Managing Member promptly shall cause the
execution and delivery of such documents and performance of such acts consistent
with the terms of this Agreement as may be necessary to comply with the
requirements of law for the formation, qualification and operation of a limited
liability company under the laws of each jurisdiction in which the Company shall
conduct business. All expenses of such filings shall be borne by the Company.
1.8 AUTHORIZED PERSON. Salvatore J. Bonanno is hereby designated
as an authorized person, within the meaning of the Act, to execute, deliver and
file the certificate of formation of the Company, and any amendments and/or
restatements thereof.
1.9 PURPOSE. The Company is formed for the purpose of, directly or
indirectly, engaging in the business of designing, manufacturing, selling and
providing customer support for mobile hydraulic cranes, aerial work platforms,
truck mounted cranes and similar devices and in any and all activities and
transactions which are necessary, convenient, desirable or incidental to the
foregoing and in any lawful business, act or activity related thereto as the
Management Committee may determine from time to time and for which a limited
liability company may be organized under the Act, and in any and all activities
necessary, convenient, desirable or incidental to the foregoing.
1.10 POWERS. Except as otherwise limited in this Agreement,
(a) the Company shall have the power and authority to do
any and all acts necessary, appropriate, proper, advisable, convenient or
incidental to or for the furtherance of the purpose set forth in Section 1.9,
including:
2
<PAGE>
(i) to conduct its business, carry on its
operations and have and exercise the powers granted to a limited liability
company by the Act in any state, territory, district or possession of the United
States, or in any foreign country that may be necessary, convenient or
incidental to the accomplishment of the purpose of the Company;
(ii) to acquire by purchase, lease, contribution of
property or otherwise, own, hold, operate, maintain, finance, improve, lease,
sell, convey, mortgage, transfer, demolish or dispose of any real or personal
property that may be necessary, convenient or incidental to the accomplishment
of the purpose of the Company;
(iii) to enter into, perform and carry out contracts
of any kind, including, without limitation, contracts with any Member or any
Affiliate thereof, or any agent of the Company necessary to, in connection with,
convenient to, or incidental to the accomplishment of the purposes of the
Company;
(iv) to purchase, take, receive, subscribe for or
otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge,
or otherwise dispose of, and otherwise use and deal in and with, shares or other
interests in or obligations of domestic or foreign corporations, associations,
general or limited partnerships (including the power to be admitted as a partner
thereof and to exercise the rights and perform the duties created thereby),
trusts, limited liability companies (including the power to be admitted as a
member or appointed as a manager thereof and to exercise the rights and perform
the duties created thereby), or individuals or direct or indirect obligations of
the United States or of any government, state, territory, governmental district
or municipality or of any instrumentality of any of them;
(v) to lend money for any proper purpose, to invest
and reinvest funds and to take and hold real and personal property for the
payment of funds so loaned or invested;
(vi) to sue and be sued, complain and defend and
participate in administrative or other proceedings, in its name;
(vii) to appoint employees and agents of the Company,
define their duties and fix their compensation;
(viii) to indemnify any Person to the fullest extent
permitted by the Act and to obtain any and all types of insurance;
(ix) to cease its activities and cancel its
Certificate;
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(x) to negotiate, enter into, renegotiate, extend,
renew, terminate, modify, amend, waive, execute, acknowledge or take any other
action with respect to any lease, contract or security agreement in respect of
any assets of the Company;
(xi) to borrow money and issue evidences of
indebtedness, and to secure the same by a mortgage, pledge or other lien on the
assets of the Company;
(xii) to pay, collect, compromise, litigate,
arbitrate or otherwise adjust or settle any and all other claims or demands of
or against the Company or to hold such proceeds against the payment of
contingent liabilities; and
(xiii) to make, execute, acknowledge and file any and
all documents or instruments necessary, convenient or incidental to the
accomplishment of the purpose of the Company.
(b) The Company, and the Managing Member, on behalf of the
Company, may enter into and perform any and all documents, agreements and
instruments contemplated thereby, all without any further act, vote or approval
of any Member notwithstanding any other provision of this Agreement, the Act or
other applicable law. The Managing Member or Management Committee may authorize
any Person (including, without limitation, any other Member) to enter into and
perform any document on behalf of the Company.
(c) The Company may merge with, or consolidate into,
another Delaware limited liability company or other business entity (as defined
in Section 18-209(a) of the Act) upon the approval of the Managing Member or the
Management Committee.
ARTICLE II
INTERESTS; COMMITMENTS; CLOSING; CONTRIBUTIONS
----------------------------------------------
2.1 CAPITAL CONTRIBUTIONS. The Member shall contribute, transfer,
assign and convey (collectively, "CONTRIBUTE"), or cause to be contributed, to
the capital of the Company, an amount in cash equal to $168,206,759 in exchange
for 100% of the interests (an "Interest") in the Company. The Member will have
no interest in specific Company property.
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ARTICLE III
DISTRIBUTIONS
-------------
3.1 DISTRIBUTIONS.
(a) The Company shall, to the extent the Managing Member or
Managment Committee determines that Company has cash available to do so, make
quarterly distributions of cash to the Member in an amount equal to (i) the
product of (A) the taxable income of the Company and (B) the maximum combined
Federal, state and local income tax rates applicable to an individual resident
of New York City or Los Angeles, California, whichever is higher, PROVIDED,
HOWEVER, that in determining such amount, the effect thereon of any net
operating loss carryforwards or other carryforwards or tax attributes
attributable to the Company, such as alternative minimum tax carryforwards shall
be taken into account, and adjusted to take into account any applicable credits,
deductions or other adjustments allowed under both New York and California law
to a direct or indirect owner of an Interest in the Company for state and local
income tax purposes.
(b) Additional distributions shall be made to the Member at
the times and in the aggregate amounts determined by the Managing Member or
Management Committee.
ARTICLE IV
MANAGEMENT
----------
4.1 MANAGEMENT OF THE COMPANY.
(a) The Company shall be managed by a Management Committee.
The Management Committee shall manage the Company in accordance with this
Agreement and the actions of the Management Committee taken in such capacity and
in accordance with this Agreement shall bind the Company.
(b) The Management Committee shall have full and complete
discretion to manage and control the business and affairs of the Company, to
make all decisions affecting the business and affairs of the Company and to take
all such actions as it deems necessary or appropriate to accomplish the purpose
of the Company as set forth herein. The Management Committee shall be the sole
person or entity with the power to bind the Company, except and to the extent
that such power is expressly delegated to any other person, committee or entity
by this Agreement or by the Management Committee, and such delegation shall not
cause the Management Committee to cease being the Management Committee. There
shall not be a "manager" (within the meaning of the Act) of the Company.
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(c) The Management Committee may appoint individuals with
or without such titles as it may elect, including the titles of Chairman, Chief
Executive Officer, Chief Financial Officer, General Counsel, Vice President,
Treasurer, Assistant Treasurer, Secretary, and Assistant Secretary, to act on
behalf of the Company with such power and authority as the Management Committee
may delegate in writing to any such persons, and otherwise such officers shall
have all the powers and authority customarily exercised by such officers.
(d) The Management Committee may adopt the By-laws of the
Company consistent with this Agreement and the Act.
4.2 POWERS OF THE MANAGEMENT COMMITTEE. The Management Committee
shall have the right, power and authority, in the management of the business and
affairs of the Company, to do or cause to be done, at the expense of the
Company, any and all acts deemed by the Management Committee to be necessary or
appropriate to effectuate the business, purposes and objectives of the Company.
Without limiting the generality of the foregoing, the
Management Committee shall have the power and authority to:
(a) issue from time to time in one or more series of any
number of Interests, and with such powers, preferences, rights and
qualifications, limitations or restrictions thereof, and such distinctive serial
designations, all as shall hereafter be stated and expressed in the resolution
or resolutions adopted by the Management Committee. Each series of Interests
(a) may have such voting rights or powers, full or limited, or may be without
voting rights or powers; (b) may be subject to redemption at such time or times
and at such prices; (c) may be entitled to receive allocations and distributions
(which may be cumulative or non-cumulative) at such rate or rates, on such
conditions and at such times, and allocable and payable in preference to, or in
such relation to, the allocations and distributions allocable and payable to any
other class or classes or series of Interests; (d) may have such rights upon the
voluntary or involuntary liquidation, winding up or dissolution of, or upon any
distribution of the assets of, the Company; (e) may be made convertible into or
exchangeable for, Interests of any other class or classes or of any other series
of the same or any other class or classes of interests of the Company at such
price or prices or at such rates of exchange and with such adjustments; (f) may
be entitled to the benefit of a sinking fund to be applied to the purchase or
redemption of Interests of such series in such amount or amounts; (g) may be
entitled to the benefit of conditions and restrictions upon the creation of
indebtedness of the Company or any subsidiary, upon the issue of any additional
Interests (including additional Interests of such series or of any other series)
and upon the making of allocations or distributions on, and the purchase,
redemption or other acquisition by the Company or any subsidiary of, any
outstanding Interests of the Company and (h) may have such other relative,
participating, optional or other special rights, qualifications, limitations or
restrictions thereof; all as shall be stated in said resolution or resolutions
providing for the issue of such Interests;
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(b) cause the Interests of the Company to be represented by
certificates in such form and on the basis of such procedure as shall be
approved by the Management Committee, including with respect to the issuance of
new certificates to replace lost, destroyed, stolen or mutilated certificates.
(c) establish a record date with respect to all actions to
be taken hereunder that require a record date be established, including with
respect to allocations and distributions;
(d) bring and defend on behalf of the Company actions and
proceedings at law or in equity before any court or governmental, administrative
or other regulatory agency, body or commission or otherwise; and
(e) execute all documents or instruments, perform all
duties and powers and do all things for and on behalf of the Company in all
matters necessary, desirable, convenient or incidental to the purpose of the
Company, including, without limitation, all documents, agreements and
instruments related to the making of investments of Company funds.
In connection with the issuance of any Interests as
contemplated under Subsection (a) above, the Management Committee is hereby
authorized to enter into such amendments or supplements to this Agreement as the
Management Committee determines to be necessary or advisable to give effect to
such issuance, including to make appropriate adjustments to the total number of
Interests outstanding; provided, however, that such adjustments shall not treat
Members differently and adversely from the manner in which other Members holding
similar Interests are treated.
The expression of any power or authority of the Management
Committee in this Agreement shall not in any way limit or exclude any other
power or authority of the Management Committee which is not specifically or
expressly set forth in this Agreement.
Notwithstanding anything in this Agreement to the contrary, all
transactions between the Company or any Subsidiary and any Member, its
Affiliates or any officer, director, shareholder, partner, member, employee or
agent of a Member or an Affiliate of a Member or family members of the foregoing
shall be on an arms length basis.
4.3 GOVERNANCE.
(a) NUMBER. The Management Committee shall consist of one
or more members. Each Management Committee member shall hold office until a
successor is elected and qualified or until such member's death, resignation or
removal.
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(b) ELECTION. Management Committee members shall be
elected by the Managing Member from time to time.
(c) RESIGNATION. Any Management Committee member may
resign at any time upon written notice to the Company.
(d) REMOVAL. Any or all of the Management Committee
members may be removed with or without cause by the Managing Member.
(e) TIMES AND PLACES OF MEETINGS. The times and places for
fixing meetings may be fixed from time to time by the Management Committee.
(f) QUORUM. A majority of the Management Committee members
shall be necessary and sufficient to constitute a quorum for the transaction of
business at any meeting of the Management Committee.
(g) ACTION BY MAJORITY VOTE. The act of a majority of the
Management Committee members present at a meeting at which a quorum is present
shall be the act of the Management Committee.
(h) ACTION WITHOUT A MEETING. Any action or permitted
action required to be taken at any meeting of the Management Committee may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by a majority of
the Management Committee members and such consent is filed with the minutes of
the proceedings of the Company.
4.4 NO MANAGEMENT BY OTHER PERSONS OR ENTITIES. Except and only to
the extent expressly delegated by the Management Committee, no person or entity
other than the Management Committee shall be an agent of the Company or have any
right, power or authority to transact any business in the name of the Company or
to act for or on behalf of or to bind the Company.
4.5 BY-LAWS. The Member or the Management Committee may adopt
by-laws consistent with this Agreement and the Act.
4.6 RELIANCE BY THIRD PARTIES. Any person or entity dealing with
the Company or the Management Committee or a Member, in his capacity as a
Member, may rely upon a certificate signed by the Management Committee as to:
(a) the identity of the Management Committee or the Member;
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(b) the existence or non-existence of any fact or facts
which constitute a condition precedent to acts by the Management Committee or
the Member or are in any other manner germane to the affairs of the Company;
(c) the persons who or entities which are authorized to
execute and deliver any instrument or document of or on behalf of the Company;
or
(d) any act or failure to act by the Company as to any
other matter whatsoever involving the Company or the Member.
