<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1998
REGISTRATION NO. 333-57609
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
<TABLE>
<S> <C>
GROVE HOLDINGS LLC GROVE HOLDINGS CAPITAL, INC.
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
DELAWARE DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
6719 6799
(PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER) CLASSIFICATION CODE NUMBER)
52-2089467 52-2090024
(I.R.S. Employer Identification (I.R.S. Employer Identification
Number) Number)
201 MAIN STREET, SUITE 3200 1565 BUCHANAN TRAIL EAST
FORT WORTH, TEXAS 76102 SHADY GROVE, PENNSYLVANIA 17256
(817) 390-8500 (717) 597-8121
(Address, including zip code, and (Address, including zip code, and
telephone number, including telephone number, including
area code, of registrant's principal area code, of registrant's principal
executive offices) executive offices)
</TABLE>
SALVATORE J. BONANNO
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
GROVE HOLDINGS LLC
1565 BUCHANAN TRAIL EAST
SHADY GROVE, PENNSYLVANIA 17256
(717) 597-8121
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
WITH A COPY TO:
MARK S. BERGMAN, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 373-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
--------------------------
If the Securities registered on this Form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /_____
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /_____
--------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 6, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PRELIMINARY PROSPECTUS
$88,000,000
GROVE HOLDINGS LLC
GROVE HOLDINGS CAPITAL, INC.
OFFER TO EXCHANGE THEIR 11 5/8% SENIOR DISCOUNT DEBENTURES DUE 2009, WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR ANY AND ALL OF THEIR
OUTSTANDING 11 5/8% SENIOR DISCOUNT DEBENTURES DUE 2009
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998, UNLESS EXTENDED
Grove Holdings LLC, a Delaware limited liability company ("Holdings"), and
Grove Holdings Capital, Inc., a Delaware corporation and a wholly owned
subsidiary of Holdings ("Grove Holdings Capital" and, together with Holdings,
the "Issuers"), hereby offer, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying letter of transmittal (the "Letter
of Transmittal," and together with this Prospectus, the "Exchange Offer") up to
$88,000,000 aggregate principal amount at maturity of their 11 5/8% Senior
Discount Debentures Due 2009 (the "Exchange Debentures") for a like principal
amount of their outstanding 11 5/8% Senior Discount Debentures Due 2009 that
were issued and sold in reliance upon an exemption from registration under the
Securities Act of 1933, as amended (the "Securities Act") (the "Senior Discount
Debentures" and, together with the Exchange Debentures, the "Debentures").
The terms of the Exchange Debentures will be the same in all material
respects (including principal amount, interest rate, maturity and ranking) as
the terms of the Senior Discount Debentures for which they may be exchanged
pursuant to the Exchange Offer, except that the Exchange Debentures have been
registered under the Securities Act, and therefore will not be subject to
certain restrictions on transfer applicable to the Senior Discount Debentures
and will not be entitled to registration rights except under certain limited
circumstances. The Exchange Debentures will be issued under the Indenture (as
defined on page 3) governing the Senior Discount Debentures. The Senior Discount
Debentures are, and the Exchange Debentures will be, general unsecured
obligations of the Issuers, will rank equal in right of payment to all existing
and future senior indebtedness of the Issuers and will be senior in right of
payment to all subordinated indebtedness of the Issuers. As indebtedness of the
Issuers, however, the Debentures will be effectively subordinated to all
liabilities of Grove Worldwide LLC (the "Company" or "Grove") and its other
subsidiaries. As of August 29, 1998, the Debentures were subordinated to
approximately $685.9 million of liabilities of Grove and its other subsidiaries.
As of August 29, 1998, Holdings had no senior indebtedness (other than the
Debentures) and no subordinated indebtedness outstanding.
The Senior Discount Debentures were originally issued and sold on April 29,
1998 in a transaction not registered under the Securities Act, in reliance upon
the exemption provided in Section 4(2) of the Securities Act and Rule 144A of
the Securities Act (the "Initial Offering"). Accordingly, the Senior Discount
Debentures may not be reoffered, resold or otherwise pledged, hypothecated or
transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is available.
Based upon interpretations provided to third parties by the Staff (the "Staff")
of the Securities and Exchange Commission (the "Commission"), the Issuers
believe that the Exchange Debentures issued pursuant to the Exchange Offer in
exchange for the Senior Discount Debentures may be offered for resale, resold
and otherwise transferred by holders thereof (other than any holder which is (i)
an "affiliate" of the Company within the meaning of the Securities Act (an
"Affiliate") or (ii) a broker-dealer that purchases Debentures from the Issuers
to resell pursuant to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Debentures are acquired in the
ordinary course of such holder's business and such holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Debentures and neither such holder nor any other such person is
engaging in or intends to engage in a distribution of such Exchange Debentures.
Each Affiliate that receives the Exchange Debentures must comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable. In addition, each broker-dealer that receives Exchange
Debentures for its own account pursuant to the Exchange Offer may be deemed to
be an "underwriter" within the meaning of the Securities Act, and must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Debentures. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Debentures received in exchange for
Senior Discount Debentures where such Senior Discount Debentures were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Issuers have agreed that, for a period of one year after the
Expiration Date (as defined below), they will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Exchange Debentures constitute new issues of securities with no
established public trading market. The Issuers do not intend to apply for
listing of the Exchange Debentures on any national securities exchange or for
their quotation through the Nasdaq Stock Market, Inc. Therefore, there can be no
assurance as to the development or liquidity of any trading market for the
Exchange Debentures. Any Senior Discount Debentures not tendered and accepted in
the Exchange Offer will remain outstanding. To the extent that Senior Discount
Debentures are tendered and accepted in the Exchange Offer, a holder's ability
to sell untendered Senior Discount Debentures could be adversely affected.
Following consummation of the Exchange Offer, the holders of Senior Discount
Debentures will continue to be subject to the existing restrictions on transfer
thereof and Holdings will have no further obligation to register such Senior
Discount Debentures under the Securities Act except under certain limited
circumstances. See "Description of Debentures--Registration Rights; Liquidated
Damages."
The Senior Discount Debentures currently trade in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. Following
commencement of the Exchange Offer but prior to its consummation, the Senior
Discount Debentures may continue to be traded in the PORTAL market. Following
consummation of the Exchange Offer, the Exchange Debentures will not be eligible
for PORTAL trading.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Senior Discount Debentures being tendered or accepted for exchange.
The Exchange Offer will expire at 5:00 p.m., New York City time, on ,
1998, unless extended (the "Expiration Date"). The date of acceptance for
exchange of the Senior Discount Debentures ( the "Exchange Date") will be the
Expiration Date, upon surrender of the Senior Discount Debentures tendered.
Senior Discount Debentures tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date.
The Issuers will not receive any proceeds from this Exchange Offer and no
underwriter is being utilized in connection with this Exchange Offer.
------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 21 FOR A DISCUSSION OF CERTAIN RISKS
ASSOCIATED WITH AN INVESTMENT IN THE EXCHANGE DEBENTURES.
---------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
AVAILABLE INFORMATION
Upon the effectiveness of this Registration Statement, the Issuers will
become subject to the periodic reporting and to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, Holdings will file reports, proxy statements and other
information with the Commission. Reports, proxy and information statements and
other information filed by Holdings may be inspected and copied at the public
reference facilities maintained by the Commission in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained upon written request from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the Commission maintains a site on the
World Wide Web at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.
No separate financial statements of Grove Holdings Capital are included
herein. Holdings believes that providing separate financial statements and other
disclosures concerning Grove Holdings Capital would not be material to holders
of the Exchange Debentures. As of June 27, 1998 (the latest date for which
financial statements are included in this Prospectus), Grove Holdings Capital
had no assets, liabilities or operations.
Holdings is required by the terms of the Indenture dated as of April 29,
1998, by and among the Issuers and the United States Trust Company of New York
(the "Trustee"), under which the Senior Discount Debentures were issued and
under which the Exchange Debentures are to be issued (the "Indenture"), to
furnish to holders of the Debentures (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if Holdings were required to file such Forms,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" that describes the financial condition and results of
operations of Holdings and its consolidated subsidiaries and, with respect to
the annual information only, a report thereon by the Holdings' certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if Holdings were required to file such
reports, in each case within the time periods specified in the Commission's
rules and regulations. In addition, following the consummation of the Exchange
Offer, whether or not required by the rules and regulations of the Commission,
the Company will file a copy of all such information and reports with the
Commission for public availability within the time periods specified in the
Commission's rules and regulations (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. In addition, (i) at all times the Commission
does not accept the filings provided for in the preceding sentence or (ii) such
filings provided for in the preceding sentence do not contain the information
required to be delivered upon request pursuant to Rule 144A(d)(4) under the
Securities Act, then, in each case, the Company has agreed that, for so long as
any Debentures remain outstanding, it will furnish to the holders of the
Debentures and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Issuers with the Commission under
the Securities Act. This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, and reference is
hereby made to the Registration Statement and to the exhibits relating thereto
for further information with respect to the Issuers and the Exchange Debentures.
Any statements contained herein concerning the provisions of any document are
not necessarily complete, and, in each instance, reference is made to the copy
of such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
3
<PAGE>
SPECIAL NOTE REGARDING FORWARD--LOOKING STATEMENTS
Certain statements under "Prospectus Summary," "Risk Factors," "Selected
Historical Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere in this
Prospectus constitute "forward-looking statements." 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 Holdings, 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 Prospectus. 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 Holdings 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. See "Risk Factors." 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 Holdings 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
Holdings 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.
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND COMBINED FINANCIAL
STATEMENTS OF THE GROVE COMPANIES, THE PREDECESSOR TO HOLDINGS AND THE CONDENSED
FINANCIAL STATEMENTS OF HOLDINGS, INCLUDING THE NOTES THERETO (THE "FINANCIAL
STATEMENTS"), INCLUDED ELSEWHERE IN THIS PROSPECTUS. 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 1993,
FISCAL 1994, FISCAL 1995, FISCAL 1996 AND FISCAL 1997 REFER TO THE FISCAL YEARS
ENDED OCTOBER 2, 1993, OCTOBER 1, 1994, SEPTEMBER 30, 1995, SEPTEMBER 28, 1996
AND SEPTEMBER 27, 1997, RESPECTIVELY. REFERENCES TO HISTORICAL FINANCIAL
INFORMATION ARE TO THE HISTORICAL COMBINED FINANCIAL RESULTS OF THE ACQUIRED
BUSINESS. SEE "THE TRANSACTIONS--THE ACQUISITION." THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INHERENTLY INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING THOSE SET
FORTH UNDER "THE COMPANY--BUSINESS STRATEGY" AND "RISK FACTORS." CERTAIN MARKET
DATA USED IN THIS PROSPECTUS REFLECT MANAGEMENT ESTIMATES. PROSPECTIVE INVESTORS
ARE URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY.
HOLDINGS
Membership interests of the Company and capital stock of Grove Holdings
Capital account for all of Holdings' assets. Holdings conducts all of its
business through the Company.
THE COMPANY
Grove Worldwide is a leading international designer, manufacturer and
marketer of a comprehensive line of mobile hydraulic cranes, aerial work
platforms and truck-mounted cranes. In North America, Grove Crane, the Company's
largest operating division, has a number one market position and a 45% market
share. 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 believes it has achieved a leading position in each of its principal
markets due to its: (i) strong brand name and reputation for quality products;
(ii) superior customer service; (iii) established network of distributors; (iv)
broad product line; and (v) commitment to superior engineering design and
product innovation.
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 (67% of fiscal 1997 new equipment
sales), Europe (19% of fiscal 1997 new equipment sales), Africa and the Middle
East (4% of fiscal 1997 new equipment sales), Asia (7% of fiscal 1997 new
equipment sales) and Latin America (3% of fiscal 1997 new equipment sales). The
Company markets its products through three operating divisions:
- - GROVE CRANE (approximately 69% of fiscal 1997 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. From fiscal 1993 to fiscal 1997, Grove Crane's net
sales (including acquisitions) increased from $290 million to $587 million,
representing a compound annual growth rate ("CAGR") of 19.4%.
- - GROVE MANLIFT (approximately 23% of fiscal 1997 net sales) designs and
manufactures over 60 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,
5
<PAGE>
quickly and easily than alternative methods such as scaffolding and ladders.
From fiscal 1993 to fiscal 1997, Grove Manlift's net sales (including
acquisitions) increased from $57 million to $199 million, representing a CAGR
of 36.8%.
- - NATIONAL CRANE (approximately 8% of fiscal 1997 net sales) designs and
manufactures over 14 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. From fiscal 1993 to fiscal
1997, National Crane's net sales increased from $40 million to $71 million,
representing a CAGR of 15.4%.
COMPETITIVE STRENGTHS
The Company believes that it benefits from the following competitive
strengths:
- - LEADING MARKET POSITIONS. The Company believes that its three operating
divisions have established a leading position in each of their principal
markets.
<TABLE>
<CAPTION>
DIVISION PRODUCTS PRINCIPAL MARKETS MARKET POSITION(1) MARKET SHARE(1)
- -------------------- -------------------------- ------------------------ ----------------------- -------------------
<S> <C> <C> <C> <C>
Grove Crane Mobile Hydraulic Cranes North America 1 43%(2)
2 14%
Europe (excluding
Russia)
Grove Manlift Aerial Work Platforms North America 3 10%
3 16%
Europe (excluding
Russia)
National Crane Truck-Mounted Cranes:
1 43%
Telescoping North America
4 13%(3)
Articulating North America
</TABLE>
- - STRONG BRAND NAME AND REPUTATION FOR QUALITY PRODUCTS. The Company has
created significant brand equity as a result of its innovative designs,
quality products and product reliability. With over 100,000 units sold during
the past 50 years, the Company believes that it currently has one of the
industry's largest installed bases of cranes and aerial work platforms. The
quality of the Company's products and the value of its brand name are
reflected in the North American marketplace, where the Company believes that
its cranes generally command premium prices and have higher residual values
than comparable products manufactured by its competitors. For example, Grove
Crane's products typically have residual values in excess of 50% of their
original cost after five years, which management believes is significantly
greater than the average residual value of its competitors' products.
- - SUPERIOR CUSTOMER SERVICE. The Company is committed to providing superior
training, sales and service support to its distributors and end-users as a
standard part of its sales and marketing effort. Management believes that no
other major competitor matches the extent and quality of its customer support
services and that such services significantly contribute to the Company's
ability to charge premium prices for its products. In addition, the Company
has focused on providing ready availability of service parts. For example, in
fiscal 1997, the Company shipped over 80% of its replacement parts worldwide
within 24 hours after receipt of an order. After-market sales for parts and
services accounted for 12% of the
- ------------------------------
(1) All market share data are based on units shipped during fiscal 1997, except
for data on Grove Manlift's share of the North American and European aerial
work platform markets, which are based on fiscal 1997 revenues. With respect
to aerial work platforms, management believes that because the Company
primarily competes in the North American and European markets for larger,
high-end aerial work platforms, comparisons based on revenues are more
appropriate. Market data were derived from management estimates including
management assumptions regarding unit price.
(2) Does not include industrial cranes.
(3) In the United States, the Company has a number three market position and a
17% market share. National Crane has a nominal presence in the Canadian
market for articulating cranes.