ARTICLE V
ACCOUNTING; FINANCIAL AND TAX MATTERS
-------------------------------------
5.1 ACCOUNTING METHOD. The Company shall keep its accounting
records and shall report its profits or losses on the accrual method of
accounting in accordance with the principles used by the Company for Federal
income tax purposes and otherwise in accordance with Generally Accepted
Accounting Principles ("GAAP") and, to the extent inconsistent therewith, in
accordance with this Agreement.
5.2 ACCOUNTING RECORDS. The Company shall keep complete and
accurate business and accounting records reflecting all transactions of the
Company. Such accounting records shall be kept in accordance with the
principles used by the Company for Federal income tax purposes and otherwise in
accordance with GAAP consistently applied and, to the extent inconsistent
therewith, in accordance with this Agreement. The Company shall also keep all
records required to be kept pursuant to the Act. The Company's records,
together with a copy of this Agreement and of the Certificate, shall be
maintained at the principal place of business of the Company and shall be
subject to inspection or examination by the Member or Management Committee at
all reasonable times for any purpose reasonably related to such Member's or
Management Committee's interest in of the Company.
5.3 FISCAL YEAR AND TAXABLE YEAR. The accounting fiscal year (the
"Fiscal Year") of the Company shall end on the Saturday closest to the last day
of September of each year. The taxable year (the "Taxable Year") of the Company
shall end on December 31 of each year. The Fiscal Year and Taxable Year may be
changed by the Managing Member or Management Committee.
5.4 FINANCIAL STATEMENTS.
(a) As soon as practicable but in any event within 60 days
after the end of each of the first three quarters of each Fiscal Year of the
Company, the Management Committee or the financial officers of the Company shall
prepare quarterly financial statements
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of the Company (which need not be examined or reported on by an independent
certified public accountant), which shall include a balance sheet of the Company
as of the end of such fiscal quarter, a statement of net income and net loss for
such fiscal quarter and a statement of cash flows of the Company for such fiscal
quarter, all in reasonable detail, setting forth in each case in comparative
form the information for the corresponding period (or periods) of the previous
Fiscal Year.
(b) As soon as practicable but in any event within 90 days
after the close of each Fiscal Year of the Company, the Company shall cause to
be prepared the following financial statements, accompanied by the audited
report thereon of the independent accountants for the Company: (i) a balance
sheet of the Company as at the end of such Fiscal Year; (ii) a statement of net
income and net loss for such Fiscal Year; (iii) a statement of cash flows of the
Company for such Fiscal Year; and (iv) a statement of the Members' Capital
Accounts and changes therein for such Fiscal Year, all in reasonable detail,
setting forth in each case in comparative form all the information for the
corresponding period (or periods) of the previous Fiscal Year.
5.5 BANK AND INVESTMENT ACCOUNTS. All funds of the Company shall
be deposited in its name, or in such name as may be designated by the Managing
Member or Management Committee, in such checking, savings or other accounts, or
held in its name in the form of such other investments as shall be designated by
the Managing Member or Management Committee. The funds of the Company shall not
be commingled with the funds of any Person. All withdrawals of such deposits or
liquidations of such investments by the Company shall be made exclusively upon
the signature or signatures of such officer or officers of the Company as the
Management Committee may designate.
5.6 TAX MATTERS PARTNER. The "TAX MATTERS PARTNER" (as such term
is defined in Section 6231(a)(7) of the Code) of the Company shall be the
Managing Member or any successor "tax matters partner" designated by the
Managing Member or Management Committee in accordance with this Agreement.
5.7 TAXES.
(a) The Company shall prepare, or cause to be prepared, and
shall file all tax returns, be they information returns or otherwise, which are
required to be filed with the Internal Revenue Service, state and local tax
authorities and foreign tax jurisdictions, if any. A copy of such returns shall
be furnished to the Member and the Management Committee.
(b) The Company shall furnish the Member with all Company
information required to be reported in the tax returns of the Member for tax
jurisdictions in which the Company is considered to be doing business, including
a report indicating the
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Company's income, gain, credits, losses and deductions within 90 days after the
end of the Company's Taxable Year.
(c) All determinations as to tax elections shall be made by
the Tax Matters Partner.
5.8 CLASSIFICATION AS A DISREGARDED ENTITY. The Member intends
that the Company be disregarded as an entity separate from its owner for Federal
tax purposes effective as of the date of this Agreement. The Tax Matters
Partner shall not file an election for the Company to be taxable as an
association and shall, for and on behalf of the Company, take all steps as may
be required to maintain the Company's classification as disregarded as an entity
separate from its owner for Federal tax purposes.
5.9 ACCOUNTING DECISIONS. All determinations as to accounting
principles shall be made by the Managing Member or Management Committee.
ARTICLE VI
LIABILITY; EXCULPATION; INDEMNIFICATION
---------------------------------------
6.1 LIABILITY OF MEMBERS. A Member shall not be personally liable
for any debt, obligation or other liability of the Company, whether arising in
contract, tort or otherwise, except that a Member shall remain personally liable
for the payment of any capital contributions required by Article III, and as
otherwise provided in this Agreement, the Act and any other applicable law.
6.2 EXCULPATION.
(a) For purposes of this Agreement, "COVERED PERSON" shall
mean any Member, any Affiliate of a Member, any Management Committee member, and
any officer, director, shareholder, partner, member, employee or agent of a
Member or any Affiliate thereof, and any officer, employee or expressly
authorized agent of the Company or its Affiliates.
(b) No Covered Person shall be liable to the Company or any
other Covered Person for any loss, damage or claim incurred by reason of any act
or omission performed or omitted by such Covered Person in good faith on behalf
of the Company and in a manner reasonably believed to be within the scope of
authority conferred on such Covered Person by this Agreement, except that a
Covered Person shall be liable for any such loss, damage or claim incurred by
reason of such Covered Person's gross negligence or willful misconduct.
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(c) A Covered Person shall be fully protected in relying in
good faith upon the records of the Company and upon such information, opinions,
reports or statements presented to the Company by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the Company, including information, opinions, reports or statements as
to the value and amount of the assets, liabilities, profits, losses, or any
other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be paid.
6.3 DUTIES AND LIABILITIES OF COVERED PERSONS.
(a) To the extent that, at law or in equity, any Covered
Person has duties (including fiduciary duties) and liabilities related thereto
to the Company or to any other Covered Person, a Covered Person acting under
this Agreement shall not be liable to the Company or to any other Covered Person
for its good faith reliance on the provisions of this Agreement. The provisions
of this Agreement, to the extent that they restrict the duties and liabilities
of a Covered Person otherwise existing at law or in equity, are agreed by the
Members to replace such other duties and liabilities of such Covered Person.
(b) Unless otherwise expressly provided herein,
(i) whenever a conflict of interest exists or arises between Covered Persons, or
(ii) whenever this Agreement or any other agreement contemplated herein provides
that a Covered Person shall act in a manner that is, or provides terms that are,
fair and reasonable to the Company or any Member, the Covered Person shall
resolve such conflict of interest, taking such action or providing such terms,
considering in each case the relative interest of each party (including its own
interest) to such conflict, agreement, transaction or situation and the benefits
and burdens relating to such interests, any customary or accepted industry
practices, and any applicable generally accepted accounting practices or
principles. In the absence of bad faith by the Covered Person, the resolution,
action or term so made, taken or provided by the Covered Person shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or of any duty or obligation of the Covered Person at law or in equity or
otherwise.
(c) Whenever in this Agreement a Covered Person is
permitted or required to make a decision (a) in its "discretion" or under a
grant of similar authority or latitude, the Covered Person shall be entitled to
consider only such interests and factors as it desires, including its own
interests, and shall have no duty or obligation to give any consideration to any
interest of or factors affecting the Company or any other Person, or (b) in its
"good faith" or under another express standard, the Covered Person shall act
under such express standard and shall not be subject to any other or different
standard imposed by this Agreement or other applicable law.
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6.4 INDEMNIFICATION.
(a) To the fullest extent permitted by applicable law, the
Company shall indemnify any Covered Person who was or is made a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding brought by or against the Company or otherwise, whether
civil, criminal, administrative or investigative, including, without limitation,
an action by or in the right of the Company to procure a judgment in its favor,
by reason of the fact that such Covered Person is or was a Member, Affiliate,
officer, employee or agent of the Company, or that such Covered Person is or was
serving at the request of the Company as an Affiliate partner, member, director,
officer, trustee, employee or agent of another Person, against all expenses,
including attorneys' fees and disbursements, judgments, fines and amounts paid
in settlement actually and reasonably incurred by such Covered Person in
connection with such action, suit or proceeding. Notwithstanding the foregoing,
no indemnification shall be provided to or on behalf of any Covered Person if a
judgment or other final adjudication adverse to such Covered Person establishes
that his or her acts constituted intentional misconduct or gross negligence.
(b) Any indemnification under subsection (a) of this
Section (unless ordered by a court) shall be made by the Company only as
authorized in the specific case upon a determination that the indemnification of
the Covered Person is proper under the circumstances because he or she has met
the applicable standard of conduct set forth in subsection (a) of this
Section 6.4. Such determination shall be made by the Member or, if the Member
so directs, by independent legal counsel in a written opinion. Any
indemnification payment shall be payable only out of and to the extent of the
Company's assets, and no Covered Person shall have any liability therefor.
(c) The Company shall, in the discretion of the Member, pay
expenses incurred in defending any action, suit or proceeding described in
subsection (a) above (including reasonable legal fees and expenses of counsel
and other experts) in advance of the final disposition of such action, suit or
proceeding upon receipt by the Company of an undertaking, in form satisfactory
to the Managing Member or the Company's legal counsel, to repay such amount if
it shall be determined that the Covered Person is not entitled to be indemnified
as authorized by paragraph (a) above.
(d) The indemnification provided by this Section 6.4 shall
not be deemed exclusive of any other rights to indemnification to which those
seeking indemnification may be entitled under any agreement, or otherwise. The
rights to indemnification and reimbursement or advancement of expenses provided
by, or granted pursuant to, this Section 6.4 shall continue as to a Covered
Person who has ceased to be a Member, officer, employee or agent (or other
person indemnified hereunder) and shall inure to the benefit of the executors,
administrators, legatees and distributees of such person.
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(e) The provisions of this Section 6.4 shall be a contract
between the Company, on the one hand, and each Covered Person who served in such
capacity at any time while this Section 6.4 is in effect, on the other hand,
pursuant to which the Company and each such Covered Person intend to be legally
bound. No repeal or modification of this Section 6.4 shall affect any rights or
obligations with respect to any state of facts then or theretofore existing or
thereafter arising or any proceeding theretofore or thereafter brought or
threatened based in whole or in part upon such state of facts.
6.5 INSURANCE. The Company may purchase and maintain insurance, to
the extent and in such amounts as the Managing Member shall, in its sole
discretion, deem reasonable, on behalf of Covered Persons and such other persons
or entities as the Managing Member shall determine, against any liability that
may be asserted against or expenses that may be incurred by any such person or
entity in connection with the activities of the Company or such indemnities,
regardless of whether the Company would have the power to indemnify such person
or entity against such liability under the provisions of this Agreement. The
Managing Member, on behalf of the Company, and/or the Company may enter into
indemnity contracts with Covered Person and adopt written procedures pursuant to
which arrangements are made for the advancement of expenses and the funding of
obligations under Section 6.4 hereof and containing such other procedures
regarding indemnification as are appropriate.
ARTICLE VII
TERMINATION; DISSOLUTION; LIQUIDATION AND WINDING-UP
----------------------------------------------------
7.1 EVENTS OF DISSOLUTION. The Company shall be dissolved upon any
of the following (each a "DISSOLUTION EVENT"):
(a) the entry of a decree of judicial dissolution under
Section 18-802 of the Act;
(b) the written consent to a dissolution of the Member;
(c) the expiration of 60 days after the assignment, sale,
transfer or other disposition of all or substantially all of the assets,
properties and business of the Company;
(d) the death, retirement, resignation, expulsion,
bankruptcy or dissolution of the Member or any other event that terminates the
continued membership of the Member.
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7.2 LIQUIDATION AND WINDING-UP. If the Company is dissolved
pursuant to Section 7.1, the Company shall be liquidated and wound up in
accordance with the Act and the following provisions:
(a) The financial officers of the Company shall be directed
to prepare a balance sheet, income statement and statement of cash flows of the
Company in accordance with GAAP as of the date of dissolution and for the period
ended on such date, which balance sheet shall be reported upon by the Company's
independent public accountants.
(b) The assets, properties and business of the Company
shall be liquidated by the Managing Member as promptly as possible, but in an
orderly and businesslike manner so as not to involve undue sacrifice.