6
<PAGE>
Company's net sales and 26% of gross profits in fiscal 1997. Such sales
typically have higher gross margins and are less cyclical than new equipment
sales.
- - ESTABLISHED NETWORK OF DISTRIBUTORS. 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 sold the Company's products for over 10 years. The Company believes that,
in many cases, its products represent an important portion of its
distributors' business. Many of these distributors also represent Caterpillar
Inc. or Komatsu Ltd. and, as such, are considered among the best-capitalized
in the industry. Management believes that the strength of its distributor
network is an important competitive advantage. For example, within twelve
months after acquiring the mobile hydraulic crane business of Fried Krupp AG
Hoesch-Krupp ("Krupp") in August 1995, the Company leveraged Grove's brand
name and distribution network to increase annual sales in the United States of
the cranes, formerly manufactured by Krupp, by 100% from approximately 40
units in 1995 to approximately 80 units in 1996.
- - BROAD PRODUCT LINE. The Company believes it has the broadest product line in
the industry, with 10 product categories and over 120 models offered by its
three operating divisions. Management believes the breadth of the Company's
product offerings enables it to more effectively serve the equipment rental
market, which management estimates represents approximately 80% of the
Company's net sales. The Company's broad product line allows it to satisfy the
rental market's demand for models addressing specific end-user needs, while
also providing customers the opportunity to save on support, maintenance and
training costs by purchasing from a single manufacturer.
BUSINESS STRATEGY
As a result of the Acquisition (as defined), 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 the Operations Improvement Program in
cooperation with the George Group Inc. ("George Group"), an acquisition and
management consulting firm that applies strategic and operations management
expertise to manufacturing businesses. Management is led by Salvatore J. Bonanno
who joined the Company in March 1998 from Foamex International Inc., where he
led an organizational restructuring designed to reduce manufacturing and
overhead costs. The Company will implement the Operations Improvement Program
and the other key elements of the Company's business strategy described below in
order to reach its objective of increased net sales and EBITDA.
- - OPERATIONS IMPROVEMENT PROGRAM. The Company, in cooperation with the George
Group, has developed a comprehensive program (the "Operations Improvement
Program") which it believes will enable the Company to reduce its annual costs
by approximately $35 million to $50 million and achieve significant working
capital efficiencies by fiscal 2001. The Operations Improvement Program is
intended to improve the Company's operating efficiency and margins by: (i)
rationalizing product lines; (ii) reducing manufacturing costs; and (iii)
reducing selling, general and administrative expenses. In addition, the
Company believes the Operations Improvement Program should enable it to reduce
its working capital requirements by decreasing inventory levels by
approximately $40 million to $50 million.
- - CONTINUE TO PROVIDE SUPERIOR PRODUCTS. The Company has maintained a
commitment to superior engineering design and technological innovation. The
Company believes that it has the most extensive engineering capability in the
crane industry, with a dedicated engineering group focusing on developing
innovative, high performance, low maintenance products that satisfy the
demands of its customers. Together with the Company's manufacturing and
marketing staff, these engineers seek to utilize new technologies and
effectively introduce new products. For example, the Company has introduced
lighter booms with greater lifting capacity, electronic controls that
facilitate operations and product features that enhance safety and increase
versatility. The Company believes that the greater sophistication of its
7
<PAGE>
products contributes to its ability to sustain higher residual values. The
Company intends to intensify its efforts to design products that meet evolving
customer needs while reducing manufacturing costs and the period from product
conception to introduction.
- - EXPAND EXISTING INTERNATIONAL BUSINESS. The Company intends to leverage its
significant brand equity and strong distribution network to opportunistically
expand its existing international business. As an industry leader, the Company
believes it is well-positioned to increase sales internationally as
infrastructure development in existing and emerging markets stimulates demand
for cranes and aerial work platforms. In 1995, the Company expanded its
product offerings and strengthened its manufacturing and distribution presence
in Europe by acquiring the mobile hydraulic crane business of Krupp in Germany
and the aerial work platform business of Delta Systemes SA ("Delta") in
France. In addition, all of the Company's manufacturing facilities have
received ISO 9001 certifications, which enhances the Company's international
marketing efforts.
- - CAPITALIZE ON THE GROWTH OF THE WORLDWIDE AERIAL WORK PLATFORM MARKET. The
Company seeks to capitalize on the increasing recognition by end-users
worldwide that aerial work platforms are economical and safe alternatives to
scaffolding and ladders. The North American aerial work platform industry
experienced a CAGR in total unit shipments from 1992 to 1997 of 32%. In 1997,
approximately 41,000 aerial work platforms were shipped in North America while
only 13,000 units were shipped in markets outside of North America. The
Company expects to generate increased sales of aerial work platforms in
international markets as international end-users recognize the productivity
and safety advantages of aerial work platforms.
THE OPERATIONS IMPROVEMENT PROGRAM
The Company, in cooperation with George Group, has developed a comprehensive
program which it believes will enable it to reduce its annual costs by
approximately $35 million to $50 million and achieve significant working capital
efficiencies by fiscal 2001. The Operations Improvement Program is intended to
improve the Company's operating efficiency and its margins by: (i) rationalizing
product lines; (ii) reducing manufacturing costs; and (iii) reducing selling,
general and administrative expenses. In addition, the Company believes the
Operations Improvement Program should enable it to reduce its working capital
requirements by decreasing inventory levels by approximately $40 million to $50
million. It is expected that these cost savings will be offset by non-recurring
costs of up to approximately $25 million associated with the implementation of
the Operations Improvement Program, plus consulting fees payable to George
Group. Estimates of potential cost savings and implementation costs are
inherently uncertain and the description of the Operations Improvement Program
should be read in conjunction with "Special Note Regarding Forward Looking
Statements" and "Risk Factors--Realization of Benefits of Operations Improvement
Program." The key components of the Operations Improvement Program are as
follows:
RATIONALIZE PRODUCT LINES. The Company expects to implement a product line
rationalization program which will position it to reduce both operating costs
and working capital requirements without diminishing the advantages derived from
its broad product line. The Company will monitor product line data to enable it
to simplify its engineering processes by reducing the number of models and
manufacturing components, standardizing options and using platform design
concepts. The Company believes this program will enable it to eliminate certain
models that have low demand, low margins or features and capabilities that are
redundant with other models. The product line rationalization program will
identify key product requirements by different customer groups within each of
the market segments which the Company serves. Such information will be used to
define a more focused product portfolio which, when compared to the existing
product lines, will help the Company identify opportunities to reduce
components, standardize features and eliminate models. Management believes that
these actions will (i) reduce inventory, (ii) increase labor productivity, (iii)
improve purchasing leverage and (iv) help reduce selling, general and
administrative expenses without negatively impacting revenue.
8
<PAGE>
REDUCE MANUFACTURING COSTS. Management intends to reduce the annual costs
of goods sold by approximately $25 million to $30 million by fiscal 2001 by
rationalizing its product line and undertaking the following initiatives to
improve the Company's manufacturing process:
- - Accelerate the recently initiated Design for Manufacturing and Assembly
("DFMA") program and continue to implement value analysis programs. These
established techniques are designed to lower material and labor costs by
redesigning products, incorporating more standardized components and allowing
a simplified fabrication and assembly process. Initial efforts during fiscal
1997 resulted in a 28% reduction in labor costs for a test model.
- - Consolidate sourcing by using fewer suppliers to fulfill the Company's global
requirements. As a result of its product rationalization and DFMA programs,
the Company expects to purchase a greater volume of fewer components, enabling
it to significantly reduce its vendor base and benefit from increased sourcing
leverage.
- - Implement other procedures to reduce manufacturing costs, including: (i)
improving planning and scheduling by introducing continuous flow manufacturing
principles and integrating the Company's new management information system;
(ii) improving product flow and reducing cycle time in order to increase
manufacturing flexibility and capacity; and (iii) shifting the production of
certain models and components to facilities where they can be more efficiently
produced.
REDUCE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Management believes it
can reduce annual selling, general and administrative expenses by approximately
$10 million to $20 million by fiscal 2001 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. See "Business--Management Information System."
REDUCE WORKING CAPITAL REQUIREMENTS. Management believes the Operations
Improvement Program will enable the Company to reduce its working capital
requirements by reducing inventory levels by approximately $40 million to $50
million. The Company expects to reduce its inventory levels primarily as a
result of: (i) improved manufacturing processes; (ii) the shifting of production
of certain models and components to facilities where they can be more
efficiently produced; and (iii) product rationalization.
9
<PAGE>
THE TRANSACTIONS
THE ACQUISITION
On March 10, 1998, the Company, entered into an agreement (together with the
related agreements, the "Acquisition Agreement") to acquire, 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"), for aggregate cash consideration
of approximately $583.0 million plus certain assumed liabilities, subject to a
post-closing net worth adjustment (the "Acquisition").
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 $604.5 million, which were provided by: (i) $209.5
million of borrowings under a new $325.0 million credit facility (the "New
Credit Facility"); (ii) $225.0 million of estimated gross proceeds to the
Company from the offering of the 9 1/4% Senior Subordinated Notes due 2008 (the
"Senior Subordinated Notes"); (iii) the issuance by Holdings of $50.0 million in
gross proceeds of its Senior Discount Debentures; and (iv) the issuance of
$120.0 million of limited liability company membership interests of Holdings
(the "Holdings Equity Issuance") (collectively, the "Financings"). At the
Closing, 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 "The
Transactions."
Under the Acquisition Agreement, the purchase price is subject to a post
closing net worth adjustment based upon the net worth of the Grove Companies (as
defined in the Acquisition Agreement) as of April 28, 1998. In July 1998, the
Company received $16.7 million from Hanson in payment of the post closing net
worth adjustment. The Company has until October 1998 to review the combined
balance sheet of the Grove Companies (the "Closing Balance Sheet") and, if it
does not agree with the post closing net worth adjustment, to object to such
determination.
THE INVESTOR GROUP
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 and certain
other investors, including certain members of senior management (together with
Keystone, Strategic Partners, the minority investors and the George Group, the
"Investor Group") beneficially own in the aggregate, through Grove Investors LLC
("Grove Investors"), all of the outstanding membership interests of Holdings.
Keystone is the principal investment entity of Robert M. Bass. Since 1985,
Keystone and associated entities have directly and indirectly sponsored over 30
leveraged acquisitions valued in the aggregate at more than $6.0 billion. These
acquisitions have included, among others, American Savings Bank, F.A., Bell &
Howell Company, CapStar Hotel Company, Ivex Packaging Corporation, National
Reinsurance Corporation, Reliant Building Products, Inc., Specialty Foods
Corporation, Stage Stores, Inc., and Williams Scotsman, Inc. 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. George Group has established an exclusive
relationship with Keystone to pursue leveraged acquisitions of companies in
which George Group's operational expertise may significantly reduce costs and
increase revenue, cash flow and return on invested capital. As part of their
on-going relationship, in May 1997, Keystone, Strategic Partners, certain other
parties and George Group completed the acquisition of Reliant Building Products,
Inc.
10
<PAGE>
GROVE HOLDINGS CAPITAL, INC.
Grove Holdings Capital was organized as a direct wholly owned subsidiary of
Holdings for the purpose of acting as a co-issuer of the Debentures and is also
a co-registrant of the Registration Statement. This was done so that certain
institutional investors to whom the Senior Discount Debentures were marketed and
that might otherwise have been restricted in their ability to purchase debt
securities issued by a limited liability company, such as Holdings, by reason of
the legal investment laws of their states of organization or their charter
documents, would be able to invest in the Senior Discount Debentures. Grove
Holdings Capital has no assets, no liabilities (other than the Debentures), no
operations and will not have any revenues and is prohibited from engaging in any
business activities. As a result, holders of the Debentures should not expect
Grove Holdings Capital to participate in servicing the interest and principal
obligations on the Debentures.
11
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
ISSUERS........................... The Exchange Debentures will be joint and several
obligations of Holdings and Grove Holdings Capital.
Grove Holdings Capital is a Delaware corporation and
wholly-owned subsidiary of the Company formed in
connection with the Offering. Grove Holdings Capital has
no assets, no liabilities (other than the Debentures)
and no operations and is prohibited from engaging in any
business activities.
THE EXCHANGE OFFER................ The Issuers are offering to exchange up to $88,000,000
aggregate principal amount at maturity of their 11 5/8%
Series Discount Debentures due 2009 for a like principal
amount at maturity of their outstanding 11 5/8% Senior
Discount Debentures due 2009 that were issued and sold
on April 29, 1998 in reliance upon an exemption from
registration under the Securities Act. The terms of the
Exchange Debentures will be identical in all material
respects (including principal amount, interest rate,
maturity and ranking) to the terms of the Senior
Discount Debentures for which they may be exchanged
pursuant to the Exchange Offer, except that the Exchange
Debentures will be registered under the Securities Act
and therefore will not be subject to certain
restrictions on transfer and will not be entitled to
registration rights except under certain limited
circumstances. See "The Exchange Offer--Terms of the
Exchange".
Exchange Debentures issued pursuant to the Exchange
Offer in exchange for the Senior Discount Debentures may
be offered for resale, resold and otherwise transferred
by holders thereof (other than any holder which is (i)
an Affiliate of the Company or (ii) a broker-dealer that
purchases Notes from the Issuers to resell pursuant to
Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such
Exchange Debentures are acquired in the ordinary course
of such holder's business and such holder has no
arrangement or understanding with any person to
participate in the distribution of such Exchange
Debentures and neither such holder nor any other such
person is engaging in or intends to engage in a
distribution of such Exchange Debentures.
EXPIRATION DATE................... The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1998 unless extended (the
"Expiration Date").
EXCHANGE DATE..................... The first date the Senior Discount Debentures will be
accepted for exchange will be the Exchange Date.
CONDITIONS TO THE EXCHANGE
OFFER........................... The obligation of the Issuers to consummate the Exchange
Offer is subject to certain customary conditions which
may be waived by the Issuers. See "The Exchange
Offer--Certain Conditions to the Exchange Offer." The
Exchange Offer is not conditioned
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
upon any minimum aggregate principal amount of Senior
Discount Debentures being tendered for exchange. The
Issuers reserve the right to terminate or amend the
Exchange Offer at any time prior to the Expiration Date
upon the occurrence of any such condition.
WITHDRAWAL RIGHTS................. Tenders may be withdrawn at any time prior to the
Expiration Date. Any Senior Discount Debentures not
accepted for any reason will be returned without expense
to the tendering holders thereof as promptly as
practicable after the expiration or termination of the
Exchange Offer.
PROCEDURES FOR TENDERING SENIOR
DISCOUNT DEBENTURES............. Unless a tender of Senior Discount Debentures is
effected pursuant to the procedures for book-entry
transfer as provided herein, each holder of Senior
Discount Debentures wishing to accept the Exchange Offer
must complete, sign and date a Letter of Transmittal, or
a facsimile thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such facsimile,
together with such Senior Discount Debentures or in
compliance with the specified procedures for guaranteed
delivery of Senior Discount Debentures, and any other
required documentation, to the Exchange Agent at the
address set forth herein. Holders of Senior Discount
Debentures registered in the name of a broker, dealer,
commercial bank, trust company or other nominee are
urged to contact such person promptly if they wish to
tender Senior Discount Debentures pursuant to the
Exchange Offer. See "Risk Factors--Adverse Consequences
of Failure To Exchange" and "The Exchange
Offer--Procedures for Tendering Senior Subordinated
Notes."