Notwithstanding the foregoing, if it is determined by the Managing Member not to
sell all or any portion of the properties and assets of the Company, such
properties and assets shall be distributed in kind in the order of priority set
forth in subsection (c); PROVIDED, HOWEVER, that the Fair Market Value of such
properties and assets, as determined in good faith by the Managing Member, shall
be used in determining the extent and amount of a distribution in kind of such
properties and assets in lieu of actual cash proceeds of any sale or other
disposition thereof.
(c) The proceeds of sale of all or substantially all of the
properties and assets of the Company and all other properties and assets of the
Company not sold, as provided in subsection (b) above, and valued at the Fair
Market Value thereof as provided in such subsection (b), shall be applied and
distributed as follows, and in the following order or priority:
(i) FIRST, to the payment of all debts and
liabilities of the Company and the expenses of liquidation not otherwise
adequately provided for;
(ii) SECOND, to the setting up of any reserves that
are reasonably necessary for any contingent unforeseen liabilities or
obligations of the Company or of the Member arising out of, or in connection
with, the Company.
(iii) THEREAFTER, to the Member.
(d) A Certificate of Cancellation shall be filed with the
Secretary of State of the State of Delaware by the Member.
7.3 SURVIVAL OF RIGHTS, DUTIES AND OBLIGATIONS. Termination,
dissolution, liquidation or winding up of the Company for any reason shall not
release any party from any liability which at the time of such termination,
dissolution, liquidation or winding up already had accrued to any other party or
which thereafter may accrue in respect to any act or omission prior to such
termination, dissolution, liquidation or winding up.
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7.4 CLAIMS OF THE MEMBER. The Member shall look solely to the
Company's assets for the return of its contribution to the Company, and if the
assets of the Company remaining after payment of or due provision for all debts,
liabilities and obligations of the Company are insufficient to return such
contribution, the Member shall have no recourse against the Company.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 ASSIGNMENTS. The Member may assign in whole or in part its
limited liability company Interest.
8.2 RESIGNATION. The Managing Member may resign from the Company.
8.3 ADMISSION OF ADDITIONAL MEMBERS. One (1) or more additional
members of the Company may be admitted to the Company with the consent of the
Member.
8.4 LIABILITY OF MEMBERS. The Member shall not have any liability
for the obligations or liabilities of the Company except to the extent provided
in the Act.
8.5 AMENDMENT. This Agreement may be amended at any time by the
Member or the Management Committee.
8.6 GOVERNING LAW. This Agreement shall be governed by, and
construed under, the laws of the State of Delaware, all rights and remedies
being governed by said laws.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, has duly executed this Limited Liability Company Agreement as of the
date and year first aforesaid.
GROVE HOLDINGS LLC
By: /s/ Salvatore J. Bonanno
----------------------------------------
Name: Salvatore J. Bonanno
Title: Chief Executive Officer
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[Logo] GROVE(R) [Logo]
worldwide
Ref: ChgCtl/letter 1.GD.ll0
July 25, 1997
Personal
Robert C Stift Esq
Chairman & CEO
Grove Worldwide
1565 Buchanan Trail East (Rt. 16)
Shady Grove
PA 17256-0021
Dear Bob
1. Introduction.
The Company recognises that the possibility of a Change in Control (as
defined in Part II of Exhibit A) of Kidde Industries Inc. (the "Company")
or a Change in Control of Hanson, with the attendant uncertainties and
risks, might result in the departure or distraction of key employees of
the Company to the detriment of the Company, Hanson and its stockholders.
In light of the possibility of a Change in Control of the Company or
Hanson, the Company has determined that it is appropriate to induce key
employees to remain with the Company, and to reinforce and encourage their
continued attention and dedication. Accordingly, upon your written
acceptance of the terms and conditions of this agreement (the "Agreement")
evidenced by signing below, the Company intends to provide you the
protections set forth herein as of the Effective Date set forth in Section
8. Capitalized terms not defined in the body of this Agreement shall have
the
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P.O. Box 21 Shady Grove, Pennsylvania 17256 717-597-8121 Fax: 717-593-5001
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meanings set forth in Exhibit A hereto, which is incorporated herein and
made a part of this Agreement.
2. Termination Following a Change in Control.
(a) If a Change in Control of the Company occurs on or after the Effective
Date and your employment is terminated during the Post Change in Control
Period (i) by the Company without Cause (ii) by you for Good Reason or
without Good Reason, (iii) due to your death, (iv) due to your Disability,
or (v) due to your Retirement, then you shall be entitled to the amounts
and benefits provided in Section 3 herein. Furthermore, if a Change in
Control occurs on or after the Effective Date and your employment was
terminated within the Pre Change in Control Period (i) by the Company
without Cause, (ii) by you for Good Reason (based on an event that
occurred within the Pre Change in Control Period), or (iii) due to your
death, you shall be entitled to the amounts and benefits provided in
Section 3 herein.
(b) If a Change in Control of Hanson occurs on or after the Effective Date and
your employment was terminated within the Pre Change in Control Period or
is terminated during the Post-Change in Control Period (i) by the Company
without Cause or (ii) by you for Good Reason then you shall be entitled to
the amounts and benefits provided in Section 3 herein.
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3. Compensation on Change in Control Termination
If pursuant to Section 2 you are entitled to amounts and benefits under
this Section 3, the Company shall, subject to Section 6, pay and provide
to you: (A) in a lump sum within five (5) days after such termination (or,
if such termination occurred during the Pre Change in Control Period,
within five (5) days after the Change in Control) (i) three (3) times your
highest annual base salary in effect within one-hundred and eighty (180)
days prior to the Change in Control, (ii) three (3) times the highest
annual bonus paid or payable to you for any of the last three (3)
completed years by the Company (which shall in no event include amounts
contributed or allocated by the Company on your behalf or paid to you
under any supplemental executive bonus plans applicable to you,
(including, without limitation, the 1993 or 1996 HI Long Term Incentive
Plans, any other plan commonly referred to by the Company as a "top-hat"
plan or any equity related plan)), (iii) any unreimbursed business
expenses for the period prior to termination payable in accordance with
the Company's policies, and (iv) any base salary, bonus, vacation pay or
other deferred compensation accrued or earned under law or in accordance
with the Company's policies applicable to you but not yet paid; (B) any
other amounts or benefits due under the then employee benefit, equity or
incentive plans applicable to you as shall be determined and paid in
accordance with such plans; (C) three (3) years of additional service and
compensation credit (at your highest compensation level in the one-hundred
and eighty (180) day period prior to the Change in Control) for pension
purposes under any defined benefit type qualified or nonqualified pension
plan or arrangement of the Company and its affiliates applicable to
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you, measured from the date of termination of employment and not credited
to the extent that you are otherwise entitled to such credit during such
three (3) year period, which payments shall be made through and in
accordance with the terms of the nonqualified defined benefit pension plan
or arrangement if any then exists, or, if not, in an actuarially
equivalent lump sum (using the actuarial factors then applying in the
Company's defined or its affiliates' benefit plan covering you); (D) an
amount equal to three (3) years of the maximum Company contribution
(assuming you deferred the maximum amount and continued to earn your then
current salary), measured from the date of termination of employment under
any type of qualified or nonqualified 401(k) plan (payable at the end of
each such year and not payable to the extent otherwise contributed to such
plan); and (E) payment by the Company of the premiums for you (except in
the case of your death) and your dependents' health coverage for three (3)
years from the date of termination of your employment under the Company's
health plans which cover the senior executives of the Company or
materially similar benefits (to the extent not otherwise provided),
provided that in the case of termination within one hundred eighty (180)
days prior to a Change in Control, the obligations under this subpart (E)
shall only exist to the extent that you or your dependents, as the case
may be, had timely elected or timely elect COBRA coverage which continued
at the time of the Change in Control and the obligation with regard to the
period prior to the Change in Control shall be limited to reimbursement of
the COBRA premiums previously paid or due for such period. Payments under
(E) above may, at the discretion of the Company, be made by continuing
your participation in the plan as a terminee, by paying
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the applicable COBRA premium for you and your dependents, or by covering
you and your dependents under substitute arrangements, provided that, to
the extent you incur tax tat you would not have incurred as an active
employee as a result of the aforementioned coverage or the benefits
provided thereunder, you shall receive from the Company an additional
payment in the amount necessary so that you will have no additional cost
for receiving such items or any additional payment. Section 4 hereof shall
also continue to apply in all instances.
4. Indemnification
(a) The Company and Hanson, jointly and severally, agree that if you are
made a party to or threatened to be made a party to any action, suit
or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that you are
or were a director or officer of the Company or Hanson, and/or any
other affiliate of any of such companies, or are or were serving at
the request of any of such companies as a director, officer, member,
employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including,
without limitation, service with respect to employee benefit plans,
whether or not the basis of such Proceeding is alleged action in an
official capacity as a director, officer, member, employee,
fiduciary or agent while serving at a director, officer, member,
employee, fiduciary or agent, you shall be indemnified and held
harmless by the Company and Hanson to the fullest extent authorized
by the law applicable to
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the relevant company, as the same exists or may hereafter be
amended, against all Expenses (as defined below) incurred or
suffered by you in connection therewith, and such indemnification
shall continue as to you even if you have ceased to be an officer,
director, member, fiduciary or agent, or are no longer employed by
the Company, and shall inure to the benefit of your heirs, executors
and administrators. With respect to the obligations set forth in
this Section 4, the Company and Hanson shall become liable hereunder
with respect to any Proceeding which arises out of or relates to
events occurring on or after the Effective Date except to the extent
that the liability relates to service with or for another assignee
under Section 8 hereof (in which case such assignee shall be
liable).
(b) As used in this Agreement, the term "Expenses" shall include,
without limitation, damages, losses, judgements, liabilities, fines,
penalties, excise taxes, settlements and reasonable costs,
reasonable attorneys' fees, reasonable accountants' fees, and
reasonable disbursements and costs of attachment or similar bonds,
investigations, and any reasonable expenses of establishing a right
to indemnification under this Agreement.
(c) Expenses incurred by you in connection with any Proceeding shall be
paid by the Company and Hanson in advance upon your request and the
giving by you of any undertakings required by applicable law.
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(d) You shall give the Company and Hanson prompt notice of any claim
made against you for which indemnity will or could be sought under
this Agreement. In addition, you shall give the Company and Hanson
such information and cooperation as it may reasonably require and as
shall be within your power and at such times and places as are
reasonably convenient for you.
(e) With respect to any Proceeding as to which you notify the Company
and Hanson of the commencement thereof: (i) the company will be
entitled to participate therein at its own expense; and (ii) except
as otherwise provided below, to the extent that it may wish, the
company jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof.
(f) The Company and Hanson shall not be liable to indemnify you under
this Agreement for any amounts paid in settlement of any Proceeding
effected without its written consent. Neither the Company nor Hanson
shall settle any Proceeding in any manner which would impose any
penalty or limitation on you without your written consent. Neither
the Company, Hanson nor you will unreasonably withhold or delay
their consent to any proposed settlement.
(g) The right to indemnification and the payment of expenses incurred in
defending a Proceeding in advance of its final disposition conferred
in this Section 4 shall not be exclusive of any other right which
you may have or hereafter may acquire under any statute, provision
of the certificate of incorporation or by-
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laws of the company, agreement, vote of stockholders or
disinterested directors or otherwise.
5. Legal Fees
In the event that a claim for payment or benefits under this Agreement is
disputed as a result of events which occurred after a Change in Control,
the Company shall pay all reasonable attorney, accountant and other
professional fees and reasonable expenses incurred by you in pursuing such
claim, unless the claim by you is found to be frivolous by any court or
arbitrator.
6. No Duty to Mitigate/Set-off
The Company agrees that if your employment with the Company is terminated
pursuant to this Agreement during the term of this Agreement, you shall
not be required to seek other employment or to attempt in any way to
reduce any amounts payable to you by the Company pursuant to this
Agreement. Further, the amount of any payment or benefit provided for in
this Agreement shall not be reduced by any compensation earned by you or
benefit provided to you as the result of employment by another employer or
otherwise. Except as otherwise provided herein and apart from any
disagreement between you and the Company concerning interpretation of this
Agreement or any term or provision hereof, the Company's obligations to
make the payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any circumstances,
including without limitation, any set-off, counterclaim, recoupment,
defense or other right which the Company may have
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against you. The amounts due under Section 3 are inclusive, and in lieu
of, any amounts payable under any other salary continuation or cash
severance arrangement of the Company on termination of employment that is
or may become applicable to you and to the extent paid or provided under
any other such arrangement shall be offset against the amount due
hereunder.
7. Effective Date and Term
(a) Notwithstanding anything else herein, this Agreement shall become
effective (the "Effective Date") as of February 24, 1997.