Letters of Transmittal and certificates representing
Senior Discount Debentures should not be sent to the
Issuers. Such documents should only be sent to the
Exchange Agent. Questions regarding how to tender and
requests for information should be directed to the
Exchange Agent. See "Risk Factors--Adverse Consequences
of Failure To Exchange" and "The Exchange
Offer--Exchange Agent."
FEDERAL INCOME TAX CONSEQUENCES... In the opinion of Paul, Weiss, Rifkind, Wharton &
Garrison, counsel to the Issuers, the exchange of Senior
Discount Debentures for Exchange Debentures by holders
will not constitute an exchange for federal income tax
purposes, and U.S. holders will not realize any gain or
loss upon receipt of Exchange Debentures. See "The
Exchange Offer--Certain Federal Income Tax
Considerations."
EFFECT ON HOLDERS OF THE SENIOR
DISCOUNT DEBENTURES............. As a result of the making of the Exchange Offer, and
upon acceptance for exchange of all validly tendered
Senior Discount Debentures pursuant to the terms of this
Exchange Offer, the Company will have fulfilled
covenants contained in the terms of
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
the Senior Discount Debentures and the Registration
Rights Agreement (the "Registration Rights Agreement")
dated April 29, 1998 between the Issuers and Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") and
Chase Securities Inc. ("Chase Securities" and together
with DLJ, the "Initial Purchasers") and, accordingly,
the holders of the Senior Discount Debentures will have
no further registration or other rights under the
Registration Rights Agreement, except under certain
limited circumstances. See "Description of Deben-
tures--Registration Rights; Liquidated Damages." Holders
of the Senior Discount Debentures who do not tender
their Senior Discount Debentures in the Exchange Offer
will continue to hold such Senior Discount Debentures
and will be entitled to all the rights and limitations
applicable thereto under the Indenture. All untendered,
and tendered but unaccepted, Senior Discount Debentures
will continue to be subject to the restrictions on
transfer provided for in the Senior Discount Debentures
and the Indenture. To the extent that Senior Discount
Debentures are tendered and accepted in the Exchange
Offer, the trading market, if any, for the Senior
Discount Debentures could be adversely affected. See
"Risk Factors--Adverse Consequences of Failure to
Exchange."
EXCHANGE AGENT.................... The United States Trust Company of New York is serving
as exchange agent (the "Exchange Agent") in connection
with the Exchange Offer. See "The Exchange
Offer--Exchange Agent."
RESALE OF EXCHANGE DEBENTURES..... Based upon interpretations by the Staff issued to third
parties, the Issuers believe that Exchange Debentures
issued pursuant to the Exchange Offer in exchange for
the Senior Discount Debentures may be offered for
resale, resold and otherwise transferred by holders
thereof (other than any holder which is (i) an Affili-
ate of the Company or (ii) a broker-dealer that
purchases Debentures from the Issuers to resell pursuant
to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such
Exchange Debentures are acquired in the ordinary course
of such holder's business and such holder has no
arrangement or understanding with any person to partici-
pate in the distribution of such Exchange Debentures and
neither such holder nor any other such person is
engaging in or intends to engage in a distribution of
such Exchange Debentures. Each Affiliate that receives
the Exchange Debentures must comply with the
registration and prospectus delivery requirements of the
Securities Act to the extent applicable. In addition,
each broker-dealer that receives Exchange Debentures for
its own account pursuant to the Exchange Offer may be
deemed to be an "underwriter" within the meaning of the
Securities Act, and must acknowledge that it will
deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such
Exchange Debentures. This Prospectus, as it may be
amended or supplemented from time to
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
time, may be used by a broker-dealer in connection with
resales of Exchange Debentures received in exchange for
Senior DiscountDebentures where such Senior
DiscountDebentures were acquired by such broker-dealer
as a result of market-making or other trading
activities. See "The Exchange Offer--Resale of Exchange
Debentures."
</TABLE>
TERMS OF THE EXCHANGE DEBENTURES
The Exchange Offer applies to $88,000,000 aggregate principal amount at
maturity of the Senior Discount Debentures. The form and terms of the Exchange
Debentures are the same in all material respects as the form and terms of the
Senior Discount Debentures except that the Exchange Debentures have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The Exchange Debentures will evidence the same
debt as the Senior Discount Debentures and will be entitled to the benefit of
the Indenture. See "Description of Debentures."
<TABLE>
<S> <C>
THE EXCHANGE DEBENTURES........... $88,000,000 aggregate principal amount at maturity of
11 5/8% Senior Discount Debentures due 2009.
MATURITY DATE..................... May 1, 2009.
ACCRETION......................... The Exchange Debentures will accrete at a rate of
11 5/8% compounded semi-annually to an aggregate
principal amount of $88.0 million at May 1, 2003.
INTEREST RATE..................... The Exchange Debentures will bear interest at the rate
of 11 5/8 per annum, payable semi-annually on May 1 and
November 1 of each year, commencing November 1, 2003.
SINKING FUND...................... None.
RANKING........................... The Exchange Debentures will be general unsecured
obligations of the Issuers, will rank equal in right of
payment with all existing and future senior indebtedness
of the Issuers and will rank senior in right of payment
to all subordinated indebtedness of the Issuers. As
indebtedness of the Issuers, however, the Exchange
Debentures will be effectively subordinated to all
indebtedness of Grove and its other subsidiaries. As of
August 29, 1998, the Debentures were subordinated to
approximately $685.9 million of liabilities of Grove and
its other subsidiaries. As of August 29, 1998, Holdings
had no senior indebtedness (other than the Debentures)
and no subordinated indebtedness outstanding.
OPTIONAL REDEMPTION............... The Exchange Debentures will be redeemable at the option
of the Issuers, in whole or in part, at any time on or
after May 1, 2003 in cash at the redemption prices set
forth herein, plus accrued and unpaid interest and
Liquidated Damages (as defined), if any, thereon to the
date of redemption. In addition, at any time prior to
May 1, 2001, the Issuers may on any one or more
occasions redeem up to 35% of the aggregate principal
amount of Exchange Debentures originally issued at a
redemption price equal to 111.625% of the principal
amount thereof,
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
plus accrued and unpaid interest and Liquidated Damages,
if any, thereon to the redemption date, with the net
cash proceeds of one or more Public Equity Offerings (as
defined); PROVIDED that at least 65% of the aggregate
principal amount of Exchange Debentures originally
issued remains outstanding immediately after the
occurrence of any such redemption. See "Description of
Debentures--Optional Redemption."
CHANGE OF CONTROL................. Upon the occurrence of a Change of Control, each holder
of Exchange Debentures will have the right to require
the Issuers to repurchase all or any part of such
holder's Exchange Debentures 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. See
"Description of Debentures--Repurchase at the Option of
Holders--Change of Control." There can be no assurance
that, in the event of a Change of Control, the Issuers
would have sufficient funds to purchase all Exchange
Debentures tendered. See "Risk Factors--Limitations on
Ability to Make Change of Control Payment."
CERTAIN COVENANTS................. The Indenture contains certain covenants that will
limit, among other things, the ability of the Issuers
to: (i) pay dividends, redeem capital stock or make
certain other restricted payments or investments, (ii)
incur additional indebtedness or issue certain preferred
equity interests, (iii) merge, consolidate 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. See "Description of
Debentures--Certain Covenants."
ORIGINAL ISSUE DISCOUNT........... The Exchange Debentures are being issued with original
issue discount for U.S. federal income tax purposes.
Thus, although interest will not be payable on the
Exchange Debentures prior to November 1, 2003, holders
will be required to include amounts in gross income for
U.S. federal income tax purposes in advance of receipt
of the cash payments to which such income is attribu-
table. See "Certain Federal Income Tax
Considerations--United States Holders--Original Issue
Discount."
ABSENCE OF PUBLIC MARKET.......... There is no public market for the Exchange Debentures,
and the Exchange Debentures will not be listed on any
securities exchange or quotation system. The Company has
been advised by the Initial Purchasers that, following
consummation of the Exchange Offer, the Initial
Purchasers intend to make a market in the Exchange
Debentures; however, any market-making may be
discontinued at any time without notice. If an active
public market does not develop, the market price and
liquidity of the Exchange Debentures may be adversely
affected. See "Risk Factors--Absence of a Public Market
for Exchange Debentures."
The Senior Discount Debentures currently trade in the
PORTAL market. Following commencement of the Exchange
Offer
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
but prior to its consummation, the Senior Discount
Debentures may continue to be traded in the PORTAL
market. Following consummation of the Exchange Offer,
the Exchange Debentures will not be eligible for PORTAL
trading.
</TABLE>
For definitions of certain capitalized terms used herein, see "Description
of Debentures."
HOLDERS OF SENIOR DISCOUNT DEBENTURES AND PROSPECTIVE PURCHASERS OF THE
EXCHANGE DEBENTURES SHOULD CAREFULLY CONSIDER ALL OF THE INFORMATION SET FORTH
IN THIS PROSPECTUS AND, IN PARTICULAR, SHOULD EVALUATE THE SPECIFIC FACTORS SET
FORTH UNDER "RISK FACTORS" FOR RISKS ASSOCIATED WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE DEBENTURES. SEE "RISK FACTORS."
------------------------
Holdings principal executive offices are located at 201 Main Street, Suite
3200, Fort Worth, Texas 76102. The telephone number of Holdings executive
offices is (817) 390-8500. Grove Holdings Capital's principal executive offices
are located at 1565 Buchanan Trail East, Shady Grove, Pennsylvania 17256. The
telephone number of Grove Holdings Capital's executive offices is (717)
597-8121.
17
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table presents summary: (i) historical financial data of the
Company for fiscal 1995, fiscal 1996, fiscal 1997, the nine months ended June
28, 1997, the seven months ended April 28, 1998 and the two months ended June
27, 1998; (ii) pro forma data of the Company for fiscal 1997 and the nine months
ended June 27, 1998; and (iii) historical consolidated balance sheet data of the
Company as of June 27, 1998. The Company's fiscal year ends on the Saturday
closest to the last day of September. The summary historical financial data for
the nine months ended June 28, 1997, the seven months ended April 28, 1998 and
the two months ended June 27, 1998 were derived from unaudited historical
financial statements. The pro forma financial data for fiscal 1997 and the nine
months ended June 27, 1998 give effect to the Transactions as if they had
occurred at the beginning of fiscal 1997. The pro forma financial data are
unaudited and do not purport to represent what the Company's results of
operations or financial position would have been if the Transactions had been
completed as of the date or for the periods presented, nor does such data
purport to represent the results of operations for any future period. The
summary financial data set forth below should be read in conjunction with "The
Transactions," "Selected Historical Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and the
historical financial statements and pro forma financial data of the Company and
the related notes thereto included elsewhere in this Prospectus. For purposes of
the following discussion, the Company refers to Holdings.
<TABLE>
<CAPTION>
PREDECESSOR
-------------------------------------------------------
NINE COMPANY
MONTHS SEVEN -----------
FISCAL YEAR ENDED ENDED MONTHS TWO MONTHS
------------------------------- JUNE 28, ENDED APRIL ENDED JUNE
1995 1996 1997 1997 28, 1998 27, 1998
--------- --------- --------- --------- ----------- -----------
STATEMENT OF OPERATIONS DATA(1):
<S> <C> <C> <C> <C> <C> <C>
Net sales................................................... $ 503,815 $ 794,209 $ 856,812 $ 633,845 $ 476,199 $ 154,780
Gross profit................................................ 126,589 185,079 203,273 146,086 100,467 23,636
Operating expenses.......................................... 88,216 134,459 135,382 100,575 78,412 24,326
Operating profit (loss)..................................... 38,373 50,620 67,891 45,511 22,055 (690)
Net income (loss)(2)........................................ 16,769 25,448 42,220 27,320 4,436 (10,420)
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents................................... $ 11,424
Total assets................................................ 951,416
Total debt.................................................. 514,753
Total holder's equity....................................... 107,529
OTHER DATA(3):
Depreciation and amortization(4)............................ 13,765 17,313 17,985 13,560 10,934 2,749
Capital expenditures(5)..................................... 7,385 19,443 32,491 26,282 20,254 3,047
Sales backlog at end of period(6)........................... 208,152 185,237 229,513 242,529 218,669
Net cash provided by (used in) operating activities......... 6,953 9,826 11,995 (22,003) 96,464 (20,515)
Net cash used in investing activities....................... (46,574) (45,241) (68,782) (38,839) (33,004) (574,925)
Net cash provided by (used in) financing activities......... 50,601 25,752 54,349 59,214 (59,459) 606,952
<CAPTION>
NINE MONTHS
ENDED
JUNE 27,
1998
-----------
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA DATA(7):
Interest expense(8)......................................... 44,318 33,264
</TABLE>
- ------------------------------
(1) The financial results of Krupp and Delta have been included since their
respective dates of acquisition on August 30, 1995 and November 30, 1995,
respectively.
(2) Includes losses by the Company's Sunderland U.K. facility of $14,085 and
$2,912 for the seven months ended April 28, 1998 and the two months ended
June 27, 1998, respectively. In August 1998, the Company announced plans to
close the Sunderland facility. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
18
<PAGE>
(3) The data below presents, for the periods indicated, operating profit plus
(i) depreciation and amortization (exclusive of depreciation on equipment
held for rent), (ii) write-off of amount assigned to inventory in purchase
accounting, (iii) management fees paid to Hanson, (iv) restructuring
charges, principally related to redundancy costs of facility
reorganizations, (v) business process reengineering and training costs
associated with installation of the Company's new management information
system ("MIS") and (vi) an adjustment to eliminate the effect of units sold
with residual value guarantees which have been accounted for as operating
leases and recognize the gross profit on such units in the period in which
such units were shipped. This data is included herein to provide additional
information with respect to the ability of the Company to meet its future
debt service, capital expenditure and working capital requirements. In
addition, the Company believes that certain investors find this data to be a
useful tool for measuring the ability of the Company to service its debt.
This data is not necessarily a measure of the Company's ability to fund its
cash needs nor is it intended to represent and should not be considered an
alternative to, or more meaningful than, net income and income from
operations as an indicator of the operating performance of this data should
not be considered by investors as an indicator of cash flows from operating
activities, investing activities and financing activities as determined in
accordance with generally accepted accounting principles, and items
excluded, such as depreciation and amortization, are significant components
in understanding and assessing the Company's financial performance. For
purposes of the following presentation, the Company has compiled certain
unaudited financial information for the seven months ended April 28, 1998
(prior to the Acquisition) and has combined such information with the
unaudited financial information for the two months ended June 27, 1998
(period subsequent to the Acquisition) to provide unaudited financial
information with respect to the nine month period ended June 27, 1998.