(b) This Agreement shall be for a term (the "Term") commencing on the
Effective Date and terminating at the end of six (6) years from the
Effective Date, provided that if a Change in Control has taken place
prior to termination of this Agreement, this Agreement shall
continue in full force and effect during the Change in Control
Protection Period and further provided that the payment and other
obligations hereunder shall survive such termination to the extent a
Change in Control has occurred during the Term, and in any event,
the obligations under Section 4 hereof shall survive the end of the
Term with regard to matters occurring during the Term (even if a
claim is made after the Term).
8. Successors; Binding Agreements
In addition to any obligations imposed by law upon any successor to the
Company, the Company will require any successor (whether direct or
indirect, by purchase, merger,
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consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree in writing to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it and this Agreement shall inure to
the benefit of such successor. Any such assignment shall not relieve the
Company from liability hereunder. This Agreement shall inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devises and
legatees. If you die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of the
Agreement to the executors, personal representatives, estate trustees, or
administrators of your estate. This Agreement is personal to you and
neither this Agreement nor any rights hereunder may be assigned by you.
9. Communications
Any notice or other communication required or permitted hereunder shall be
in writing and shall be delivered personally, or sent by registered mail,
postage prepaid as follows:
(i) If to the Company at:
1565 Buchanan Trail East (Rt. 16)
Shady Grove
PA 17256-0021
Attention: General Counsel
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with a copy to Hanson at:
1 Grosvenor Place
London Telephone: 0171 245 1245
SW1X 7JH Fax: 0171 235 3455
Attention: Legal Director
(ii) If to you, to the last shown address on the books of the Company or
Hanson.
Any such notice shall be deemed given when so delivered personally, or, if
mailed, five (5) days after the date of deposit (in the form of registered
or certified mail, return receipt requested, postage prepaid) in the
United States postal system. Any party may by notice designate another
address or person for receipt of notices hereunder.
10. Not an Agreement of Employment
This is not an agreement assuring employment and the Company reserves the
right to terminate your employment at any time with or without Cause,
subject to the payment provisions hereof if such termination is during the
Change in Control Protection Period. You acknowledge that you are aware
that you shall have no claim against the Company hereunder or for
deprivation of the right to receive the amounts hereunder as a result of
any termination that does not specifically satisfy the requirements
hereof. The foregoing shall not affect your rights under any other
agreement with the Company.
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11. Miscellaneous
No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and
signed by you and such officer as may be specifically designated by the
Company Board (as defined in Part III of Exhibit A). No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior
or subsequent time. This Agreement constitutes the entire Agreement
between the parties hereto pertaining to the subject matter hereof and
supersedes any prior agreements between the Company and you. No agreements
or representations, oral or otherwise, express or implied, with respect to
the subject matter hereof have been made by either party which are not
expressly set forth in this Agreement. All references to any law shall be
deemed also to refer to any successor provisions to such laws.
12. Acknowledgement
You acknowledge that you: (a) have read this Agreement, understand its
terms and that it has been entered into by you voluntarily; (b) that the
payments to be made hereunder constitute additional compensation to you;
(c) have had sufficient opportunity to consider this Agreement and discuss
it with advisors of your choice, including your attorney and accountants;
(d) have been informed that you have the right to consider this Agreement
for a period of at least 21 days prior to entering into it; (e) have taken
sufficient time to consider this Agreement before signing it; and (f) have
the right to
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revoke this Agreement for a period of 7 days following the Agreement's
execution by giving written notice to the Company.
13. Release
As a material inducement to the Company to enter into this Agreement, you
agree for yourself and your heirs, successors, and assigns that upon
receipt of the amounts payable under this Agreement you hereby release and
forever discharge the Company and any parent or affiliate thereof, its or
their respective directors, officers, employees, agents, representatives,
successors and assigns, from any and all claims, demands, actions,
liability, damages, back pay, attorney fees, or rights of any and every
kind or nature, accrued or unaccrued, known or unknown, arising out of or
in any manner relating to your employment and termination of employment
with the Company or its parents or affiliates including without limitation
any alleged violation of Title VII of the Civil Rights Act of 1964, the
Age Discrimination in Employment Act of 1967, the Employee Retirement
Income Security Act of 1974 as the same may have been or be amended from
time to time or any other federal, state or local law, regulation or
ordinance (except for your existing accrued rights under the Company's (or
any affiliate of the Company) pension plan, SERP, saving plan, health and
welfare benefit plans, and the rights already granted to you under any
Stock Option Scheme of Hanson PLC and/or any long term incentive plan of
the Company, and except as expressly set forth herein). If requested by
the Company you agree to execute a further formal waiver and release at
the time of termination of your employment and payment by the
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Company of the amounts payable under this Agreement in the terms or
substantially in the terms set out in this Section 13.
14. Withholding
The Company may withhold from any and all amounts payable under this
Agreement such federal, state and local taxes as may be required to be
withheld pursuant to any applicable law or regulation.
15. Governing Law
This Agreement shall be construed, interpreted, and governed in accordance
with the laws of the State of Delaware without reference to rules relating
to conflicts of law.
Very truly yours,
By: /s/ Keith R. Simmons
-----------------------------
Name: Keith R. Simmons
Title: Sr. VP & General Counsel
& VP of Kidde Industries Inc.
/s/ Robert C. Stift
-------------------------------
Robert C. Stift
Agreed and accepted this
29th day of July 1997
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EXHIBIT A
Part I - Cause
1. Subject to compliance with the notification provisions in this Exhibit A,
this Agreement shall not prevent the termination of your employment by the
Company for Cause. A termination for Cause means a termination by the
Company effected by a written notice of termination for Cause if you have
committed any serious breach or (after warning in writing) any repeated or
continued material breach of your obligations as Chief Executive of the
Company or shall have been guilty of any act of dishonesty or serious
misconduct or any conduct which in the reasonable opinion of the Company
Board tends to bring you, the Company or Hanson into disrepute. Any delay
by the Company in exercising such right to terminate shall not constitute
a waiver thereof.
2. A notice of termination for Cause shall mean a notice that shall set forth
in reasonable detail the specific basis, facts and circumstances which
provide for a basis for termination for Cause.
3. Notwithstanding anything to the contrary contained in this Agreement, if
any purported termination for Cause within the Change in Control
Protection Period that occurs on or after the Effective Date is held by a
court not to have been based on the grounds set forth in this Agreement
such purported termination for Cause shall be deemed a termination by the
Company without Cause and you shall be entitled to the amounts and
benefits provided in Section 3 to the extent, if any, applicable.
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Part II - Change in Control
1. For purposes of this Agreement, a "Change in Control" shall mean either a
Change in Control of Hanson or a Change in Control of the Company. Only
one (1) Change in Control may occur under this Agreement.
2. Change in Control of Hanson. For purposes of this Agreement, the term
"Change in Control of Hanson shall mean (i) any "person" as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934
("Act") (other than Hanson, any trustee or other fiduciary holding
securities under any employee benefit plan of Hanson or any company owned,
directly or indirectly, by the stockholders of Hanson in substantially the
same proportions as their ownership of ordinary shares of Hanson),
becoming the "beneficial owner" (as defined in Rule l3d-3 under the Act),
directly or indirectly, of securities of Hanson representing twenty-five
per cent (25%) or more of the combined voting power of Hanson's then
outstanding securities; (ii) during any period of two (2) consecutive
years individuals who at the beginning of such period constitute the Board
of Directors of Hanson and any new director (other than a director
designated by a person who has entered into an agreement with Hanson to
effect a transaction described in clause (i), (iii) or (iv) of this
paragraph or a director whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents by
or on behalf of a person other than the Board of Directors of Hanson whose
election by
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the Board of Directors of Hanson or nomination for election by Hanson's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning
of the two (2) year period or whose election or nomination for election
was previously so approved, cease for any reason to constitute at least a
majority of the Board of Directors of Hanson (iii) the merger or
consolidation of Hanson with any other corporation, other than a merger or
consolidation which would result in the voting securities of Hanson
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty per cent (50%) of the combined voting
power of the voting securities of Hanson or such surviving entity
outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a
recapitalisation of Hanson (or similar transaction) in which no person
(other than those covered by the exceptions in (i) above) acquired more
than twenty-five per cent (25%) of the combined voting power of Hanson's
then outstanding securities shall not constitute a Change in Control of
Hanson; or (iv) approval by the stockholders of Hanson of a plan of
complete liquidation of Hanson or the closing of the sale or disposition
by Hanson of all or substantially all of the assets of Hanson other than
the sale or disposition of all or substantially all of the assets of
Hanson to a person or persons who beneficially own, directly or
indirectly, at least fifty per cent (50%) or more of the combined voting
power of the outstanding voting securities of Hanson at the time of the
sale.
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3. Change in Control of the Company. For purposes of this Agreement, the term
"Change in Control of the Company" shall mean (i) any "person" as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934 (other than Hanson or a Subsidiary (as defined below) of Hanson)
becoming the "beneficial owner" (as defined in Rule l3d-3 under the Act),
directly or indirectly, of securities of the Company representing more
than fifty per cent (50%) of the combined voting power of the Company's
then outstanding securities entitled to vote in a general election of
directors; or (ii) all or substantially all of the Company's assets are
sold other than to Hanson or a Subsidiary of Hanson. "Subsidiary" shall
have the meaning set forth in Section 424 of the Internal Revenue Code of
1986.
4. Change in Control Protection Period
For the purposes of this Agreement, the term "Change in Control Protection
Period" shall mean the Pre Change in Control Period and the Post Change in
Control Period, as each is defined below.
5. Pre Change in Control Period
For purposes of this Agreement, Pre Change in Control Period shall mean
the one hundred and eighty (180) day period prior to the date of a Change
in Control that occurs on or after the Effective Date.
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6. Post Change in Control Period
For purposes of this Agreement, Post Change in Control Period shall mean
the period commencing on the date of a Change in Control that occurs on or
after the Effective Date and ending the day immediately prior to the
second anniversary of the Change in Control.
Part III - Company Board
For purposes of this Agreement, the term "Company Board" shall be deemed to
refer to the Board of Directors of the Company and Hanson.
Part IV - Disability
For purposes of this Agreement, the term "Disability" shall mean your inability
to perform your material duties and responsibilities hereunder due to the same
or related physical or mental reasons for more than one hundred eighty (180)
consecutive days in any twelve (12) consecutive month period. A termination for
Disability shall be deemed to occur when you are terminated by the Company by
written notice after you incur a Disability and while you remain disabled.
Part V - Retirement
For purposes of this Agreement, the term "Retirement" shall mean your retirement
by the Company at or after your sixty-fifth (65th) birthday to the extent such
termination is
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specifically permitted as a stated exception from applicable federal and state
age discrimination laws based on position and retirement benefits.
Part VI - Good Reason
1. For purposes of this Agreement, a termination for "Good Reason" shall mean
a termination by you effected by a written notice of termination for Good
Reason given within ninety (90) days after the occurrence of the Good
Reason event. Subject to subsection 2 below, "Good Reason" shall mean the
occurrence or failure to cause the occurrence, as the case may be, without
your express written consent, of (i) any material diminution of your
positions, duties or responsibilities with the Company from the highest
position held within (as defined above) the Pre Change in Control Period
(except in each case in connection with the termination of your employment
for Cause, Disability or as a result of your death, or in the case of a
material diminution of duties or responsibilities, temporarily as a result
of your illness or other absence) or the assignment to you of duties or
responsibilities that are inconsistent with your aforementioned highest
position; (ii) your removal from, or the nonreelection to, your positions
as an officer with the Company held during the Pre Change in Control
Period; (iii) a relocation of the Company's principal United States
executive offices to a location more than twenty-five (25) miles from
where they are at the time of the Change in Control, or a relocation by
the Company of your principal office away from such principal United
States executive offices; (iv) a failure by the Company or Hanson (A) to
continue any bonus plan, program or arrangement in which you were entitled
to
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participate during the Pre Change in Control Period (the "Bonus Plans"),
provided that any such Bonus Plans may be modified at the Company's or
Hanson's discretion from time to time but shall be deemed terminated if
(x) any such plan does not remain substantially in the form in effect
prior to such modification or (y) if plans providing you with
substantially similar benefits are not substituted therefor ("Substitute
Plans"), or (B) to continue you as a participant in the Bonus Plans or
Substitute Plans on not less than the same maximum level of award and not
more than the same level of difficulty for achievability thereof as was
applicable to you immediately prior to any change in such plans, in
accordance with the Bonus Plans and the Substitute Plans; (v) any material
breach by the Company or Hanson of any provision of this Agreement; (vi)
if on the Board of Directors of the Company during the Pre Change in
Control Period, your removal from or failure to be reelected to the board;
(vii) a reduction by the Company of your rate of annual base salary to a
level below your highest rate of base salary within one-hundred and eighty
(180) days prior to the Change in Control; or (viii) failure of any
successor of the Company to assume in a writing delivered to you upon the
assignee becoming such, the obligations of the Company hereunder.