<TABLE>
<CAPTION>
PREDECESSOR
--------------------------------------------------------- COMPANY
SEVEN -----------
FISCAL YEAR ENDED NINE MONTHS MONTHS TWO MONTHS
------------------------------- ENDED JUNE ENDED APRIL ENDED JUNE
1995 1996 1997 28, 1997 28, 1998 27, 1998
--------- --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operating profit................................ $ 38,373 $ 50,620 $ 67,891 $ 45,511 $ 22,055 $ (690)
Depreciation and amortization................... 13,765 17,313 17,985 13,560 10,934 2,749
Write-off of amount assigned to inventory in
purchase accounting........................... -- -- -- -- -- 10,000
Management fees paid to Hanson.................. 3,390 5,655 2,176 1,632 162 --
Restructuring charges from facility
reorganizations............................... -- -- 1,960 1,960 -- --
Expenses associated with new MIS installation... -- 2,723 1,283 910 142 12
Impact of units sold accounted for as operating
leases........................................ 66 2,393 2,555 1,381 801 797
--------- --------- --------- ----------- ----------- -----------
Total........................................... $ 55,594 $ 78,704 $ 93,850 $ 64,954 $ 34,094 $ 12,868
--------- --------- --------- ----------- ----------- -----------
--------- --------- --------- ----------- ----------- -----------
<CAPTION>
COMBINED
-----------
NINE MONTHS
ENDED JUNE
27, 1998
-----------
<S> <C>
Operating profit................................ $ 21,365
Depreciation and amortization................... 13,683
Write-off of amount assigned to inventory in
purchase accounting........................... 10,000
Management fees paid to Hanson.................. 162
Restructuring charges from facility
reorganizations............................... --
Expenses associated with new MIS installation... 154
Impact of units sold accounted for as operating
leases........................................ 1,598
-----------
Total........................................... $ 46,962
-----------
-----------
</TABLE>
(4) Depreciation and amortization excludes depreciation on equipment held for
rent.
(5) Includes expenditures on the Company's new MIS of approximately $4,300 in
fiscal 1996, approximately $14,000 in fiscal 1997, approximately $9,084 for
the nine months ended June 28, 1997, approximately $9,322 for the seven
months ended April 28, 1998 and approximately $2,222 for the two months
ended June 27, 1998.
(6) Sales backlog includes firm orders for new equipment and replacement parts.
Data with respect to backlog is unaudited for all periods presented.
(7) As a result of the Acquisition, the Company has had to replace certain
administrative functions previously provided by Hanson. Management estimates
that the cost of replacing these functions will be less than $1,000 in the
first twelve months following the Acquisition ("Stand-alone Costs"). Since
the Acquisition, no further management fees have been paid to Hanson.
Accordingly, the adjusted operating profit data presented in footnote (3)
above may be further adjusted to take account of (i) Stand-alone Costs and
(ii) reductions in corporate overhead. Management expects that reductions in
corporate overhead will result from, among other things, (i) the elimination
of the senior management long-term incentive plan and certain other
perquisites, (ii) lower pension and postretirement benefit expense due to
purchase accounting adjustments and (iii) the elimination of professional
fees and other expenses associated with the sale of the Company. The Company
replaced the long-term incentive plan with an option plan providing for the
granting of options to purchase membership interests to certain members of
senior management at fair market value. See "Unaudited Pro Forma Combined
Financial Data."
The pro forma adjustments to the adjusted operating profit data presented in
footnote (3) are set forth below for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 27, 1997 JUNE 27, 1998
------------------- -----------------
<S> <C> <C>
$ 93,850 $ 46,962
Reduction in corporate overhead, net................................... 2,404 2,067
Stand-alone Costs...................................................... (1,000) (583)
------- -------
Total.................................................................. $ 95,254 $ 48,446
------- -------
------- -------
</TABLE>
19
<PAGE>
In addition to the cost savings reflected in the pro forma financial
statements, the Company believes it can achieve $35,000 to $50,000 of annual
cost savings by fiscal 2001. These additional cost savings, which depend
upon the Company's ability to implement certain improvements, relate to
manufacturing productivity improvements, better supplies procurement and
SG&A reductions. It is expected that cost savings during the four fiscal
years ending September 29, 2001 will be offset by non-recurring costs of up
to approximately $25,000 associated with the implementation of the
Operations Improvements Program. See "Special Note Regarding Forward Looking
Statements," "Risk Factors--Realization of Benefits of Operations
Improvement Program" and "Business--The Operations Improvement Program."
(8) Cash interest expense represents total interest expense less amortization of
deferred financing costs. Interest rates with respect to borrowings under
the New Credit Facility are variable. A 25-basis point increase in interest
rates on borrowings under the New Credit Facility would increase pro forma
interest expense by $500 annually.
20
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS
TOGETHER WITH THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, BEFORE MAKING
A DECISION TO EXCHANGE THE SENIOR DISCOUNT DEBENTURES. CERTAIN STATEMENTS IN
THIS PROSPECTUS (INCLUDING CERTAIN OF THE FOLLOWING FACTORS) CONSTITUTE
FORWARD-LOOKING STATEMENTS. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS."
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
The Issuers incurred substantial indebtedness in connection with the
Transactions and are highly leveraged. As of August 29, 1998, the Issuers had
total indebtedness of $484.2 million. On a pro forma basis after giving effect
to the Transactions, interest expense for fiscal 1997 would have been $38.3
million. Pro forma earnings before fixed charges were insufficient to cover
fixed charges by approximately $8.2 million for the nine months ended June 27,
1998. Pro forma earnings for the nine months ended June 27, 1998 include
non-cash charges of approximately $15.3 million. Holdings may incur additional
indebtedness in the future, subject to limitations imposed by the Indenture, the
New Credit Facility and certain other agreements. See "The Transactions--The
Acquisition," "Capitalization," "Description of Debentures" and "Unaudited Pro
Forma Combined Financial Statements."
Holdings' ability to make scheduled payments of principal of, or pay
interest on, or to refinance its indebtedness depends on its future performance,
which, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory, and other factors beyond its control.
Furthermore, all or a portion of the principal payments at maturity on the
Debentures may require refinancing. There can be no assurance that Holdings'
business will generate sufficient cash flow from operations or that future
borrowings will be available in an amount sufficient to enable Holdings to
service its indebtedness, including the Debentures, or for the Company to make
necessary capital expenditures, or that any refinancing would be available on
commercially reasonable terms or at all. See "--Limitation on the Payment of
Funds to Holdings by its Subsidiaries" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
The degree to which the Issuers are leveraged could have significant
consequences to the Issuers and the holders of the Debentures, including the
following: (i) Holdings' ability to obtain additional financing for working
capital, capital expenditures, acquisitions or general corporate purposes may be
impaired; (ii) a substantial portion of Holdings' cash flow from operations will
be dedicated to the payment of interest on the Debentures and the Company's
existing indebtedness (including indebtedness under the New Credit Facility and
the Senior Subordinated Notes), thereby reducing the funds available to Holdings
for other purposes; (iii) certain indebtedness under the New Credit Facility are
at variable rates of interest, which would cause Holdings to be vulnerable to
increases in interest rates; (iv) Holdings is substantially more leveraged than
certain of its competitors, which might place Holdings at a competitive
disadvantage; and (v) Holdings' substantial degree of leverage could make it
more vulnerable in the event of a downturn in general economic conditions or in
its business. See "The Transactions--The Acquisition," "Description of Certain
Indebtedness--New Credit Facility" and "Description of Debentures--Repurchase at
the Option of Holders--Change of Control."
HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION
Holdings is a holding company and does not have any material operations or
assets other than ownership of the Company. Accordingly, the Debentures will be
effectively subordinated to all existing and future liabilities of Holdings'
subsidiaries including indebtedness under the New Credit Facility and the Senior
Subordinated Notes. As of August 29, 1998, the aggregate amount of liabilities
of Holdings' subsidiaries to which holders of the Debentures were subordinated
was approximately $685.9 million. Holdings and its subsidiaries may incur
additional indebtedness in the future, subject to certain limitations contained
in the instruments governing their indebtedness.
21
<PAGE>
Any right of Holdings to participate in any distribution of assets of its
subsidiaries upon the liquidation, reorganization or insolvency of any such
subsidiary (and the consequent right of the holders of the Debentures to
participate in the distribution of those assets) will be subject to the prior
claims of the respective subsidiary's creditors. The obligations of the Company
under the New Credit Facility are secured by substantially all of its assets.
Additionally, Holdings will guarantee the Company's obligations under the New
Credit Facility, and such guarantee will be secured by a first priority pledge
of all the membership interests of the Company owned by Holdings. See
"Description of Certain Indebtedness-- New Credit Facility."
LIMITATION ON THE PAYMENT OF FUNDS TO HOLDINGS BY ITS SUBSIDIARIES
Holdings' cash flow, and consequently its ability to pay dividends and to
service debt, including its obligations under the Debentures, is dependent upon
the cash flows of its subsidiaries and the payment of funds by such subsidiaries
to Holdings in the form of loans, dividends or otherwise. Holdings' subsidiaries
have no obligation, contingent or otherwise, to pay any amounts due pursuant to
the Debentures or to make any funds available therefor. In addition, the
Company's New Credit Facility and the indenture governing the Company's Senior
Subordinated Notes (the "Senior Subordinated Notes Indenture") impose, and
agreements entered into in the future may impose, significant restrictions on
the payment of dividends and the making of loans by the Company to Holdings.
Accordingly, repayment of the Debentures may depend upon the ability of Holdings
to effect an offering of membership interests or to refinance the Debentures.
ASSET ENCUMBRANCES
In connection with the New Credit Facility, Holdings has granted the lenders
thereunder a first priority lien on all of the membership interests of the
Company owned by it as security for its guarantee of the Company's obligations
under the New Credit Facility. In the event of a default under the New Credit
Facility or such guarantee, the lenders under the New Credit Facility could
foreclose upon the assets pledged to secure the New Credit Facility, including
such membership interests, and the holders of the Debentures might not be able
to receive any payments until any payment default was cured or waived, any
acceleration was rescinded, or the indebtedness under the New Credit Facility
was discharged or paid in full.
REALIZATION OF BENEFITS OF OPERATIONS IMPROVEMENT PROGRAM
The Company estimates that significant cost savings can be achieved through
implementation of the Operations Improvement Program. However, the estimates of
potential cost savings are inherently uncertain, and the actual cost savings, if
any, could differ materially from those projected. In addition, a majority of
those cost savings are to be realized gradually over the next four years. There
can be no assurance that any or all of these cost savings will be achieved, or
specifically, that they can be achieved within four years. Further, it is
expected that cost savings during the four fiscal years ending September 29,
2001 will be offset by non-recurring costs of up to approximately $25.0 million
associated with the implementation of the Operations Improvement Program, plus
consulting fees payable to George Group. See "Special Note Regarding Forward
Looking Statements" and "Business--Operations Improvement Program."
INDUSTRY CYCLICALITY
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.
22
<PAGE>
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 "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Cyclicality."
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. See
"Business--Competition."
INTERNATIONAL RISKS
The Company's products are sold in over 50 countries around the world. In
fiscal 1997, the Company generated approximately 29% of its net sales in foreign
currencies, while the costs associated with those net sales were only partly
incurred in the same currencies. The major foreign currencies, among others, in
which the Company does business are the British pound sterling, German mark and
French franc. Because the Company's financial statements are denominated in U.S.
dollars, changes in exchange rates between the U.S. dollar and other currencies
have had and will have an impact on the reported results of the Company. To
date, this impact has not been material. In addition, changes in currency rates
can affect the competitiveness of the Company's products and could result in
management reconsidering prices and strategies to maintain market share.
Historically, the Company's currency risk had been coordinated with Hanson. The
Company is now responsible for its own cash management activities and expects to
use forward exchange contracts and options to manage its foreign currency risk.
Although revenues and costs of the Company may be partially hedged, currency
fluctuations will likely impact the Company's financial performance in the
future.
In addition, the Company's business strategy includes expanding its existing
business in selected international markets. International operations and
business expansion plans are subject to numerous additional risks, including the
impact of foreign government regulations, currency and interest rate
fluctuations, exchange controls, trade barriers, the effects of income and
withholding tax, governmental expropriation, political uncertainties and
differences in business practices. There can be no assurance that foreign
governments will not adopt regulations or take other actions that would have a
direct or indirect adverse impact on the business or market opportunities of the
Company. Furthermore, there can be no assurance that the political, cultural and
economic climate outside the United States will be favorable to the Company's
operations and business strategy.
ENVIRONMENTAL AND RELATED MATTERS
The Company generates hazardous and nonhazardous wastes 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 and regulations,
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 and regulations has required, and will 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.
CONCENTRATION OF OWNERSHIP
The members of the Investor Group beneficially own, through their holdings
of the membership interests of Grove Investors, all of the outstanding
membership interests of Holdings. Holdings in turn
23
<PAGE>
owns 100% of the outstanding membership interests of the Company. As a result,
the Investor Group has the ability to control the Company's management, policies
and financing decisions, to elect a majority of the members of the Company's
Management Committee and to control the vote on all matters coming before the
equity holders of the Company. See "Security Ownership of Certain Beneficial
Owners and Management."
RESTRICTIVE DEBT COVENANTS
The New Credit Facility and the Senior Subordinated Note Indenture impose
significant operating and financial restrictions on the subsidiaries of
Holdings, and the Indenture and certain other agreements impose significant
financial restrictions on the Issuers. The New Credit Facility significantly
limits or prohibits, among other things, the ability of the Company and its
restricted subsidiaries to incur additional indebtedness, incur liens, pay
dividends or make certain other restricted payments or investments, consummate
certain asset sales, enter into certain transactions with affiliates, impose
restrictions on the ability of a subsidiary to pay dividends or make certain
payments to the Issuers, merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of the assets of the Company. The Indenture and certain other agreements contain
similar restrictions on the Issuers and their restricted subsidiaries. The New
Credit Facility also requires the Company to maintain balance sheet and fixed
charge coverage and leverage ratios. The ability of the Company to comply with
these and other provisions of the New Credit Facility and the Senior
Subordinated Note Indenture may be affected by events beyond the Company's
control, and the Issuers' compliance with the provisions of the Indenture may be
similarly affected. These restrictions could limit the ability of the Company to
respond to market conditions or meet extraordinary capital needs or otherwise
restrict corporate activities. There can be no assurances that such restrictions
will not materially adversely affect the ability of the Company to finance its
future operations or capital needs. See "Description of Certain
Indebtedness--New Credit Facility" and "Description of Debentures--Certain
Covenants."
LIMITATIONS ON ABILITY TO MAKE CHANGE OF CONTROL PAYMENT
The Indenture provides that, upon the occurrence of any Change of Control
(as defined therein), the Issuers will be required to make an offer (a "Change
of Control Offer") to repurchase all the Debentures issued and then outstanding
under the Indenture at a price equal to 101% of the Accreted Value thereof (if
such date of repurchase is prior to May 1, 2003) or 101% of the principal amount
thereof (if such date of repurchase is on or after May 1, 2003) plus, in each
case, accrued and unpaid interest and Liquidated Damages, if any, to the date of
repurchase. Any Change of Control under the Indenture would trigger a similar
change of control offer under the Senior Subordinated Note Indenture and would
constitute a default under the New Credit Facility. Therefore, upon the
occurrence of a Change of Control, the lenders under the New Credit Facility
would have the right to accelerate the Company's obligations under the New
Credit Facility. Upon such event, such lenders would be entitled to receive
payment of all outstanding obligations under the New Credit Facility. See
"Description of Certain Indebtedness--New Credit Facility." If a Change of
Control were to occur and waivers under the New Credit Facility were not
obtained, it is unlikely that the Company and Grove Capital, Inc. ("Grove
Capital") would be able to repay all of their obligations under the New Credit
Facility and the Senior Subordinated Notes. Consequently, it is unlikely that
the Issuers would have sufficient funds available to repurchase the Debentures
pursuant to the Change of Control Offer in the absence of a waiver under the New
Credit Facility and the Senior Subordinated Note Indenture.
RISK OF FRAUDULENT TRANSFER LIABILITY
If a court of competent jurisdiction in a suit by an unpaid creditor or a
representative of creditors (such as a trustee in bankruptcy or a
debtor-in-possession) were to find that either the Issuers did not receive fair
consideration or reasonably equivalent value for issuing the Senior Discount
Debentures and,
24
<PAGE>
at the time of the incurrence of indebtedness represented by the Senior Discount
Debentures, the Issuers were insolvent, were rendered insolvent by reason of
such incurrence, were engaged in a business or transaction for which their
remaining assets constituted unreasonably small capital, intended to incur, or
believed that they would incur, debts beyond their ability to pay as such debts
matured, or intended to hinder, delay or defraud their creditors, such court
could avoid such indebtedness, subordinate such indebtedness to other existing
and future indebtedness of the Issuers or take other action detrimental to the
holders of the Senior Discount Debentures. The measure of insolvency for
purposes of the foregoing will vary depending upon the law of the relevant
jurisdiction. Generally, however, a company would be considered insolvent for
purposes of the foregoing if the sum of such company's debts is greater than all
the company's property at a fair valuation, or if the present fair saleable
value of the company's assets is less than the amount that will be required to
pay its probable liability on its existing debts as they become absolute and
matured.
RELIANCE ON KEY MANAGEMENT
The success of Holdings' business is dependent upon the management and
leadership skills of Salvatore J. Bonanno, the Chairman and Chief Executive
Officer of both Holdings and the Company. Although Holdings and the Company have
an employment agreement with Mr. Bonanno, the loss of his services or those of
other members of senior management could have a material adverse effect on the
Company and Holdings.
PRODUCT RECALL
From time to time, the Company becomes aware of defects in product design
for existing products which require it to take steps to correct or retrofit, at
the Company's expense, previously sold products. There can be no assurance that
any such product recall will not adversely affect the Company's reputation or
result in a decline in sales of the Company's products, that action required to
be taken to correct these defects will not result in additional temporary
disruptions in the Company's business or that the costs of correcting any such
defects will not adversely affect the Company's results of operations.
ADVERSE CONSEQUENCES OF FAILURE TO EXCHANGE
Issuance of the Exchange Debentures in exchange for Senior Discount
Debentures pursuant to the Exchange Offer will be made only after a timely
receipt by the Exchange Agent of such Senior Discount Debentures, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Senior Discount Debentures desiring to tender
such Senior Discount Debentures in exchange for Exchange Debentures should allow
sufficient time to ensure timely delivery. A tender will not be deemed to have
been timely received if the tendering holder's properly completed and duly
signed Letter of Transmittal accompanied by the Senior Discount Debentures is
mailed prior to the Expiration Date but is received by the Exchange Agent after
the Expiration Date. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of Senior Discount Debentures
tendered for exchange will be determined by the Issuers in their sole
discretion, which determination will be final and binding on all parties.
Neither the Issuers nor the Exchange Agent are under any duty to give
notification of defects or irregularities with respect to the tenders of Senior
Discount Debentures for exchange. See "The Exchange Offer--Procedures for
Tendering Senior Discount Debentures."
Holders of Senior Discount Debentures who do not exchange their Senior
Discount Debentures for Exchange Debentures pursuant to the Exchange Offer, or
whose Senior Discount Debentures are tendered but not accepted, will continue to
be subject to the restrictions on transfer of such Senior Discount Debentures as
set forth in the legend thereon as a consequence of the issuance of the Senior
Discount Debentures pursuant to exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. In general, the Senior Discount Debentures may not be offered
or sold unless registered under the Securities Act and applicable state laws,
25
<PAGE>
or pursuant to an exemption therefrom. The Issuers do not intend to register the
Senior Discount Debentures under the Securities Act, other than in the limited
circumstances contemplated by the Registration Rights Agreement. In addition, to
the extent that Senior Discount Debentures are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Senior Discount Debentures could be adversely affected. See "The Exchange
Offer--Consequences of Failure to Exchange."
RECEIPT OF RESTRICTED SECURITIES UNDER CERTAIN CIRCUMSTANCES
Any holder of Senior Discount Debentures who tenders in the Exchange Offer
for the purpose of participating in a distribution of the Exchange Debentures
may be deemed to have received restricted securities and, if so, will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Failure of any
holder to comply with such registration and prospectus delivery requirements may
subject such holder to civil and criminal liability under the Securities Act.
See "The Exchange Offer--Resale of Exchange Debentures."
ABSENCE OF A PUBLIC MARKET FOR EXCHANGE DEBENTURES
The Exchange Debentures will constitute a new issue of securities for which
there is no established trading market. The Issuers do not intend to list the
Exchange Debentures on any national securities exchange or to seek the admission
of the Exchange Debentures for quotation through the Nasdaq Stock Market, Inc.
Although the Initial Purchasers have advised the Company that they currently
intend to make a market in the Exchange Debentures, they are not obligated to do
so, and may discontinue such market-making at any time without notice. In
addition, such market-making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act. The Senior Discount Debentures
currently trade in the PORTAL market. Following commencement of the Exchange
Offer but prior to its consummation, the Senior Discount Debentures may continue
to be traded in the PORTAL market, but the Exchange Debentures will not be
eligible for PORTAL trading. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Exchange Debentures (or any
Senior Discount Debentures not tendered), the ability of the holders of the
Exchange Debentures to sell their Exchange Debentures or the price at which the
holders would be able to sell their Exchange Debentures. Future trading prices
of the Exchange Debentures (or any Senior Discount Debentures not tendered) will
depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
26
<PAGE>
THE TRANSACTIONS
THE ACQUISITION
On March 10, 1998, the Company entered into the Acquisition Agreement to
acquire, through certain of its subsidiaries, the mobile hydraulic crane, aerial
work platform and truck-mounted crane businesses of Hanson and certain of its
subsidiaries (the "Sellers"), for aggregate cash consideration of approximately
$583.0 million plus certain assumed liabilities, subject to a post-closing net
worth adjustment. In July 1998, the Company received $16.7 million from Hanson
in payment of the post closing net worth adjustment. The Company has until
October 1998 to object to the Closing Balance Sheet and the post closing net
worth adjustment determined thereby.
To effect the Acquisition, the Company purchased from Hanson and certain of
its subsidiaries substantially all of the assets of Kidde Industries, Inc., a
Delaware corporation ("Kidde"), and the capital stock of each of Crane Holdings,
Inc, a Delaware corporation, Grove Europe Ltd., a limited company organized
under the laws of England and Wales, Deutsche Grove GmbH, a German limited
liability company, Grove France S.A., a SOCIETE ANONYME organized under the laws
of France, Delta Manlift S.A.S., a SOCIETE PAR ACTION SIMPLIFIEE organized under
the laws of France, and Grove Manlift Pty. Ltd., a limited liability company
incorporated under the laws of New South Wales, Australia. The Acquisition
closed on April 29, 1998. As a result of the Acquisition, the Company became the
parent company of the entities operating the Acquired Business. The Company is a
wholly owned subsidiary of Holdings, whose limited liability membership
interests are owned indirectly by members of the Investor Group. Cash funding
requirements to consummate the Acquisition, including the payment of related
fees and expenses, were $604.5 million. Financing for the Acquisition was
provided by: (i) $209.5 million of borrowings under the New Credit Facility;
(ii) $225.0 million of gross proceeds from the offering of the Senior
Subordinated Notes; and (iii) the proceeds from the Equity Contribution.
Holdings and the Company had no operations prior to the Acquisition. Holdings,
Grove Holdings Capital, the Company and Grove Capital were formed in December
1997, March 1998, December 1997 and March 1998, respectively, with nominal
capital contributions and had no operations prior to the Acquisition.
The structure of Grove Investors, Holdings, the Company and their
subsidiaries (excluding inactive and immaterial foreign subsidiaries) is set
forth below:
[CHART]
- ------------------------
(1) The Senior Discount Debentures were offered by Holdings and Grove Holdings
Capital, a wholly owned subsidiary of Holdings.
(2) The Senior Subordinated Notes were offered by the Company and Grove Capital,
Inc., a wholly owned subsidiary of the Company.
27
<PAGE>
NEW CREDIT FACILITY
On the Closing Date, the Company and Grove Capital, Inc. ("Grove Capital")
entered into the New Credit Facility with a syndicate of banks, as lenders, and
Chase Bank of Texas, National Association, as administrative agent ("Chase"),
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as documentation
agent, and BankBoston, N.A. ("BankBoston"), as syndication agent. The New Credit
Facility consists of a $200.0 million term loan facility (the "Term Loan
Facility") and a $125.0 million revolving credit facility (the "Revolving Credit
Facility"). At Closing, the Company borrowed $200.0 million under the Term Loan
Facility and $9.5 million under the Revolving Credit Facility. The undrawn
portion of the Revolving Credit Facility will be available for working capital,
acquisitions and general corporate purposes. See "Description of Certain
Indebtedness--New Credit Facility."
HOLDINGS EQUITY ISSUANCE
The Equity Contribution by Holdings to the Company was partially funded by
the purchase of membership interests of Holdings by Grove Investors. See
"Security Ownership of Certain Beneficial Owners and Management."
HOLDINGS DISCOUNT DEBENTURES OFFERING
The issuance by Holdings of the Debentures resulted in gross proceeds to
Holdings of approximately $50.0 million. The Equity Contribution was funded with
the net proceeds from the offering of the Debentures together with the proceeds
of the Holdings Equity Issuance.
THE INVESTOR GROUP
Members of the Investor Group beneficially own, through their holdings of
membership interests of Grove Investors, all of the outstanding membership
interests of Holdings. See "Security Ownership of Certain Beneficial Owners and
Management." Keystone, formerly Robert M. Bass Group, Inc., is the principal
investment entity of Robert M. Bass. Since 1987, Keystone and associated
entities have directly and indirectly sponsored over 30 leveraged acquisitions
valued in the aggregate at more than $6.0 billion. These acquisitions have
included, among others, American Savings Bank, F.A., Bell & Howell Company,
CapStar Hotel Company, Ivex Packaging Corporation, National Reinsurance
Corporation, Reliant Building Products, Inc., Specialty Foods Corporation, Stage
Stores, Inc., and Williams Scotsman, Inc. 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. George Group has established an exclusive relationship with Keystone
to pursue leveraged acquisitions of companies in which George Group's
operational expertise may significantly reduce costs and increase revenue, cash
flow and return on invested capital. As part of their on-going relationship, in
May 1997, Keystone, Strategic Partners, certain other parties and George Group
completed the acquisition of Reliant Building Products, Inc.
28
<PAGE>
USE OF PROCEEDS
The Issuers will not receive any cash proceeds or incur any additional
indebtedness as a result of the issuance of the Exchange Debentures pursuant to
the Exchange Offer.
The gross proceeds of $50.0 million from the sale of the Senior Discount
Debentures, together with borrowings by the Company totaling $209.5 million
under the New Credit Facility, proceeds of $120.0 million from the Holdings
Equity Issuance and gross proceeds of $225.0 million from the Senior
Subordinated Notes, were used by the Company: (i) to fund the cash purchase
price paid in connection with the Acquisition and (ii) to pay fees and expenses
in connection with the Transactions. See "The Transactions."
The estimated sources and uses of funds in connection with the Transactions
are set forth below:
<TABLE>
<CAPTION>
AMOUNT
(IN MILLIONS)
-------------
<S> <C>
SOURCES
New Credit Facility:
Revolving Credit Facility.......................................................................... $ 9.5
Term Loan Facility................................................................................. 200.0
Senior Subordinated Notes............................................................................ 225.0
Senior Discount Debentures........................................................................... 50.0
Holdings Equity Issuance............................................................................. 120.0
------
Total............................................................................................ $ 604.5
------
------
USES
Acquisition of the Acquired Business................................................................. $ 583.0
Fees and expenses.................................................................................... 21.5
------
Total............................................................................................ $ 604.5
------
------
</TABLE>
29
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth the cash and cash equivalents and
capitalization of Holdings at June 27, 1998. This table should be read in
conjunction with "Use of Proceeds," "Selected Historical Combined Financial
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the historical and pro forma combined financial statements
and the related Debentures thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF
JUNE 27, 1998
-------------
<S> <C>
Cash and cash equivalents.......................................................................... $ 11,424
-------------
-------------
Total debt:
New Credit Facility(1):
Revolving Credit Facility........................................................................ $ 25,200
Term Loan Facility............................................................................... 200,000
Senior Subordinated Notes.......................................................................... 225,000
Senior Discount Debentures......................................................................... 50,953
Other debt(2)...................................................................................... 13,600
-------------
Total debt................................................................................... 514,753
Total holder's equity.............................................................................. 107,259
-------------
Total capitalization......................................................................... $ 622,282
-------------
-------------
</TABLE>
- ------------------------
(1) As part of the Transactions, the Company and Grove Capital, Inc. entered
into the New Credit Facility, which consists of a $125,000 Revolving Credit
Facility and a $200,000 Term Loan Facility. The Revolving Credit Facility
enables the Issuers to obtain revolving credit loans and the issuance of
letters of credit. As of June 27, 1998, $22 of letters of credit were
outstanding under the Revolving Credit Facility and $99.8 million of the
Revolving Credit Facility was available for future liquidity and capital
needs. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and "Description of
Certain Indebtedness--New Credit Facility."
(2) Represents short-term borrowings by Deutsche Grove GmbH, which are secured
by an equal amount of trade receivables.