2. A notice of termination for Good Reason shall indicate the specific basis
for termination relied upon and set forth in reasonable detail the facts
and circumstances claimed to provide a basis for a termination for Good
Reason. The failure by you to set forth in the notice of termination for
Good Reason any facts or circumstances which contribute to the showing of
Good Reason shall not waive any of your rights hereunder
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or preclude you from asserting such fact or circumstance in enforcing your
rights hereunder. The notice of termination for Good Reason shall provide
for a date of termination not less than ten (10) nor more than sixty (60)
days after the date such notice of termination for Good Reason is given.
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Exhibit 10.24
MAKER: Stephen Cripe
PAYEE: Grove Worldwide LLC
PROMISSORY NOTE
$437,500 October 27, 1998
FOR VALUE RECEIVED, Stephen Cripe ("Maker"), promises to pay to the
order of Grove Worldwide LLC (collectively with all subsequent holders of this
Note, "Payee"), at 1565 Buchanan Trail East, P.O. Box 21, Shady Grove,
Pennsylvania 17256-0021, or at such other address or addresses as payee may from
time to time designate in writing, in lawful money of the United States of
America, an amount equal to Four Hundred Thirty-Seven Thousand and Five Hundred
dollars ($437,500) (the "Principal Amount"), together with interest on the
unpaid Principal Amount owing hereunder from time to time at the rate per annum
equal to the lesser of (1) or (2) below:
(1) a varying rate per annum equal to the prevailing designated
prime or base rate of Wells Fargo Bank, N.A., or its successor, as published or
announced by such bank from time to time (the "Prime Rate"), with adjustments in
such varying rate to be made on the same date as any change in the Prime Rate
(the "Applicable Rate"); or
(2) the maximum lawful rate (the "Maximum Rate") which may be
contracted for, charged, taken, received, reserved by Payee in accordance with
New York law from time to time in effect except to the extent federal law
permits Payee to contract for, charge, take, receive, or reserve a greater
amount of interest, due credit being given for all charges made in connection
with the loan evidenced hereby that may be treated as interest under applicable
law.
Interest will be based on a 365-day year.
Notwithstanding anything in this Note to the contrary, if at any
time the Applicable Rate, together with all fees and charges, if any, contracted
for, charged, received, taken, or reserved by Payee in connection with the loan
evidenced hereby that may be treated as interest under applicable law
(collectively, the "Charges"), computed over the full term of this Note, exceeds
the Maximum Rate, then the rate of interest payable hereunder, together with
all Charges, will be limited to the Maximum Rate. If, however, the Maximum Rate
from time to time subsequently increases, then the interest charged on the
unpaid Principal Amount will remain equal to the Maximum Rate, and any
subsequent reduction in the Applicable Rate will not reduce the rate borne by
this Note, until the total amount of interest earned hereunder, together with
all Charges, equals the total amount of interest that would have accrued at the
Applicable Rate if the Applicable Rate had at all times been in effect.
Moreover, if at maturity or final payment of this Note the total amount of
interest paid or accrued under the foregoing provisions is less than the total
amount of interest that would have accrued if the Applicable Rate had at all
times been in effect, Maker agrees to pay to Payee, to the
<PAGE>
2
extent allowed by then-applicable law, an amount equal to the difference between
(a) the lesser of (i) the amount of interest that would have been accrued on
this Note if the Maximum Rate had at all times been in effect, and (ii) the
amount of interest that would have accrued if the Applicable Rate had at all
times been in effect, and (b) the amount of interest actually accrued under this
Note.
This Note evidences the loan, between the Maker and the Payee for
the purchase by Maker of a membership interest (the "Equity") in Grove Investors
LLC, a Delaware limited liability company ("Investors"). So much of the
Principal Amount as is required for Maker's purchase of the Equity shall be
advanced by Payee directly to Investors, which will sell the Equity to Maker in
an amount that corresponds to Payee's advance. Maker authorizes and directs
Payee to make the advance to Investors and further authorizes Investors to
evidence the sale of the Equity in such manner with respect to the advance made
by Payee under this Note. Such advance will be deemed to have been received by
Maker upon Maker's receipt of the Equity and thereafter paid to Investors as the
purchase price for the Equity.
This Note is secured by Maker's pledge of: (i) Maker's membership
interest in Investors (the "Pledged Equity"), as more fully set forth in that
certain Pledge Agreement (the "Pledge Agreement") dated as of the date hereof by
and between Maker and Payee; and (ii) such other assets or documents as are at
any time given as security for or relating to this Note (the Pledge Agreement
and all other security documents are collectively referred to as the "Security
Instruments," and the Pledged Equity and any other assets that are at any time
pledged as security for this Note are collectively referred to as the
"Collateral").
This Note is due and payable as follows:
(A) At the time of, and to the extent of the after-tax proceeds of,
all distributions respecting and proceeds and payments on, from, or in
connection with the Collateral and any other amounts to which Maker becomes
entitled with respect to the Collateral (such amounts to be paid to Payee as
provided below). For this purpose, after-tax proceeds shall be computed by
taking into account income taxes attributable to Maker's ownership or
disposition of the Collateral (including income tax liability attributable to
Maker's distributive share of taxable income of Investors) and by assuming that
Maker will pay taxes at the maximum federal income tax rate and the maximum
state income tax rate for the state in which the Pledgor pays income taxes with
respect to such ownership or disposition of the Collateral, taking into account
the deductibility of state income taxes for federal income tax purposes.
(B) At the time of and to the extent of (i) proceeds from Investors'
redemption of the Pledged Equity (such amounts to be paid to Payee as provided
below) and (ii) other proceeds arising out of the sale or other disposition of
all or any portion of the Pledged Equity.
<PAGE>
3
(C) If a bonus is payable under the Short Term Incentive Plan to the
Maker in a year, fifty percent of the after tax proceeds of such bonus
calculated at the highest marginal tax rate applicable to the Maker is due.
(D) Unless sooner paid under this Note, any unpaid Principal Amount
and all unpaid interest accrued thereon is finally due and payable on the tenth
anniversary of the date hereof.
Maker hereby acknowledges that, except as expressly provided above,
all distributions, redemptions and other payments in respect of the Collateral
payable by Investors to Maker will be paid directly to Payee as payments under
this Note. Maker hereby directs and authorizes Investors to pay the foregoing
amounts directly to Payee to be applied against this Note. By signing below
Investors agrees to make all such payments directly to Payee unless otherwise
notified in writing to the contrary by Payee. The parties hereto acknowledge and
agree that such amounts will be deemed to have been distributed to Maker and
thereafter paid by Maker to Payee as payment under this note.
Time is of the essence in this Note.
If Maker does not pay this Note as and when due to Payee, then this
Note will bear interest until paid at the Default Rate (as defined below).
Maker may at any time prepay all or from time to time any portion of
this Note without premium or penalty upon at least two days written notice to
the Payee. All payments on this Note will, at the option of Payee, be applied
first to pay unpaid accrued interest and any remainder will be applied to reduce
the Principal Amount.
Except as otherwise specifically provided, Maker: (i) waives grace,
presentment and demand for payment, protest and notice of protest, notice of
intent to accelerate maturity, notice of acceleration of maturity, notice of
nonpayment, and all other notices of any nature, filing of suit, and diligence
in collecting this Note or enforcing any of the Collateral for it; (ii) agrees
that the amount due hereunder must be paid without set-off, counterclaim,
abatement, suspension or diminution; and (iii) agrees that Payee will not be
required first to file suit or exhaust its remedies against Maker, any
guarantor, or others liable or to become liable on this Note to enforce payment
of this Note. No extension or postponement of time for paying this Note or any
installment hereof affects the liability of Maker under this Note.
Any of the following is a "Default" under this Note:
(a) Maker fails to perform or observe any provision of this
Note, the Pledge Agreement, or any other Security Instrument.
<PAGE>
4
(b) Maker commences a voluntary case under Title 11 of the
United States Code as from time to time in effect (the "Bankruptcy
Code").
(c) Maker seeks relief as a debtor under any applicable law,
other than the Bankruptcy Code, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or
alteration of the rights of creditors, or consents to or acquiesces
in such relief.
(d) Maker has entered against him any order by a court of
competent jurisdiction finding him to be bankrupt or insolvent, or
assuming custody of, or appointing a receiver or other custodian
for, all or a substantial part of his property.
(e) Maker makes an assignment for the benefit of, or enters
into a composition with, his creditors, or appoints or consents to
the appointment of a receiver or other custodian for all or a
substantial part of his property.
(f) A court having jurisdiction enters a decree or order for
relief in respect of Maker in an involuntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, which decree or order is
not stayed; or any other similar relief is granted under any
applicable federal or state law.
(g) An involuntary case is commenced against Maker under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect; or a decree or order of a
court having jurisdiction for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian, or other officer
having similar powers over Maker, or over all or a substantial part
of his property, has been entered; or the involuntary appointment of
an interim receiver, trustee, or other custodian of Maker for all or
a substantial part of his property has occurred; or a warrant of
attachment, execution, or similar process has been issued against
any substantial part of Maker's property, and any such event
described in this clause (g) continues for 60 days unless dismissed,
bonded or discharged.
If a Default occurs, then and in each and every such case the unpaid
Principal Amount and all accrued interest will automatically become due and
payable without presentation, presentment, protest, or further demand or notice
of any kind, all of which Maker expressly waives. Payee may proceed to enforce
payment of all or part of such amount in a commercially reasonable manner. Payee
will also be entitled to exercise any and all other rights, remedies, and
recourses now or later existing in equity or at law. All remedies under this
Note and the Security Instruments are cumulative, not exclusive.
<PAGE>
5
Upon Default under this Note, or under any of the Security
Instruments, at Payee's option all amounts then due and payable under this Note
or the Security Instruments will bear interest from the date the Default occurs
at a rate of interest per annum (the "Default Rate") equal to the lesser of (a)
4% over the Applicable Rate, and (b) the Maximum Rate.
Maker agrees to pay all costs of collection hereof when incurred,
including reasonable attorneys' fees of the Payee, whether or not any action is
instituted to enforce this Note.
Maker and Payee at all times intend to comply with the applicable
law now or hereafter governing the terms of this Note and the interest payable
on this Note. If the applicable law is ever revised, repealed, or judicially
interpreted so as to render any provision of this Note invalid, or so as to
render usurious any amount called for under this Note or under any of the
Security Instruments or contracted for, charged, taken, reserved, or received
with respect to the loan evidenced by this Note, or if Payee's exercise of its
rights to accelerate the maturity of this Note, or if any prepayment by Maker
results in Maker's having paid any interest in excess of that permitted by law,
then it is Maker's and Payee's express intent that all excess amounts previously
collected by Payee be credited on the Principal Amount of this Note (or, if the
Note has been paid in full, refunded to Maker). This Note and the Security
Instruments immediately will then be deemed reformed and the amounts later
collectible hereunder and thereunder reduced without the need to execute any new
document, so as to comply with the then applicable law, but so as to permit the
recovery of the greatest amount otherwise called for hereunder and thereunder.
All sums paid or agreed to be paid to Payee for the use,
forbearance, or detention of this indebtedness evidenced by this note will, to
the extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full term of this Note until paid in full so that the rate
or amount of interest on account of such indebtedness does not exceed the
applicable usury ceiling for so long as any amount is outstanding.
THIS NOTE MUST BE GOVERNED BY AND CONSTRUED ACCORDING TO NEW YORK
LAW EXCEPT AS APPLICABLE FEDERAL LAW PERMITS PAYEE TO CONTRACT FOR, CHARGE,
TAKE, RECEIVE, OR RESERVE A GREATER AMOUNT OF INTEREST.
Any suit, action, proceeding, controversy or claim arising out of or
relating to this Note or a Default must be brought in a court of appropriate
jurisdiction in New York City, New York. Maker hereby submits and consents to
the jurisdiction of such court for any such suit, action or proceeding and
irrevocably waives: (i) any objection that he now has or may later have to the
venue of such court, and (ii) any objection that any such suit, action, or
proceeding brought in such court has been brought in an inconvenient forum.
<PAGE>
6
THIS PROMISSORY NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Maker has duly executed this Note effective as of the date first
above written.
"MAKER"
/s/ Stephen Cripe
---------------------------------
STEPHEN CRIPE
"PAYEE"
GROVE WORLDWIDE LLC
By: /s/ Salvatore J. Bonanno
------------------------------
Name: Salvatore J. Bonanno
Title: Chief Executive Officer
(Payee's signature is added
solely to acknowledge the
statement in the next to the
last paragraph above that
this is the final written
agreement between the parties.)