30
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table presents selected historical combined financial data of
the Company (i) as of and for each of the fiscal years ended October 2, 1993,
October 1, 1994, September 30, 1995, September 28, 1996 and September 27, 1997
and (ii) as of June, 1998 and for the nine months ended June 28, 1997, the seven
months ended April 28, 1998 and the two months ended June 27, 1998. The selected
historical financial data for fiscal 1993 and fiscal 1994 and as of September
25, 1993, September 24, 1994 and September 30, 1995, respectively, and the nine
months ended June 28, 1997, the seven months ended April 28, 1998 and the two
months ended June 27, 1998 were derived from unaudited historical financial
statements. The selected historical combined financial data for fiscal 1995 were
derived from historical financial statements as of and for such periods audited
by PricewaterhouseCoopers LLP and included elsewhere in this Prospectus. The
selected historical financial data for fiscal 1996 and 1997 were derived from
historical financial statements for such periods audited by Ernst & Young LLP
and included elsewhere in this Prospectus. Information for interim periods
includes all adjustments (consisting of normal recurring adjustments) considered
necessary in the opinion of management for a fair presentation of financial
position and results of operations of the Company. Results for interim periods
are not indicative of results for a full fiscal year. The selected historical
financial data set forth below should be read in conjunction with "The
Transactions," "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 Prospectus. For purposes of the
following discusssion, the Company refers to Holdings.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------------------------------------------------------------------- ---------
NINE SEVEN TWO
MONTHS MONTHS MONTHS
ENDED ENDED ENDED
JUNE 28, APRIL 28, JUNE 27,
1993 1994 1995 1996 1997 1997 1998 1998
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................. $ 387,373 $ 393,526 $ 503,815 $ 794,209 $ 856,812 $ 633,845 $ 476,199 $ 154,780
Gross profit.......................... 95,225 87,991 126,589 185,079 203,273 146,086 100,467 23,636
Operating expenses.................... 86,077 80,752 88,216 134,459 135,382 100,575 78,412 24,326
Operating profit (loss)............... 9,148 7,239 38,373 50,620 67,891 45,511 22,055 (690)
Net income (loss)(2).................. (5,358) (4,942) 16,769 25,448 42,220 27,320 4,436 (10,420)
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents............. $ 5,458 $ 7,135 $ 18,685 $ 8,184 $ 5,024 $ 11,424
Total assets.......................... 497,646 509,189 652,000 730,158 881,496 951,486
Total debt............................ -- -- -- 7,443 7,265 514,753
Total invested capital................ 416,368 399,762 467,306 502,554 628,492 107,529
OTHER DATA:
Depreciation and amortization(3)...... $ 13,093 $ 13,258 $ 13,765 $ 17,313 $ 17,985 $ 13,560 $ 10,934 $ 2,749
Capital expenditures(4)............... 4,672 6,042 7,385 19,443 32,491 26,282 20,254 3,047
Sales backlog at end of period........ 63,084 109,350 208,152 185,237 229,513 242,529 218,669
Ratio of earnings to fixed
charges(5).......................... 2.7x 2.0x 12.4x 12.2x 22.4x 16.5x 10.1x --
</TABLE>
- ------------------------
(1) The results of Krupp and Delta have been included since their dates of
acquisition on August 30, 1995 and November 30, 1995, respectively.
(2) Includes losses by the Company's Sunderland U.K. facility of $14,085 and
$2,912 for the seven months ended April 28, 1998 and the two months ended
June 27, 1998, respectively. In August 1998, the Company announced plans to
close the Sunderland facility. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
(3) Depreciation and amortization excludes depreciation on equipment held for
rent.
(4) Includes expenditures on the Company's new MIS of approximately $4,300 in
fiscal 1996, approximately $14,000 in fiscal 1997, approximately $9,084 for
the nine months ended June 28, 1997, approximately $9,322 for the seven
months ended April 28, 1998 and approximately $2,222 for the two months
ended June 27, 1998.
(5) Earnings used in computing the ratio of earnings to fixed charges consists
of earnings before provision for income taxes plus fixed charges. Fixed
charges are defined as interest expense, which includes the amortization of
deferred financing costs, and that portion of rental expense representative
of interest (deemed to be one-third of rental expense). Earnings before
fixed charges were insufficient to cover fixed charges by $8,669 for the two
months ended June 27, 1998. Earnings for the two months ended June 27, 1998
included non-cash charges of $13,080.
31
<PAGE>
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 financial statements and pro
forma combined financial data included elsewhere in this Prospectus.
OVERVIEW
Membership interests of the Company and capital stock of Grove Holdings
Capital account for all of Holdings' assets. Holdings conducts all of its
business through the Company.
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.
Over the three fiscal years ended September 27, 1997, the Company
experienced significant growth and profitability as a result of a strong North
American economy and growing market demand for aerial work platforms. The
Company also benefited from the acquisition of the mobile hydraulic crane
business of Krupp in August 1995 and the aerial work platform business of Delta
in November 1995. The Company's net sales for the nine months ended June 27,
1998 were $631.0 million, a decrease of 0.4% from the same period in fiscal
1997. The following is a summary of net sales for the periods indicated (dollars
in millions):
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED
------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
JUNE 28, JUNE 27,
1995 1996 1997 1997 1998
--------- --------- --------- ----------- -----------
New equipment sold (1)........................................... $ 378.8 $ 632.4 $ 670.1 $ 499.5 $ 492.8
After-Market..................................................... 81.5 120.6 125.8 90.0 89.5
Other (2)........................................................ 43.5 41.2 60.9(3) 44.3 48.7
--------- --------- --------- ----------- -----------
Net sales........................................................ $ 503.8 $ 794.2 $ 856.8 $ 633.8 $ 631.0
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
</TABLE>
- ------------------------
(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 1 of Notes to
Combined 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) Holdings 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 will be allocated to the
equity holders of Holdings, and (iii) such equity holders will be responsible
for income taxes on such taxable income. The Company
32
<PAGE>
intends to make distributions in the form of dividends to equity holders of
Holdings to enable them to meet their tax obligations with respect to income
allocated to them by the Company. See "Description of Notes--Certain
Covenants--Restricted Payments."
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 unaudited financial information for the nine months
ended June 27, 1998 by combining results of operations for the seven months
ended April 28, 1998 (prior to the Acquisition) with those for the two months
ended June 27, 1998 (subsequent to the Acquisition). As described above, the
Company's capital structure changed and, for income tax reporting purposes, the
Company is a limited liability company. Consequently, information with respect
to interest, income taxes, and net income for the nine month periods ended June
27, 1998 is not considered meaningful and, accordingly, comparison of such items
with results for the nine month periods ended June 28, 1997 are not made herein.
Set forth below is certain information regarding the Company's results of
operations for fiscal 1995, fiscal 1996 and fiscal 1997 and the nine month
periods ended June 28, 1997 and June 27, 1998 (dollars in thousands).
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------- ----------------------------
1995 1996 1997 JUNE 28, 1997 JUNE 27, 1998
--------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Sales............................................ $ 503,815 $ 794,209 $ 856,812 $ 633,845 $ 630,979
Cost of goods sold................................... 377,226 609,130 653,539 487,759 496,876
Write-off of amount assigned to inventory in excess
of historical costs resulting from purchase
accounting adjustments............................. -- -- -- -- 10,000
--------- --------- --------- ------------- -------------
Gross profit..................................... 126,589 185,079 203,273 146,086 124,103
Selling, engineering, general and administrative
expenses........................................... 84,826 128,804 124,152 92,142 96,197
Management fees paid to Hanson....................... 3,390 5,655 2,176 1,632 162
Amortization of goodwill............................. -- -- 9,054 6,801 6,379
--------- --------- --------- ------------- -------------
Operating profit................................. $ 38,373 $ 50,620 $ 67,891 $ 45,511 $ 21,365
--------- --------- --------- ------------- -------------
--------- --------- --------- ------------- -------------
</TABLE>
NINE MONTHS ENDED JUNE 27, 1998 (THE "FISCAL 1998 NINE MONTHS") COMPARED TO THE
NINE MONTHS ENDED JUNE 28, 1997 (THE "FISCAL 1997 NINE MONTHS").
NET SALES. Net sales for the Company decreased $2.8 million, or 0.4%, from
$633.8 million for the fiscal 1997 nine months to $631.0 million for the fiscal
1998 nine months.
Net sales of mobile hydraulic cranes declined from the fiscal 1997 nine
months to the fiscal 1998 nine months 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 customers remained strong, net sales
in Europe and Asia declined. Net sales in Europe were also lower as a result of
an increase in the percentage of units sold with residual value guarantees
accounted for as operating leases.
Net sales of aerial work platforms increased modestly from the fiscal 1997
nine months to the fiscal 1998 nine months. 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 the fiscal
1997 nine months to the fiscal 1998 nine months. Net sales increased as the
result of increased production capacity as well as significantly increased
demand for higher priced models.
After-market sales, including parts and services, decreased slightly from
the fiscal 1997 nine months to the fiscal 1998 nine months. This decrease was
due primarily to a modest decrease in parts sales partially offset by an
increase in used equipment sales.
33
<PAGE>
Other sales increased 9.9% 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 $22.0 million, or 15.0%, from $146.1
million in the fiscal 1997 nine months to $124.1 million in the fiscal 1998 nine
months. The decline in gross profit was primarily attributable to a $10.2
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 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.
In addition, gross profit was adversely impacted by the $10.0 million write-off
of amounts assigned to inventory in excess of historical costs.
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling,
engineering, general and administrative expenses increased $4.1 million, or
4.4%, from $92.1 million in the fiscal 1997 nine months to $96.2 million in the
fiscal 1998 nine months. As a percentage of net sales, selling, engineering,
general and administrative expenses were 14.5% in the fiscal 1997 nine months
and 15.2% in the fiscal 1998 nine months. The expense growth occurred broadly
across the Company as the result of the distraction to operations created by the
Acquisition. Included in selling, engineering, general and administrative
expenses for the 1998 nine months are approximately $0.9 million of George Group
expenses and $1.4 million of transition costs related to the sale of the
Company. Included in selling, engineering, general and administrative expenses
for the 1997 nine months is 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.
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.
34
<PAGE>
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling,
engineering, general and administrative expenses increased $4.4 million, or
3.4%, from $128.8 million in fiscal 1996 to $133.2 million in fiscal 1997.
However, as a percentage of net sales, selling, engineering, general and
administrative expenses declined from 16.2% in fiscal 1996 to 15.5% 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 "--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.
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.
FISCAL 1996 COMPARED TO FISCAL 1995
NET SALES. Net sales increased $290.4 million, or 57.6%, from $503.8
million in fiscal 1995 to $794.2 million in fiscal 1996.
Net sales of mobile hydraulic cranes increased significantly from fiscal
1995 to fiscal 1996, primarily as a result of higher unit sale and an improved
product mix. Approximately 60% of the net sales increase resulted from sales to
North American customers, with the majority of the balance resulting from sales
to European customers. Unit sales increased as a result of strong demand created
by improved economic conditions for the construction industry in North America
as well as from the acquisition and integration of the Krupp mobile hydraulic
crane business (acquired in August 1995).
Net sales of aerial work platforms increased significantly from fiscal 1995
to fiscal 1996. Unit sales increased as a result of continued growth of the
industry, resulting from efficiency considerations and government-mandated
safety standards for people working in elevated environments, as well as from
the acquisition of Delta in November 1995. Net sales to North American customers
grew by 33.5% in fiscal 1996 compared to fiscal 1995. Net sales to European
customers, excluding the impact of the Delta acquisition, grew significantly in
fiscal 1996.
35
<PAGE>
Net sales of truck-mounted cranes increased from fiscal 1995 to fiscal 1996.
Unit sales increased as a result of growth in the Company's telescoping product
line. Product sales prices and mix improved slightly.
After-market sales, including parts and services, increased significantly
from fiscal 1995 to fiscal 1996. This increase was related primarily to the
acquisition of Krupp and higher volume from an increase of service part sales
resulting from the higher installed base and relatively high rental fleet
utilization.
GROSS PROFIT. Gross profit increased $58.5 million, or 46.2%, from $126.6
million in fiscal 1995 to $185.1 million in fiscal 1996. The increase in gross
profit was primarily due to increased sales in aerial work platforms and
truck-mounted cranes, as well as due to the acquisition of Krupp. As a
percentage of sales, gross margins declined from 25.1% in fiscal 1995 to 23.3%
in fiscal 1996. The decrease was attributable principally to lower profit
margins for the acquired Krupp all-terrain line of mobile hydraulic cranes
relative to the Company's other product lines and lower gross margins from
after-market sales related to Krupp's all-terrain products.
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling,
engineering, general and administrative expenses increased $44.0 million, or
51.9%, from $84.8 million in fiscal 1995 to $128.8 million in fiscal 1996.
However, as a percentage of net sales, selling, engineering, general and
administrative expenses declined from 16.8% in fiscal 1995 to 16.2% in fiscal
1996 as the result of higher sales that absorbed fixed costs. The dollar
increase was primarily related to the acquisitions of Krupp and Delta and higher
selling, general and administrative expenses to support the higher volume of
business. Included in selling, engineering, general and administrative expenses
are research and development expenses, which increased $5.7 million, or 61.3%,
from $9.3 million in fiscal 1995 to $15.0 million in fiscal 1996 as the result
of costs associated with accelerated development of new products and the Krupp
acquisition. In addition, fiscal 1996 general and administrative expenses
included $2.7 million of process reengineering and systems assessment costs
associated with the installation of the Company's new management information
system.
MANAGEMENT FEES. Results of operations for fiscal 1995 and fiscal 1996
included management fees and other charges paid to Hanson of $3.4 million and
$5.7 million, respectively.
NET INTEREST EXPENSE/INCOME. Interest expenses in fiscal 1995 and fiscal
1996 were $2.6 million and $3.3 million, respectively, substantially all of
which was paid to Hanson with respect to intercompany receivables.
INCOME TAXES. Income tax expense, virtually all of which was U.S.-based,
increased from $19.0 million, or 16.7%, in fiscal 1995 to $22.2 million in
fiscal 1996. The overall effective tax rates were 53.1% and 46.6% for fiscal
1995 and fiscal 1996, respectively. The decline in tax rate was caused
principally by the utilization of Deutsche Grove loss carryforwards. The Company
has established valuation allowances for net operating losses generated by its
foreign subsidiaries.
NET INCOME. Net income increased $8.6 million, or 51.8%, from $16.8 million
in fiscal 1995 to $25.4 million in fiscal 1996. The increase related primarily
to increased sales and operating profits created by increased demand for mobile
hydraulic cranes and aerial work platforms as well as the acquisitions of Krupp
and Delta.
GEOGRAPHIC COMPARISONS DURING THE THREE YEARS ENDED SEPTEMBER 27, 1997
Net sales to unaffiliated customers by the Company's domestic subsidaries
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 subsidaries 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
36
<PAGE>
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 subsidaries 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. Net sales to unaffiliated customers by the Company's domestic
subsidaries increased by $165.2 million or 41.6% in fiscal 1996 as compared to
fiscal 1995, which represented approximately 56.0% of the Company's overall
sales increase for 1997. The increase in net sales by the Company's domestic
subsidiaries was primarily the result of continued growth of aerial work
platform sales. Net sales to unaffiliated customers by the Company's foreign
subsidiaries increased by $125.2 million or 117.3% in fiscal 1996 as compared to
fiscal 1995. The acquistion 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.
Net sales to unaffiliated customers by the Company's domestic subsidiaries
contributed in excess of 75.0% of the Company's sales in fiscal 1995 and all of
its net income. The domestic net income was offset to some extent by losses from
the foreign subsidiaries including operating losses by the Company's
manufacturing facility in Sunderland, U.K. of $2.4 million.
LIQUIDITY AND CAPITAL RESOURCES
Holdings conducts all of its business through the Company and its
subsidiaries. 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 two months ended June 27, 1998, the Company's operating
activities used approximately $20.5 million in operating cash flow. This amount
resulted primarily from $21.5 million of new notes receivable from customers
under the Company's special North American dealer financing program. In July
1998, the Company entered into an agreement with a third party financial
institution to sell up to $50.0 million of notes generated from sales under such
program. The third party financial institution purchases the notes at face value
on a 90.0% non-recourse basis. In July 1998, the Company sold approximately
$21.0 million of notes receivable to the third party. The sale of the notes
qualifies as a sale under generally accepted accounting principles and,
accordingly, upon sale, the notes receivable will be removed from the Company's
balance sheet. See Note 4 of Notes to Unaudited Condensed Financial Statements.