Acknowledged and agreed to for the
limited purposes stated herein by:
GROVE INVESTORS LLC, a
Delaware limited liability company
By: /s/ Salvatore J. Bonanno
------------------------------
Name: Salvatore J. Bonanno
Title Chief Executive Officer
<PAGE>
Exhibit 10.25
MAKER: Stephen Cripe
PAYEE: Grove Worldwide LLC
PROMISSORY NOTE
$250,000 October 27, 1998
FOR VALUE RECEIVED, Stephen Cripe ("Maker"), promises to pay to the
order of Grove Worldwide LLC (collectively with all subsequent holders of this
Note, "Payee"), at 1565 Buchanan Trail East, P.O. Box 21, Shady Grove,
Pennsylvania 17256-0021, or at such other address or addresses as payee may from
time to time designate in writing, in lawful money of the United States of
America, an amount equal to Two Hundred Fifty-Seven Thousand
dollars ($250,000) (the "Principal Amount"), together with interest on the
unpaid Principal Amount owing hereunder from time to time at the rate per annum
equal to the lesser of (1) or (2) below:
(1) a varying rate per annum equal to the prevailing designated
prime or base rate of Wells Fargo Bank, N.A., or its successor, as published or
announced by such bank from time to time (the "Prime Rate"), with adjustments in
such varying rate to be made on the same date as any change in the Prime Rate
(the "Applicable Rate"); or
(2) the maximum lawful rate (the "Maximum Rate") which may be
contracted for, charged, taken, received, reserved by Payee in accordance with
New York law from time to time in effect except to the extent federal law
permits Payee to contract for, charge, take, receive, or reserve a greater
amount of interest, due credit being given for all charges made in connection
with the loan evidenced hereby that may be treated as interest under applicable
law.
Interest will be based on a 365-day year.
Notwithstanding anything in this Note to the contrary, if at any
time the Applicable Rate, together with all fees and charges, if any, contracted
for, charged, received, taken, or reserved by Payee in connection with the loan
evidenced hereby that may be treated as interest under applicable law
(collectively, the "Charges"), computed over the full term of this Note, exceeds
the Maximum Rate, then the rate of interest payable hereunder, together with
all Charges, will be limited to the Maximum Rate. If, however, the Maximum Rate
from time to time subsequently increases, then the interest charged on the
unpaid Principal Amount will remain equal to the Maximum Rate, and any
subsequent reduction in the Applicable Rate will not reduce the rate borne by
this Note, until the total amount of interest earned hereunder, together with
all Charges, equals the total amount of interest that would have accrued at the
Applicable Rate if the Applicable Rate had at all times been in effect.
Moreover, if at maturity or final payment of this Note the total amount of
interest paid or accrued under the foregoing provisions is less than the total
amount of interest that would have accrued if the Applicable Rate had at all
times been in effect, Maker agrees to pay to Payee, to the
<PAGE>
2
extent allowed by then-applicable law, an amount equal to the difference between
(a) the lesser of (i) the amount of interest that would have been accrued on
this Note if the Maximum Rate had at all times been in effect, and (ii) the
amount of interest that would have accrued if the Applicable Rate had at all
times been in effect, and (b) the amount of interest actually accrued under this
Note.
This Note evidences the loan, between the Maker and the Payee for
the purchase by Maker of a membership interest (the "Equity") in Grove Investors
LLC, a Delaware limited liability company ("Investors"). So much of the
Principal Amount as is required for Maker's purchase of the Equity shall be
advanced by Payee directly to Investors, which will sell the Equity to Maker in
an amount that corresponds to Payee's advance. Maker authorizes and directs
Payee to make the advance to Investors and further authorizes Investors to
evidence the sale of the Equity in such manner with respect to the advance made
by Payee under this Note. Such advance will be deemed to have been received by
Maker upon Maker's receipt of the Equity and thereafter paid to Investors as the
purchase price for the Equity.
This Note is secured by Maker's pledge of: (i) Maker's membership
interest in Investors (the "Pledged Equity"), as more fully set forth in that
certain Pledge Agreement (the "Pledge Agreement") dated as of the date hereof by
and between Maker and Payee; and (ii) such other assets or documents as are at
any time given as security for or relating to this Note (the Pledge Agreement
and all other security documents are collectively referred to as the "Security
Instruments," and the Pledged Equity and any other assets that are at any time
pledged as security for this Note are collectively referred to as the
"Collateral").
This Note is due and payable as follows:
(A) At the time of, and to the extent of the after-tax proceeds of,
all distributions respecting and proceeds and payments on, from, or in
connection with the Collateral and any other amounts to which Maker becomes
entitled with respect to the Collateral (such amounts to be paid to Payee as
provided below). For this purpose, after-tax proceeds shall be computed by
taking into account income taxes attributable to Maker's ownership or
disposition of the Collateral (including income tax liability attributable to
Maker's distributive share of taxable income of Investors) and by assuming that
Maker will pay taxes at the maximum federal income tax rate and the maximum
state income tax rate for the state in which the Pledgor pays income taxes with
respect to such ownership or disposition of the Collateral, taking into account
the deductibility of state income taxes for federal income tax purposes.
(B) At the time of and to the extent of (i) proceeds from Investors'
redemption of the Pledged Equity (such amounts to be paid to Payee as provided
below) and (ii) other proceeds arising out of the sale or other disposition of
all or any portion of the Pledged Equity.
<PAGE>
3
(C) If a bonus is payable under the Short Term Incentive Plan to the
Maker in a year, fifty percent of the after tax proceeds of such bonus
calculated at the highest marginal tax rate applicable to the Maker is due.
(D) Unless sooner paid under this Note, any unpaid Principal Amount
and all unpaid interest accrued thereon is finally due and payable six months
from of the date hereof.
Maker hereby acknowledges that, except as expressly provided above,
all distributions, redemptions and other payments in respect of the Collateral
payable by Investors to Maker will be paid directly to Payee as payments under
this Note. Maker hereby directs and authorizes Investors to pay the foregoing
amounts directly to Payee to be applied against this Note. By signing below
Investors agrees to make all such payments directly to Payee unless otherwise
notified in writing to the contrary by Payee. The parties hereto ackknowledge
and are that such amounts will be deemed to have been distributed to Maker and
thereafter paid by Maker to Payee as payment under this Note.
Time is of the essence in this Note.
If Maker does not pay this Note as and when due to Payee, then this
Note will bear interest until paid at the Default Rate (as defined below).
Maker may at any time prepay all or from time to time any portion of
this Note without premium or penalty upon at least two days written notice to
the Payee. All payments on this Note will, at the option of Payee, be applied
first to pay unpaid accrued interest and any remainder will be applied to reduce
the Principal Amount.
Except as otherwise specifically provided, Maker: (i) waives grace,
presentment and demand for payment, protest and notice of protest, notice of
intent to accelerate maturity, notice of acceleration of maturity, notice of
nonpayment, and all other notices of any nature, filing of suit, and diligence
in collecting this Note or enforcing any of the Collateral for it; (ii) agrees
that the amount due hereunder must be paid without set-off, counterclaim,
abatement, suspension or diminution; and (iii) agrees that Payee will not be
required first to file suit or exhaust its remedies against Maker, any
guarantor, or others liable or to become liable on this Note to enforce payment
of this Note. No extension or postponement of time for paying this Note or any
installment hereof affects the liability of Maker under this Note.
Any of the following is a "Default" under this Note:
(a) Maker fails to perform or observe any provision of this
Note, the Pledge Agreement, or any other Security Instrument.
<PAGE>
4
(b) Maker commences a voluntary case under Title 11 of the
United States Code as from time to time in effect (the "Bankruptcy
Code").
(c) Maker seeks relief as a debtor under any applicable law,
other than the Bankruptcy Code, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or
alteration of the rights of creditors, or consents to or acquiesces
in such relief.
(d) Maker has entered against him any order by a court of
competent jurisdiction finding him to be bankrupt or insolvent, or
assuming custody of, or appointing a receiver or other custodian
for, all or a substantial part of his property.
(e) Maker makes an assignment for the benefit of, or enters
into a composition with, his creditors, or appoints or consents to
the appointment of a receiver or other custodian for all or a
substantial part of his property.
(f) A court having jurisdiction enters a decree or order for
relief in respect of Maker in an involuntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, which decree or order is
not stayed; or any other similar relief is granted under any
applicable federal or state law.
(g) An involuntary case is commenced against Maker under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect; or a decree or order of a
court having jurisdiction for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian, or other officer
having similar powers over Maker, or over all or a substantial part
of his property, has been entered; or the involuntary appointment of
an interim receiver, trustee, or other custodian of Maker for all or
a substantial part of his property has occurred; or a warrant of
attachment, execution, or similar process has been issued against
any substantial part of Maker's property, and any such event
described in this clause (g) continues for 60 days unless dismissed,
bonded or discharged.
If a Default occurs, then and in each and every such case the unpaid
Principal Amount and all accrued interest will automatically become due and
payable without presentation, presentment, protest, or further demand or notice
of any kind, all of which Maker expressly waives. Payee may proceed to enforce
payment of all or part of such amount in a commercially reasonable manner. Payee
will also be entitled to exercise any and all other rights, remedies, and
recourses now or later existing in equity or at law. All remedies under this
Note and the Security Instruments are cumulative, not exclusive.
<PAGE>
5
Upon Default under this Note, or under any of the Security
Instruments, at Payee's option all amounts then due and payable under this Note
or the Security Instruments will bear interest from the date the Default occurs
at a rate of interest per annum (the "Default Rate") equal to the lesser of (a)
4% over the Applicable Rate, and (b) the Maximum Rate.
Maker agrees to pay all costs of collection hereof when incurred,
including reasonable attorneys' fees of the Payee, whether or not any action is
instituted to enforce this Note.
Maker and Payee at all times intend to comply with the applicable
law now or hereafter governing the terms of this Note and the interest payable
on this Note. If the applicable law is ever revised, repealed, or judicially
interpreted so as to render any provision of this Note invalid, or so as to
render usurious any amount called for under this Note or under any of the
Security Instruments or contracted for, charged, taken, reserved, or received
with respect to the loan evidenced by this Note, or if Payee's exercise of its
rights to accelerate the maturity of this Note, or if any prepayment by Maker
results in Maker's having paid any interest in excess of that permitted by law,
then it is Maker's and Payee's express intent that all excess amounts previously
collected by Payee be credited on the Principal Amount of this Note (or, if the
Note has been paid in full, refunded to Maker). This Note and the Security
Instruments immediately will then be deemed reformed and the amounts later
collectible hereunder and thereunder reduced without the need to execute any new
document, so as to comply with the then-applicable law, but so as to permit the
recovery of the greatest amount otherwise called for hereunder and thereunder.
All sums paid or agreed to be paid to Payee for the use,
forbearance, or detention of this indebtedness evidenced by this note will, to
the extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full term of this Note until paid in full so that the rate
or amount of interest on account of such indebtedness does not exceed the
applicable usury ceiling for so long as any amount is outstanding.
THIS NOTE MUST BE GOVERNED BY AND CONSTRUED ACCORDING TO NEW YORK
LAW EXCEPT AS APPLICABLE FEDERAL LAW PERMITS PAYEE TO CONTRACT FOR, CHARGE,
TAKE, RECEIVE, OR RESERVE A GREATER AMOUNT OF INTEREST.
Any suit, action, proceeding, controversy or claim arising out of or
relating to this Note or a Default must be brought in a court of appropriate
jurisdiction in New York City, New York. Maker hereby submits and consents to
the jurisdiction of such court for any such suit, action or proceeding and
irrevocably waives: (i) any objection that he now has or may later have to the
venue of such court, and (ii) any objection that any such suit, action, or
proceeding brought in such court has been brought in an inconvenient forum.
<PAGE>
6
THIS PROMISSORY NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Maker has duly executed this Note effective as of the date first
above written.
"MAKER"
/s/ Stephen Cripe
---------------------------------
STEPHEN CRIPE
"PAYEE"
GROVE WORLDWIDE LLC
By: /s/ Salvatore J. Bonanno
------------------------------
Name: Salvatore J. Bonanno
Title Chief Executive Officer
(Payee's signature is added
solely to acknowledge the
statement in the next to the
last paragraph above that
this is the final written
agreement between the parties.)
Acknowledged and agreed to for the
limited purposes stated herein by:
GROVE INVESTORS LLC, a
Delaware limited liability company
By: /s/ Salvatore J. Bonanno
------------------------------
Name: Salvatore J. Bonanno
Title: Chief Executive Officer
<PAGE>
Exhibit 10.26
MAKER: Donald Mallo
PAYEE: Grove Worldwide LLC
PROMISSORY NOTE
$50,000 October 27, 1998
FOR VALUE RECEIVED, Donald Mallo ("Maker") promises to pay to the
order of Grove Worldwide LLC (collectively with all subsequent holders of this
Note, "Payee"), at 1565 Buchanan Trail East. P.O. Box 21, Shady Grove,
Pennsylvania 17256-0021, or at such other address or addresses as payee may
from time to time designate in writing, in lawful money of the United States of
America, an amount equal to Fifty Thousand dollars ($50,000) (the "Principal
Amount"), together with interest on the unpaid Principal Amount owing hereunder
from time to time at the rate per annum equal to the lesser of (1) or (2) below:
(1) a varying rate per annum equal to the prevailing designated
prime or base rate of Wells Fargo Bank, N.A., or its successor, as published or
announced by such bank from time to time (the "Prime Rate"), with adjustments in
such varying rate to be made on the same date as any change in the Prime Rate
(the "Applicable Rate"); or
(2) the maximum lawful rate (the "Maximum Rate") which may be
contracted for, charged, taken, received, or reserved by Payee in accordance
with New York law from time to time in effect except to the extent federal law
permits Payee to contract for, charge, take, receive, or reserve a greater
amount of interest, due credit being given for all charges made in connection
with the loan evidenced hereby that may be treated as interest under applicable
law.
Interest will be based on a 365-day year.
Notwithstanding anything in this Note to the contrary, if at any
time the Applicable Rate, together with all fees and charges, if any, contracted
for, charged, received, taken, or reserved by Payee in connection with the loan
evidenced hereby that may be treated as interest under applicable law
(collectively, the "Charges"), computed over the full term of this Note, exceeds
the Maximum Rate, then the rate of interest payable hereunder, together with all
Charges, will be limited to the Maximum Rate. If, however, the Maximum Rate from
time to time subsequently increases, then the interest charged on the unpaid
Principal Amount will remain equal to the Maximum Rate, and any subsequent
reduction in the Applicable Rate will not reduce the rate borne by this Note,
until the total amount of interest earned hereunder, together with all Charges,
equals the total amount of interest that would have accrued at the Applicable
Rate if the Applicable Rate had at all times been in effect. Moreover, if at
maturity or final payment of this Note the total amount of interest paid or
accrued under the foregoing provisions is less than the total amount of interest
that would have accrued if the Applicable Rate had at all times been in effect,
Maker agrees to pay to Payee, to the
<PAGE>
2
extent allowed by then-applicable law, an amount equal to the difference between
(a) the lesser of (i) the amount of interest that would have been accrued on
this Note if the Maximum Rate had at all times been in effect, and (ii) the
amount of interest that would have accrued if the Applicable Rate had at all
times been in effect, and (b) the amount of interest actually accrued under this
Note.
This Note evidences the loan, between the Maker and the Payee for
the purchase by Maker of a membership interest (the "Equity") in Grove Investors
LLC, a Delaware limited liability company ("Investors"). So much of the
Principal Amount as is required for Maker's purchase of the Equity shall be
advanced by Payee directly to Investors, which will sell the Equity to Maker in
an amount that corresponds to Payee's advance. Maker authorizes and directs
Payee to make the advance to Investors and further authorizes Investors to
evidence the sale of the Equity in such manner with respect to the advance made
by Payee under this Note. Such advance will be deemed to have been received by
Maker upon Maker's receipt of the Equity and thereafter paid to Investors as the
purchase price for the Equity.
This Note is secured by Maker's pledge of: (i) Maker's membership
interest in Investors (the "Pledged Equity"), as more fully set forth in that
certain Pledge Agreement (the "Pledge Agreement") dated as of the date hereof by
and between Maker and Payee: and (ii) such other assets or documents as are at
any time given as security for or relating to this Note (the Pledge Agreement
and all other security documents are collectively referred to as the "Security
Instruments," and the Pledged Equity and any other assets that are at any time
pledged as security for this Note are collectively referred to as the
"Collateral").
This Note is due and payable as follows:
(A) At the time of, and to the extent of the after-tax proceeds of,
all distributions respecting and proceeds and payments on, from, or in
connection with the Collateral and any other amounts to which Maker becomes
entitled with respect to the Collateral (such amounts to be paid to Payee as
provided below). For this purpose, after-tax proceeds shall be computed by
taking into account income taxes attributable to Maker's ownership or
disposition of the Collateral (including income tax liability attributable to
Maker's distributive share of taxable income of Investors) and by assuming that
Maker will pay taxes at the maximum federal income tax rate and the maximum
state income tax rate for the state in which the Pledgor pays income taxes with
respect to such ownership or disposition of the Collateral, taking into account
the deductibility of state income taxes for federal income tax purposes.
(B) At the time of and to the extent of (i) proceeds from Investors'
redemption of the Pledged Equity (such amounts to be paid to Payee as provided
below) and (ii) other proceeds arising out of the sale or other disposition of
all or any portion of the Pledged Equity.
<PAGE>
3
(C) If a bonus is payable under the Short Term Incentive Plan to the
Maker in a year, fifty percent of the after tax proceeds of such bonus
calculated at the highest marginal tax rate applicable to the Maker is due.
(D) Unless sooner paid under this Note, any unpaid Principal Amount
and all unpaid interest accrued thereon is finally due and payable on the first
anniversary of the date hereof.
Maker hereby acknowledges that, except as expressly provided above,
all distributions, redemptions and other payments in respect of the Collateral
payable by Investors to Maker will be paid directly to Payee as payments under
this Note. Maker hereby directs and authorizes Investors to pay the foregoing
amounts directly to Payee to be applied against this Note. By signing below
Investors agrees to make all such payments directly to Payee unless otherwise
notified in writing to the contrary by Payee. The parties hereto acknowledge and
agree that such amounts will be deemed to have been distributed to Maker and
thereafter paid by Maker to Payee as payment under this Note.
Time is of the essence in this Note.
If Maker does not pay this Note as and when due to Payee, then this
Note will bear interest until paid at the Default Rate (as defined below).
Maker may at any time prepay all or from time to time any portion of
this Note without premium or penalty upon at least two days written notice to
the Payee. All payments on this Note will, at the option of Payee, be applied
first to pay unpaid accrued interest and any remainder will be applied to reduce
the Principal Amount.
Except as otherwise specifically provided, Maker: (i) waives grace,
presentment and demand for payment, protest and notice of protest, notice of
intent to accelerate maturity, notice of acceleration of maturity, notice of
nonpayment, and all other notices of any nature, filing of suit, and diligence
in collecting this Note or enforcing any of the Collateral for it; (ii) agrees
that the amount due hereunder must be paid without set-off, counterclaim,
abatement, suspension or diminution; and (iii) agrees that Payee will not be
required first to file suit or exhaust its remedies against Maker, any
guarantor, or others liable or to become liable on this Note to enforce payment
of this Note. No extension or postponement of time for paying this Note or any
installment hereof affects the liability of Maker under this Note.
Any of the following is a "Default" under this Note:
(a) Maker fails to perform or observe any provision of this Note,
the Pledge Agreement, or any other Security Instrument.
<PAGE>
4
(b) Maker commences a voluntary case under Title 11 of the United
States Code as from time to time in effect (the "Bankruptcy Code").
(c) Maker seeks relief as a debtor under any applicable law, other
than the Bankruptcy Code, of any jurisdiction relating to the liquidation
or reorganization of debtors or to the modification or alteration of the
rights of creditors, or consents to or acquiesces in such relief.
(d) Maker has entered against him any order by a court of competent
jurisdiction finding him to be bankrupt or insolvent, or assuming custody
of, or appointing a receiver or other custodian for, all or a substantial
part of his property.
(e) Maker makes an assignment for the benefit of, or enters into a
composition with, his creditors, or appoints or consents to the
appointment of a receiver or other custodian for all or a substantial part
of his property.
(f) A court having jurisdiction enters a decree or order for relief
in respect of Maker in an involuntary case under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, which decree or order is not stayed; or any other
similar relief is granted under any applicable federal or state law.
(g) An involuntary case is commenced against Maker under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect; or a decree or order of a court
having jurisdiction for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian, or other officer having similar powers
over Maker, or over all or a substantial part of his property, has been
entered; or the involuntary appointment of an interim receiver, trustee,
or other custodian of Maker for all or a substantial part of his property
has occurred; or a warrant of attachment, execution, or similar process
has been issued against any substantial part of Maker's property, and any
such event described in this clause (g) continues for 60 days unless
dismissed, bonded or discharged.
If a Default occurs, then and in each and every such case the unpaid
Principal Amount and all accrued interest will automatically become due and
payable without presentation, presentment, protest, or further demand or notice
of any kind, all of which Maker expressly waives. Payee may proceed to enforce
payment of all or part of such amount in a commercially reasonable manner. Payee
will also be entitled to exercise any and all other rights, remedies, and
recourses now or later existing in equity or at law. All remedies under this
Note and the Security Instruments are cumulative, not exclusive.
<PAGE>
5
Upon Default under this Note, or under any of the Security
Instruments, at Payee's option all amounts then due and payable under this Note
or the Security Instruments will bear interest from the date the Default occurs
at a rate of interest per annum (the "Default Rate") equal to the lesser of (a)
4% dyer the Applicable Rate, and (b) the Maximum Rate.
Maker agrees to pay all costs of collection hereof when incurred,
including reasonable attorneys' fees of the Payee, whether or not any action is
instituted to enforce this Note.
Maker and Payee at all times intend to comply with the applicable
law now or hereafter governing the terms of this Note and the interest payable
on this Note. If the applicable law is ever revised, repealed, or judicially
interpreted so as to render any provision of this Note invalid, or so as to
render usurious any amount called for under this Note or under any of the
Security Instruments or contracted for, charged, taken, reserved, or received
with respect to the loan evidenced by this Note, or if Payee's exercise of its
rights to accelerate the maturity of this Note, or if any prepayment by Maker
results in Maker's having paid any interest in excess of that permitted by law,
then it is Maker's and Payee's express intent that all excess amounts previously
collected by Payee be credited on the Principal Amount of this Note (or, if the
Note has been paid in full, refunded to Maker). This Note and the Security
Instruments immediately will then be deemed reformed and the amounts later
collectible hereunder and thereunder reduced without the need to execute any new
document, so as to comply with the then-applicable law, but so as to permit the
recovery of the greatest amount otherwise called for hereunder and thereunder.
All sums paid or agreed to be paid to Payee for the use,
forbearance, or detention of this indebtedness evidenced by this note will, to
the extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full term of this Note until paid in full so that the rate
or amount of interest on account of such indebtedness does not exceed the
applicable usury ceiling for so long as any amount is outstanding.
THIS NOTE MUST BE GOVERNED BY AND CONSTRUED ACCORDING TO NEW YORK
LAW EXCEPT AS APPLICABLE FEDERAL LAW PERMITS PAYEE TO CONTRACT FOR, CHARGE,
TAKE, RECEIVE, OR RESERVE A GREATER AMOUNT OF INTEREST.
Any suit, action, proceeding, controversy or claim arising out of or
relating to this Note or a Default must be brought in a court of appropriate
jurisdiction in New York City, New York. Maker hereby submits and consents to
the jurisdiction of such court for any such suit, action or proceeding and
irrevocably waives: (i) any objection that he now has or may later have to the
venue of such court, and (ii) any objection that any such suit, action, or
proceeding brought in such court has been brought in an inconvenient forum.
<PAGE>
6
THIS PROMISSORY NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES, THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Maker has duly executed this Note effective as of the date first
above written.
"MAKER"
/s/ Donald Mallo
------------------------------------
DONALD MALLO
"PAYEE"
GROVE WORLDWIDE LLC
By: /s/ Salvatore J. Bonanno
--------------------------------
Name: Salvatore J. Bonanno
Title: Chief Executive Officer
(Payee's signature is added solely
to acknowledge the statement in
the next to the last paragraph
above that this is the final
written agreement between the
parties.)
Acknowledged and agreed to for the
limited purposes stated herein by:
GROVE INVESTORS LLC, a
Delaware limited liability company
By: /s/ Salvatore J. Bonanno
-------------------------------------
Name: Salvatore J. Bonanno
Title: Chief Executive Officer
<PAGE>
Exhibit 10.27
MAKER: Donald Mallo
PAYEE: Grove Worldwide LLC
PROMISSORY NOTE
$100,000 October 27, 1998
FOR VALUE RECEIVED, Donald Mallo ("Maker"), promises to pay to the
order of Grove Worldwide LLC (collectively with all subsequent holders of this
Note, "Payee"), at 1565 Buchanan Trail East. P.O. Box 21, Shady Grove,
Pennsylvania 17256-0021, or at such other address or addresses as payee may from
time to time designate in writing, in lawful money of the United States of
America, an amount equal to One Hundred Thousand dollars ($100,000) (the
"Principal Amount"), together with interest on the unpaid Principal Amount owing
hereunder from time to time at the rate per annum equal to the lesser of (1) or
(2) below:
(1) a varying rate per annum equal to the prevailing designated
prime or base rate of Wells Fargo Bank, N.A., or its successor, as published or
announced by such bank from time to time (the "Prime Rate"), with adjustments in
such varying rate to be made on the same date as any change in the Prime Rate
(the "Applicable Rate"); or
(2) the maximum lawful rate (the "Maximum Rate") which may be
contracted for, charged, taken, received, or reserved by Payee in accordance
with New York law from time to time in effect except to the extent federal law
permits Payee to contract for, charge, take, receive, or reserve a greater
amount of interest, due credit being given for all charges made in connection
with the loan evidenced hereby that may be treated as interest under applicable
law.