During the two months ended June 27, 1998 the Company used approximately
$574.9 million of cash flow for investing activities of which $563.5 million was
related to the Acquisition, $3.0 million was for capital expenditures and $8.3
million was for investment in equipment held for rent. The cash flows used in
operating and investing activities were funded by issuance of long-term debt of
$450.2 and an equity contribution from Holdings of $168.2 million. See "The
Transactions" and "Use of Proceeds."
During the seven months ended April 28, 1998 (the "fiscal 1998 seven
months"), the Company's operating activities provided $96.4 million in operating
cash flow. Cash flow from operating activities increased due to a sale to a
third party financing company of $52.7 million of notes receivable from
customers under the Company's special North American dealer financing program.
Until the first quarter of fiscal 1998, Hanson financed all of the notes
receivable arising under the special North American dealer financing program.
Grove is currently negotiating with a number of financial institutions to sell
secured notes receivable or similar instruments or accounts arising from sales
pursuant to the Company's special North American dealer financing program.
During the fiscal 1998 seven months, the Company used (i) $27.9 million in
investing activities, consisting of $20.2 million of capital expenditures (of
which $9.3
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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)
$59.5 million in financing activities, principally consisting of amounts paid to
Hanson.
Cash used in investing activities in fiscal 1997 was related primarily to
capital expenditures of $32.5 million and costs of equipment held for rent of
$37.9 million. Such equipment related to sales that are accounted for as
operating leases as described under the caption, "Overview," above. Costs are
recognized over the term of the residual guarantees, but the Company collects
the invoiced price of equipment on normal commercial terms after shipment.
Capital expenditures in fiscal 1997 consisted of $14.0 million related to
the installation of the new management information systems, $8.3 million in
discretionary spending (including $2.5 million to expand aerial work platform
capacity) and $10.2 million for the replacement of existing plant and equipment.
The Company estimates that capital expenditures for the fiscal year ending
September 26, 1998 will be approximately $31.7 million of which $18.7 million
will be related to the completion of the installation of the new management
information systems in its North American and European operations. See
"--Management Information Systems and the Impact of Year 2000."
The Company plans to close its Sunderland, U.K. manufacturing facility
because 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 $17.0 million, consisting
of approximately $10.0 million of employee severance and $7.0 million of plant
shut-down 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 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.
In connection with the Acquisition, the Company entered into a seven-year,
$125 million Revolving Credit Facility, which will allow the Company, 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 by the
Issuers in the Eurocurrency markets of British pounds sterling, German marks and
French francs and certain other currencies. 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 Holdings to enable them to meet their tax obligations with respect to
income allocated to them by the Company for at least the twelve months following
the Acquisition. See "Description of Certain Indebtedness--New Credit Facility."
Subject to certain exceptions, including the right of the Company to make cash
distributions to Holdings to enable Holdings to make distributions to its equity
holders with respect to their tax obligations, the New Credit Facility and the
Senior Subordinated Notes Indenture impose significant restrictions on the
payment of cash dividends by the Company and its subsidiaries to Holdings. See
"Risk Factors--Limitation on the Payment of Funds to Holdings by its
Subsidiaries."
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BACKLOG
The Company's backlog consists of firm orders for new equipment and
replacement parts. Total backlog as of September 30, 1998, was approximately
$194.1 million compared to total backlog as of September 27, 1997 of $222.5
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 12% of the Company's net sales and 26% of gross profits
in fiscal 1997. 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. See "Risk Factors--Industry Cyclicality."
During fiscal 1996, fiscal 1997 and the nine months ended June 27, 1998 net
sales of new units to Asian customers represented 5.6%, 5.1% and 2.7% 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. Any of the Company's 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. Instead,
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.
The Year-2000 Project is expected to be completed at the end of first
quarter of fiscal 1999 and will have a total cost of approximately $38.0
million, of which approximately $35.3 million had been expended as of August 29,
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
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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 "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 key suppliers to
determine the extent to which the Company may be vulnerable to such parties'
failure to remediate Year-2000 Issues in products they supply to the Company.
There can be no guarantee that the systems of the other companies on which the
Company's systems and products 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 a 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.
Further, although it is difficult to predict with certainty what will happen
after December 31, 1999, in the event that some of the Company's key suppliers
are not Year-2000 compliant, in a reasonably likely worst case scenario, the
Company may be forced to temporarily replace certain computerized functions with
manual applications and may experience significant delays in its ability to
perform certain functions, but does not expect to be unable to perform critical
functions or to otherwise conduct its business. In addition, in the event that
some of the Company's key customers are not Year-2000 compliant, in a reasonably
likely worst case scenario, the Company may suffer a loss in orders and revenue
but does not expect such loss to have a material adverse effect on its
operations or revenue. As part of the Company's Year-2000 efforts, the Company
is planning to develop a contingency plan which is designed to (i) identify
current key suppliers products which the Company has reason to believe may
suffer significant malfunctions as a result of Year-2000 compliance failures and
identify alternative suppliers in order to minimize any impact on the Company
and (ii) continue addressing any internal Year-2000 Issues.
DERIVATIVE FINANCIAL INSTRUMENTS, INFLATION AND INTEREST RATE RISK
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. In fiscal 1997, approximately 29% of the
Company's net sales were transacted in foreign currencies. During the past three
fiscal years, the impact of currency fluctuations has not had significant impact
on the Company's results of operations.
Historically, the Company's currency risk had been coordinated with Hanson.
The Company is now responsible for its own cash management activities and
expects to use forward exchange contracts and options to manage its foreign
currency risk. As of June 27, 1998, the Company was obligated under forward
exchange contracts of approximately $3.7 million primarily for the purchase and
sale of U.S. dollars, French francs, German marks and British pounds sterling.
The Company is now responsible for its own cash management activities and
expects to use forward exchange contracts and options to manage its foreign
currency risk.
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The Company historically has been able to adjust prices to offset increased
inflation, and, therefore, inflation has not had, nor is it expected to have, a
significant effect on the operations of the Company.
Interest rates on borrowings under the Company's Term Loan Facility and
Revolving Credit Facility are based, at the option of the Company, on the
Alternative Base Rate or the relevant Eurocurrency Rate (each as defined in the
Credit Agreement) plus an Applicable Margin, as defined in the Credit Agreement.
As of June 27, 1998, borrowings under the Term Loan Facility and Revolving
Credit Facility bore interest at LIBOR plus 250 and 225 basis points,
respectively. In July 1998, the Company entered into an interest rate agreement
to collar the interest rate on approximately $100.0 million of the Company's
floating rate borrowings for the three years ended September 2001. The Company
may enter into additional interest rate caps, swaps or collars to hedge its
interest rate risk. See "Description of Certain Indebtedness--New Credit
Facility."
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.
The Company is currently developing a remediation program with respect to an
area that has been contaminated by petroleum hydrocarbons at its Shady Grove,
Pennsylvania facility. The Company believes that this contamination is confined
to the Shady Grove site and has not migrated to any adjacent properties. The
Company also believes that the costs of remediating this contamination will not
have a material adverse effect on its financial condition or results of
operations.
CHANGE IN ACCOUNTING STANDARDS
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 in which
they operate, and their major customers. Management will adopt the provisions of
this Standard in fiscal year 1999.
In 1998, the American Institute of Certified Public Accountants issued
Statement No. 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained For Internal Use." This Statement requires capitalization of: (i)
external direct costs of materials and services incurred in developing or
obtaining internal-use computer software, (ii) payroll and payroll-related costs
for employees who are directly associated with and who devote time to the
internal-use computer software project and (iii) interest costs incurred in
developing computer software for internal use. Costs that are considered to be
related to research and development activities would be expensed as incurred.
Similarly, training and maintenance costs would be expensed, and allocations to
amounts capitalized of general and administrative or overhead costs would not be
permitted. The proposal is effective for fiscal years beginning after December
15, 1998. Application would be prospective. Earlier application of this
Statement of the beginning of the fiscal year is encouraged for years for which
annual financial statements have not been issued. The Company is not expected to
early-adopt this Statement. The adoption of this Statement is not expected to
have a material effect on the financial position or results of the Company.
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 the
fiscal year beginning October 1999.
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THE EXCHANGE OFFER
GENERAL
The Issuers hereby offer, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $88.0 million
aggregate principal amount at maturity of Exchange Debentures for a like
aggregate principal amount at maturity f Senior Discount Debentures properly
tendered on or prior to the Expiration Date and not withdrawn as permitted
pursuant to the procedures described below. The Exchange Offer is being made
with respect to any and all of the Senior Discount Debentures.
As of the date of this Prospectus, $88.0 million aggregate principal amount
at maturity of the Senior Discount Debentures is outstanding. This Prospectus,
together with the Letter of Transmittal, is first being sent on or about
, 1998, to all holders of Senior Discount Debentures known to
Holdings. The Issuers' obligations to accept Senior Discount Debentures for
exchange pursuant to the Exchange Offer are subject to certain conditions set
forth under "Certain Conditions to the Exchange Offer" below. The Issuers
currently expect that each of the conditions will be satisfied and that no
waivers will be necessary.
PURPOSE OF THE EXCHANGE OFFER
The Senior Discount Debentures were issued on April 29, 1998 in a
transaction exempt from the registration requirements of the Securities Act.
Accordingly, the Senior Discount Debentures may not be reoffered, resold, or
otherwise transferred unless so registered or unless an applicable exemption
from the registration and prospectus delivery requirements of the Securities Act
is available.
In connection with the issuance and sale of the Senior Discount Debentures,
the Issuers entered into the Registration Rights Agreement, which requires the
Issuers to file with the Commission a registration statement relating to the
Exchange Offer not later than June 29, 1998 (60 days after the date of issuance
of the Senior Discount Debentures) and to use their reasonable best efforts to
cause the registration statement relating to the Exchange Offer to become
effective under the Securities Act not later than October 29, 1998 (180 days
after the date of issuance of the Senior Discount Debentures) and the Exchange
Offer to be consummated not later than 30 business days after the date of the
effectiveness of the Registration Statement. In addition, under certain
circumstances the Issuers are required to use their reasonable best efforts to
file a shelf registration statement with respect to resales of the Debentures
not later than 60 days after such filing obligation arises and cause such
registration statement to become effective not later than 120 days after the
date on which the Issuers become obligated to file such shelf registration
statement. A copy of the Registration Rights Agreement has been filed as an
exhibit to the Registration Statement.
The Exchange Offer is being made by the Issuers to satisfy their obligations
with respect to the Registration Rights Agreement. The term "holder," with
respect to the Exchange Offer, means any person in whose name Senior Discount
Debentures are known to the Company or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Senior Discount Debentures are held of record by The Depository Trust Company.
Other than pursuant to the Registration Rights Agreement, the Issuers are not
required to file any registration statement to register any outstanding Senior
Discount Debentures. Holders of Senior Discount Debentures that do not tender
their Senior Discount Debentures or whose Senior Discount Debentures are
tendered but not accepted would have to rely on exemptions to registration
requirements under the securities laws, including the Securities Act, if they
wish to sell their Senior Discount Debentures.
TERMS OF THE EXCHANGE
The Issuers hereby offer to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus, $1,000 in
principal amount of Exchange Debentures for each $1,000 in principal amount of
the Senior Discount Debentures. The terms of the Exchange Debentures are
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the same in all material respects (including principal amount, interest rate,
maturity and ranking) as the terms of the Senior Discount Debentures for which
they may be exchanged pursuant to the Exchange Offer, except that the Exchange
Debentures have been registered under the Securities Act, and therefore will not
be subject to certain restrictions on transfer applicable to the Senior Discount
Debentures and will not be entitled to registration rights except under certain
limited circumstances. The Exchange Debentures will evidence the same
indebtedness as the Senior Discount Debentures and will be entitled to the
benefits of the Indenture. See "Description of Debentures."
The Exchange Offer is not conditioned upon any minimum aggregate amount of
Senior Discount Debentures being tendered for exchange.
The Issuers have not requested, and do not intend to request, an
interpretation by the Staff with respect to whether the Exchange Debentures
issued pursuant to the Exchange Offer in exchange for the Senior Discount
Debentures may be offered for sale, resold or otherwise transferred by any
holder without compliance with the registration and prospectus delivery
provisions of the Securities Act. Instead, based on an interpretation by the
Staff set forth in a series of no-action letters issued to third parties, the
Issuers believe that Exchange Debentures issued pursuant to the Exchange Offer
in exchange for Senior Discount Debentures may be offered for sale, resold and
otherwise transferred by any holder of such Exchange Debentures (other than any
holder which is (i) an Affiliate of the Company or (ii) a broker-dealer that
purchases Debentures from the Issuers to resell pursuant to Rule 144A or any
other available exemption) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Debentures are acquired in the ordinary course of such holder's
business and such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Debentures and neither such
holder nor any other such person is participating in or intends to participate
in a distribution of such Exchange Debentures. Since the Commission has not
considered the Exchange Offer in the context of a no-action letter, there can be
no assurance that Staff would make a similar determination with respect to the
Exchange Offer. Any holder who is an Affiliate of the Company or who tenders in
the Exchange Offer for the purpose of participating in a distribution of the
Exchange Debentures may be deemed to have received restricted securities and
cannot rely on such interpretation by the Staff and must comply with the
registration and prospectus delivery requirements of the Securities Act in
accordance with any resale transaction. Each holder must acknowledge, among
other things, that it is not participating in, and does not intend to
participate in, a distribution of Exchange Debentures. Each broker-dealer that
receives Exchange Debentures for its own account in exchange for Senior Discount
Debentures, where such Senior Discount Debentures were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any such resale of the Exchange Debentures. See "Plan of Distribution."
Tendering holders of the Senior Discount Debentures shall not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of the Senior
Discount Debentures pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, unless the Issuers have extended the period of time for which
the Exchange Offer is open (such date, as it may be extended, is referred to
herein as the "Expiration Date"). The Expiration Date will be at least 20
business days after the commencement of the Exchange Offer in accordance with
Rule 14e-1(a) under the Exchange Act. The Issuers expressly reserve the right,
at any time or from time to time, in their sole discretion, to extend the period
of time during which the Exchange offer is open, and thereby delay acceptance
for exchange of any Senior Discount Debentures, by giving oral or written notice
to the Exchange Agent and by timely public announcement no later than 9:00 a.m.
New York City time, on the next business day after the previously scheduled
Expiration Date. During any such extension, all Senior Discount Debentures
previously tendered will remain subject to the Exchange Offer unless properly
withdrawn.
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The Issuers expressly reserve the right to (i) terminate or amend the
Exchange Offer and not to accept for exchange any Senior Discount Debentures not
theretofore accepted for exchange upon the occurrence of any of the events
specified below under "--Certain Conditions to the Exchange Offer" which have
not been waived by the Issuers and (ii) amend the terms of the Exchange Offer in
any manner which, in their good faith judgment, is advantageous to the holders
of the Senior Discount Debentures, whether before or after any tender of the
Senior Discount Debentures. If any such termination or amendment occurs, the
Issuers will notify the Exchange Agent and will either issue a press release or
give oral or written notice to the holders of the Senior Discount Debentures as
promptly as practicable.
For purposes of the Exchange Offer, the term "business day" has the meaning
set forth in Rule 14d-1(c)(6) under the Exchange Act.