Interest will be based on a 365-day year.
Notwithstanding anything in this Note to the contrary, if at any
time the Applicable Rate, together with all fees and charges, if any, contracted
for, charged, received, taken, or reserved by Payee in connection with the loan
evidenced hereby that may be treated as interest under applicable law
(collectively, the "Charges"), computed over the full term of this Note, exceeds
the Maximum Rate, then the rate of interest payable hereunder, together with all
Charges, will be limited to the Maximum Rate. If, however, the Maximum Rate from
time to time subsequently increases, then the interest charged on the unpaid
Principal Amount will remain equal to the Maximum Rate, and any subsequent
reduction in the Applicable Rate will not reduce the rate borne by this Note,
until the total amount of interest earned hereunder, together with all Charges,
equals the total amount of interest that would have accrued at the Applicable
Rate if the Applicable Rate had at all times been in effect. Moreover, if at
maturity or final payment of this Note the total amount of interest paid or
accrued under the foregoing provisions is less than the total amount of interest
that would have accrued if the Applicable Rate had at all times been in effect,
Maker agrees to pay to Payee, to the
<PAGE>
2
extent allowed by then-applicable law, an amount equal to the difference between
(a) the lesser of (i) the amount of interest that would have been accrued on
this Note if the Maximum Rate had at all times been in effect, and (ii) the
amount of interest that would have accrued if the Applicable Rate had at all
times been in effect, and (b) the amount of interest actually accrued under this
Note.
This Note evidences the loan, between the Maker and the Payee for
the purchase by Maker of a membership interest (the "Equity") in Grove Investors
LLC, a Delaware limited liability company ("Investors"). So much of the
Principal Amount as is required for Maker's purchase of the Equity shall be
advanced by Payee directly to investors, which will sell the Equity to Maker in
an amount that corresponds to Payee's advance. Maker authorizes and directs
Payee to make the advance to Investors and further authorizes Investors to
evidence the sale of the Equity in such manner with respect to the advance made
by Payee under this Note. Such advance will be deemed to have been received by
Maker upon Maker's receipt of the Equity and thereafter paid to Investors as the
purchase price for the Equity.
This Note is secured by Maker's pledge of: (i) Maker's membership
interest in Investors (the "Pledged Equity"), as more fully set forth in that
certain Pledge Agreement (the "Pledge Agreement") dated as of the date hereof by
and between Maker and Payee; and (ii) such other assets or documents as are at
any time given as security for or relating to this Note (the Pledge Agreement
and all other security documents are collectively referred to as the "Security
Instruments," and the Pledged Equity and any other assets that are at any time
pledged as security for this Note are collectively referred to as the
"Collateral").
This Note is due and payable as follows:
(A) At the time of, and to the extent of the after-tax proceeds of,
all distributions respecting and proceeds and payments on, from, or in
connection with the Collateral and any other amounts to which Maker becomes
entitled with respect to the Collateral (such amounts to be paid to Payee as
provided below). For this purpose, after-tax proceeds shall be computed by
taking into account income taxes attributable to Maker's ownership or
disposition of the Collateral (including income tax liability attributable to
Maker's distributive share of taxable income of Investors) and by assuming that
Maker will pay taxes at the maximum federal income tax rate and the maximum
state income tax rate for the state in which the Pledgor pays income taxes with
respect to such ownership or disposition of the Collateral, taking into account
the deductibility of state income taxes for federal income tax purposes.
(B) At the time of and to the extent of (i) proceeds from Investors'
redemption of the Pledged Equity (such amounts to be paid to Payee as provided
below) and (ii) other proceeds arising out of the sale or other disposition of
all or any portion of the Pledged Equity.
<PAGE>
3
(C) If a bonus is payable under the Short Term Incentive Plan to the
Maker in a year, fifty percent of the after tax proceeds of such bonus
calculated at the highest marginal tax rate applicable to the Maker is due.
(D) Unless sooner paid under this Note, any unpaid Principal Amount
and all unpaid interest accrued thereon is finally due and payable on the tenth
anniversary of the date hereof.
Maker hereby acknowledges that, except as expressly provided above,
all distributions, redemptions and other payments in respect of the Collateral
payable by Investors to Maker will be paid directly to Payee as payments under
this Note. Maker hereby directs and authorizes Investors to pay the foregoing
amounts directly to Payee to be applied against this Note. By signing below
Investors agrees to make all such payments directly to Payee unless otherwise
notified in writing to the contrary by Payee. The parties hereto acknowledge and
agree that such amounts will be deemed to have been distributed to Maker and
thereafter paid by Maker to Payee as payment under this Note.
Time is of the essence in this Note.
If Maker does not pay this Note as and when due to Payee, then this
Note will bear interest until paid at the Default Rate (as defined below).
Maker may at any time prepay all or from time to time any portion of
this Note without premium or penalty upon at least two days written notice to
the Payee. All payments on this Note will, at the option of Payee, be applied
first to pay unpaid accrued interest and any remainder will be applied to reduce
the Principal Amount.
Except as otherwise specifically provided, Maker: (i) waives grace,
presentment and demand for payment, protest and notice of protest, notice of
intent to accelerate maturity, notice of acceleration of maturity, notice of
nonpayment, and all other notices of any nature, filing of suit, and diligence
in collecting this Note or enforcing any of the Collateral for it; (ii) agrees
that the amount due hereunder must be paid without set-off, counterclaim,
abatement, suspension or diminution; and (iii) agrees that Payee will not be
required first to file suit or exhaust its remedies against Maker, any
guarantor, or others liable or to become liable on this Note to enforce payment
of this Note. No extension or postponement of time for paying this Note or any
installment hereof affects the liability of Maker under this Note.
Any of the following is a "Default" under this Note:
(a) Maker fails to perform or observe any provision of this
Note, the Pledge Agreement, or any other Security Instrument.
<PAGE>
4
(b) Maker commences a voluntary case under Title 11 of the
United States Code as from time to time in effect (the "Bankruptcy
Code").
(c) Maker seeks relief as a debtor under any applicable law,
other than the Bankruptcy Code, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or
alteration of the rights of creditors, or consents to or acquieces
in such relief.
(d) Maker has entered against him any order by a court of
competent jurisdiction finding him to be bankrupt or insolvent, or
assuming custody of, or appointing a receiver or other custodian
for, all or a substantial part of his property.
(e) Maker makes an assignment for the benefit of, or enters
into a composition with, his creditors, or appoints or consents to
the appointment of a receiver or other custodian for all or a
substantial part of his property.
(f) A court having jurisdiction enters a decree or order for
relief in respect of Maker in an involuntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, which degree or order is
not stayed; or any other similar relief is granted under any
applicable federal or state law.
(g) An involuntary case is commenced against Maker under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect; or a decree or order of a
court having jurisdiction for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian, or other officer
having similar powers over Maker, or over all or a substantial part
of his property, has been entered; or the involuntary appointment of
an interim receiver, trustee, or other custodian of Maker for all or
a substantial part of his property has occurred; or a warrant of
attachment, execution, or similar process has been issued against
any substantial part of Maker's property, and any such event
described in this clause (g) continues for 60 days unless
dismissed, bonded or discharged.
If a Default occurs, then and in each and every such case the unpaid
Principal Amount and all accrued interest will automatically become due and
payable without presentation, presentment, protest, or further demand or notice
of any kind, all of which Maker expressly waives. Payee may proceed to enforce
payment of all or part of such amount in a commercially reasonable manner. Payee
will also be entitled to exercise any and all other rights, remedies, and
recourses now or later existing in equity or at law. All remedies under this
Note and the Security Instruments are cumulative, not exclusive.
<PAGE>
5
Upon Default under this Note, or under any of the Security
Instruments, at Payee's option all amounts then due and payable under this Note
or the Security Instruments will bear interest from the date the Default occurs
at a rate of interest per annum (the "Default Rate") equal to the lesser of (a)
4% over the Applicable Rate, and (b) the Maximum Rate.
Maker agrees to pay all costs of collection hereof when incurred,
including reasonable attorneys' fees of the Payee, whether or not any action is
instituted to enforce this Note.
Maker and Payee at all times intend to comply with the applicable
law now or hereafter governing the terms of this Note and the interest payable
on this Note. If the applicable law is ever revised, repealed, or judicially
interpreted so as to render any provision of this Note invalid, or so as to
render usurious any amount called for under this Note or under any of the
Security Instruments or contracted for, charged, taken, reserved, or received
with respect to the loan evidenced by this Note, or if Payee's exercise of its
rights to accelerate the maturity of this Note, or if any prepayment by Maker
results in Maker's having paid any interest in excess of that permitted by law,
then it is Maker's and Payee's express intent that all excess amounts previously
collected by Payee be credited on the Principal Amount of this Note (or, if the
Note has been paid in full, refunded to Maker). This Note and the Security
Instruments immediately will then be deemed reformed and the amounts later
collectible hereunder and thereunder reduced without the need to execute any new
document, so as to comply with the then-applicable law, but so as to permit the
recovery of the greatest amount otherwise called for hereunder and thereunder.
All sums paid or agreed to be paid to Payee for the use,
forbearance, or detention of this indebtedness evidenced by this note will, to
the extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full term of this Note until paid in full so that the rate
or amount of interest on account of such indebtedness does not exceed the
applicable usury ceiling for so long as any amount is outstanding.
THIS NOTE MUST BE GOVERNED BY AND CONSTRUED ACCORDING TO NEW YORK
LAW EXCEPT AS APPLICABLE FEDERAL LAW PERMITS PAYEE TO CONTRACT FOR, CHARGE,
TAKE, RECEIVE, OR RESERVE A GREATER AMOUNT OF INTEREST.
Any suit, action, proceeding, controversy or claim arising out of or
relating to this Note or a Default must be brought in a court of appropriate
jurisdiction in New York City, New York. Maker hereby submits and consents to
the jurisdiction of such court for any such suit, action or proceeding and
irrevocably waives: (i) any objection that he now has or may later have to the
venue of such court, and (ii) any objection that any such suit, action, or
proceeding brought in such court has been brought in an inconvenient forum.
<PAGE>
6
THIS PROMISSORY NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Maker has duly executed this Note effective as of the date first
above written.
MAKER
/s/ DONALD MALLO
----------------------------------
DONALD MALLO
"PAYEE"
GROVE WORLDWIDE LLC
By: /S/ Salvatore J. Bonanno
------------------------------
Name: Salvatore J. Bonanno
Title: Chief Executive Officer
(Payee's signature is added
solely to acknowledge the
statement in the next to the
last paragraph above that this
is the final written agreement
between the parties.)
Acknowledged and agreed to for the
limited purposes stated herein by:
GROVE INVESTORS LLC, a
Delaware limited liability company
By: /s/ Salvatore J. Bonanno
--------------------------------
Name: Salvatore J. Bonanno
Title: Chief Executive Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The balance sheets and statements of operations of the Registrant and its
subsidiaries and is qualified in its entirety by reference to such financial
statements. As a result of the Acquisition (see Note 2 of Notes to Consolidated
Financial Statements), the Company is required to report results prior to the
Acquisition separate from results subsequent to the Acquisition.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 7-MOS 5-MOS
<FISCAL-YEAR-END> APR-28-1998 OCT-03-1998
<PERIOD-START> SEP-28-1997 APR-29-1998
<PERIOD-END> APR-28-1998 OCT-03-1998
<CASH> 0 34,289
<SECURITIES> 0 0
<RECEIVABLES> 0 132,908
<ALLOWANCES> 0 (3,075)
<INVENTORY> 0 207,248
<CURRENT-ASSETS> 0 396,650
<PP&E> 0 219,770
<DEPRECIATION> 0 (12,595)
<TOTAL-ASSETS> 0 910,348
<CURRENT-LIABILITIES> 0 206,448
<BONDS> 0 408,000
0 0
0 0
<COMMON> 0 164,560
<OTHER-SE> 0 (18,699)
<TOTAL-LIABILITY-AND-EQUITY> 0 910,348
<SALES> 476,200 393,779
<TOTAL-REVENUES> 476,200 393,779
<CGS> 377,337 335,764
<TOTAL-COSTS> 78,161 60,899
<OTHER-EXPENSES> 9,524 554
<LOSS-PROVISION> 880 290
<INTEREST-EXPENSE> (1,048) 15,916
<INCOME-PRETAX> 11,346 (19,644)
<INCOME-TAX> 11,741 (4,337)
<INCOME-CONTINUING> (395) (23,981)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (395) (23,981)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