PROCEDURES FOR TENDERING SENIOR DISCOUNT DEBENTURES
The tender to the Issuers of Senior Discount Debentures by a holder thereof
as set forth below and the acceptance thereof by the Issuers will constitute a
binding agreement between the tendering holder and the Issuers upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal.
A holder of Senior Discount Debentures may tender the same by (i) properly
completing and signing the Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to the Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with the
certificate or certificates representing the Senior Discount Debentures being
tendered and any required signature guarantees and any other documents required
by the Letter of Transmittal, to the Exchange Agent at its address set forth
below on or prior to the Expiration Date (or complying with the procedure for
book-entry transfer described below) or (ii) complying with the guaranteed
delivery procedures described below. A tender will not be deemed to have been
timely received if the tendering holder's properly completed and duly signed
Letter of Transmittal accompanied by the Senior Discount Debentures is mailed
prior to the Expiration Date but is received by the Exchange Agent after the
Expiration Date.
Any beneficial owner whose Senior Discount Debentures are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's behalf, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal and delivering the Senior Discount Debentures, either make
appropriate arrangements to register ownership of the Senior Discount Debentures
in such beneficial owner's name or obtain a properly completed bond power from
the registered holder. The transfer of registered ownership may take
considerable time.
THE METHOD OF DELIVERY OF SENIOR DISCOUNT DEBENTURES, LETTERS OF TRANSMITTAL
AND ALL OF THE REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF
SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY. NO SENIOR DISCOUNT DEBENTURES OR
LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE ISSUERS.
If tendered Senior Discount Debentures are registered in the name of the
signer of the Letter of Transmittal and the Exchange Debentures to be issued in
exchange therefor are to be issued (and any untendered Senior Discount
Debentures are to be reissued) in the name of the registered holder (which term,
for the purposes described herein, shall include any participant in The
Depository Trust Company ("DTC" or the "Book-Entry Transfer Facility") whose
name appears on a security listing as a owner of Senior Discount Debentures),
the signature of such signer need not be guaranteed. In any other case, the
tendered Senior Discount Debentures must be endorsed or accompanied by written
instruments of transfer, in form satisfactory to the Issuers and duly executed
by the registered holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union,
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savings association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a registered signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Debentures and/or Senior Discount Debentures not exchanged are to be
delivered to an address other than that of the registered holder appearing on
the Debenture registrar for the Senior Discount Debentures, the signature in the
Letter of Transmittal must be guaranteed by an Eligible Institution.
The Issuers understand that the Exchange Agent has confirmed with DTC that
any financial institution that is a participant in DTC's system may utilize
DTC's Automated Tender Offer Program ("ATOP") to tender Senior Discount
Debentures. The Issuers further understand that the Exchange Agent will request,
within two business days after the date the Exchange Offer commences, that DTC
establish an account with respect to the Senior Discont Debentures for the
purpose of facilitating the Exchange Offer, and any participant may make
book-entry delivery of Senior Discount Debentures by causing DTC to transfer
such Senior Discount Debentures into the Exchange Agent's account in accordance
with DTC's ATOP procedures for transfer. However, the exchange of the Senior
Discount Debentures so tendered will only be made after timely confirmation (a
"Book-Entry Confirmation") of such book-entry transfer and timely receipt by the
Exchange Agent of an Agent's Message (as defined in the next sentence), an
appropriate Letter of Transmittal with any registered signature guarantee, and
any other documents required. The term "Agent's Message" means a message,
transmitted by DTC and received by the Exchange Agent and forming part of a
Book-Entry Confirmation, which states that DTC has received an express
acknowledgement from a participant tendering Senior Discount Debentures which
are the subject of such Book-Entry Confirmation and that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Issuers may enforce such agreement against such participant.
If a holder desires to tender Senior Discount Debentures in the Exchange
Offer and time will not permit a letter of Transmittal or Senior Discount
Debentures to reach the Exchange Agent before the Expiration Date or the
procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if the Exchange Agent has received at its address set
forth below on or prior to the Expiration Date, a letter, telegram or facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier) from an Eligible Institution setting forth the
name and address of the tendering holder, the names in which the Senior Discount
Debentures are registered and, if possible, the certificate number of the Senior
Discount Debentures to be tendered, and stating that the tender is being made
thereby and guaranteeing that within three business days after the Expiration
Date, the Senior Discount Debentures in proper form for transfer (or a
confirmation of book-entry transfer of each Senior Discount Debentures into the
Exchange Agent's account at the Book-Entry Transfer Facility), will be delivered
by such Eligible Institution together with a properly completed and duly
executed Letter of Transmittal (and any other required documents). Unless Senior
Discount Debentures being tendered by the above-described method are deposited
with the Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Issuers may, at their option, reject the tender. Copies of the
notice of guaranteed delivery ("Notice of Guaranteed Delivery") which may be
used by Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Senior Discount Debentures (or a confirmation of book-entry
transfer of such Senior Discount Debentures into the Exchange Agent's account at
the Book-Entry Transfer Facility) is received by the Exchange Agent, or (ii) a
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) from an Eligible Institution is received by
the Exchange Agent. Issuances of Exchange Debentures in exchange for Senior
Discount Debentures tendered pursuant to a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
by an Eligible Institution will be
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<PAGE>
made only against deposit of the Letter of Transmittal (and any other required
documents) and the tendered Senior Discount Debentures.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Senior Discount Debentures tendered for exchange will
be determined by the Issuers in their sole discretion, which determination shall
be final and binding on all parties. The Issuers reserve the absolute right to
reject any and all tenders of any particular Senior Discount Debenture not
properly tendered or not to accept any particular Senior Discount Debentures
which acceptance might, in the judgment of the Issuers or their counsel, be
unlawful. The Issuers also reserve the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to any particular Senior
Discount Debentures either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Senior
Discount Debentures in the Exchange Offer). The interpretation of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) by the Issuers shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
Senior Discount Debentures for exchange must be cured within such reasonable
period of time as the Issuers shall determine. Neither the Issuers, the Exchange
Agent nor any other person shall be under any duty to give notification of any
defect or irregularity with respect to any tender of Senior Discount Debentures
for exchange, nor shall any of them incur any liability for failure to give such
notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Senior Discount Debentures, such Senior Discount
Debentures must be endorsed or accompanied by appropriate powers of attorney, in
either case signed exactly as the name or names of the registered holder or
holders appear on the Senior Discount Debentures.
If the Letter of Transmittal or any Senior Discount Debentures or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Issuers, proper evidence satisfactory to the Issuers of
their authority to so act must be submitted.
By tendering, each holder will represent to the Issuers that, among other
things, (A) the Exchange Debentures acquired pursuant to the Exchange Offer are
being acquired in the ordinary course of business of the person receiving such
Exchange Debentures, whether or not such person is the holder; (B) it is not an
Affiliate of the Issuers; (C) it is not participating in, and does not intend to
participate in, and has no arrangement or understanding with any Person to
participate in, a distribution of the Senior Discount Debentures or the Exchange
Debentures; and (D) if such holder is a broker or dealer registered under the
Exchange Act, it will receive the Exchange Debentures for its own account in
exchange for the Senior Discount Debentures that were acquired as a result of
market-making activities or other trading activities.
Each broker-dealer referred to in clause (D) of the preceding sentence must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Debentures. See "Plan of Distribution."
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Senior Discount Debentures for exchange (the
"Transferor") exchanges, assigns and transfers the Senior Discount Debentures to
the Issuers and irrevocably constitutes and appoints the Exchange Agent as the
Transferor's agent and attorney-in-fact to cause the Senior Discount Debentures
to be assigned, transferred and exchanged. The Transferor represents and
warrants that it has full power and authority to tender, exchange assign and
transfer the Senior Discount Debentures and to acquire Exchange Debentures
issuable upon the exchange of such tendered Senior Discount Debentures, and
that, when the same are accepted for exchange, the Issuers will acquire good and
unencumbered title to the tendered Senior Discount Debentures, free and clear of
all liens, restrictions, charges and encumbrances and not
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<PAGE>
subject to any adverse claim. The Transferor also warrants that it will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or the Issuers to be necessary or desirable to complete the exchange,
assignment and transfer of tendered Senior Discount Debentures or transfer
ownership of such Senior Discount Debentures on the account books maintained by
a Book-Entry Transfer Facility. The Transferor further agrees that acceptance of
any tendered Senior Discount Debentures by the Issuers and the issuance of
Exchange Debentures in exchange therefor shall constitute performance in full by
the Issuers of certain of its obligations under the Registration Rights
Agreement. All authority conferred by the Transferor will survive the death or
incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor. The Transferor will also make the
representations described above under "Procedures for Tendering Senior Discount
Debentures."
WITHDRAWAL RIGHTS
Tenders of Senior Discount Debentures may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent at the address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Senior Discount Debentures to be withdrawn (the
"Depositor), (ii) identify the Senior Discount Debentures to be withdrawn
(including the certificate number or numbers and principal amount of such Senior
Discount Debentures), (iii) specify the principal amount of Senior Discount
Debentures to be withdrawn, (iv) include a statement that such holder is
withdrawing his election to have such Senior Discount Debentures exchanged, (v)
be signed by the holder in the same manner as the original signature on the
Letter of Transmittal by which such Senior Discount Debentures were tendered or
as otherwise described above (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee under the
Indenture register the transfer of such Senior Discount Debentures into the name
of the person withdrawing the tender and (vi) specify the name in which any such
Senior Discount Debentures are to be registered, if different from that of the
Depositor. The Exchange Agent will return the properly withdrawn Senior Discount
Debentures promptly following receipt of notice of withdrawal. If Senior
Discount Debentures have been tendered pursuant to the procedure for book-entry
transfer, any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Senior Discount Debentures or otherwise comply with the Book-Entry Transfer
Facility's procedure. All questions as to the validity of notices of
withdrawals, including time of receipt, will be determined by the Issuers in
their sole discretion and such determination will be final and binding on all
parties.
Any Senior Discount Debentures so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the Exchange Offer. Any Senior
Discount Debentures which have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost to
such holder (or, in the case of Senior Discount Debentures tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility pursuant to the book-entry transfer procedures described above, such
Senior Discount Debentures will be credited to an account with such Book-Entry
Transfer Facility specified by the holder) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Senior Discount Debentures may be retendered by following one of the
procedures described under "--Procedures for Tendering Senior Discount
Debentures" above at any time on or prior to the Expiration Date.
ACCEPTANCE OF SENIOR DISCOUNT DEBENTURES FOR EXCHANGE; DELIVERY OF EXCHANGE
DEBENTURES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Issuers will accept, promptly after the Exchange Date, all Senior Discount
Debentures properly tendered and will issue the Exchange Debentures promptly
after such acceptance. See "--Certain Conditions to the Exchange Offer"
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<PAGE>
below. For purposes of the Exchange Offer, the Issuers shall be deemed to have
accepted properly tendered Senior Discount Debentures for exchange when, as and
if the Issuers have given oral or written notice thereof to the Exchange Agent.
For each Senior Discount Debenture accepted for exchange, the holder of such
Senior Discount Debenture will receive an Exchange Debenture having a principal
amount at maturity equal to that of the surrendered Senior Discount Debenture.
In all cases, issuance of Exchange Debentures for Senior Discount Debentures
that are accepted for exchange pursuant to the Exchange Offer will be made only
after timely receipt by the Exchange Agent of certificates for such Senior
Discount Debentures or a timely book-entry confirmation of such Senior Discount
Debentures into the Exchange Agent's account at the Book-Entry Transfer
Facility, a properly completed and duly executed Letter of Transmittal and all
other required documents. If any tendered Senior Discount Debentures are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Senior Discount Debentures are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged
Senior Discount Debentures will be returned without expense to the tendering
holder thereof (or, in the case of Senior Discount Debentures tendered by
book-entry transfer into the Exchange Agent's account the Book-Entry Transfer
Facility pursuant to the book-entry transfer procedures described above, such
non-exchanged Senior Discount Debentures will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the Exchange Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Issuers shall not be required to accept for exchange,
or to issue Exchange Debentures in exchange for, any Senior Discount Debentures
and may terminate or amend the Exchange Offer (by oral or written notice to the
Exchange Agent or by a timely press release) if at any time before the
acceptance of such Senior Discount Debentures for exchange or the exchange of
the Exchange Debentures for such Senior Discount Debentures, any of the
following conditions exist:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Exchange Offer
which, in the sole judgment of the Issuers, might materially impair the
ability of the Issuers to proceed with the Exchange Offer or have a material
adverse effect on the contemplated benefits of the Exchange Offer to the
Issuers; or
(b) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Issuers that is or may be adverse to the Issuers, or the
Issuers shall have become aware of facts that have or may have adverse
significance with respect to the value of the Senior Discount Debentures or
the Exchange Debentures or that may materially impair the contemplated
benefits of the Exchange Offer to the Issuers; or
(c) any law, rule or regulation or applicable interpretation of the
Staff is issued or promulgated which, in the good faith determination of the
Issuers, does not permit the Issuers to effect the Exchange Offer; or
(d) any governmental approval has not been obtained, which approval the
Issuers, in their sole discretion, deems necessary for the consummation of
the Exchange Offer; or
(e) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation (or an amendment to any existing law, statute, rule or
regulation) which, in the sole judgment of the Issuers, might materially
impair the ability of the Issuers to proceed with the Exchange Offer or have
a material adverse effect on the contemplated benefits of the Exchange Offer
to the Issuers; or
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<PAGE>
(f) there shall occur a change in the current interpretation by the
Staff of the Commission which permits the Exchange Debentures issued
pursuant to the Exchange Offer in exchange for Senior Discount Debentures to
be offered for resale, resold and otherwise transferred by holders thereof
(other than any such holder that is a broker-dealer or an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such Exchange Debentures are acquired in the
ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such
Exchange Debentures.
The Issuers expressly reserve the right to terminate the Exchange Offer and
not accept for exchange any Senior Discount Debentures upon the occurrence of
any of the foregoing conditions. In addition, the Issuers may amend the Exchange
Offer at any time prior to the Expiration Date if any of the conditions set
forth above occur. Moreover, regardless of whether any of such conditions has
occurred, the Issuers may amend the Exchange Offer in any manner which, in its
good faith judgment, is advantageous to holders of the Senior Discount
Debentures.
The foregoing conditions are for the sole benefit of the Issuers and may be
asserted by the Issuers regardless of the circumstances giving rise to any such
condition or may be waived by the Issuers in whole or in part at any time and
from time to time in their sole discretion. The failure by the Issuers at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Issuers will not accept for exchange any Senior Discount
Debentures tendered, and no Exchange Debentures will be issued in exchange for
any such Senior Discount Debentures, if at such time any stop order shall be
threatened or in effect with respect to the Registration Statement of which this
Prospectus constitutes a part or the qualification of the Indenture under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). In any such
event the Issuers are required to use their best efforts to obtain the
withdrawal of any stop order at the earliest possible time.
The Exchange Offer is not conditioned upon any minimum principal amount of
Senior Discount Debentures being tendered for exchange.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent the addresses set forth below:
<TABLE>
<S> <C>
BY HAND UP TO 4:30 PM: United States Trust Company of New York
111 Broadway
Lower Level
New York, New York 10006
Attention: Corporate Trust Services
Telephone: 1(800) 548-6565
Facsimile: (212) 780-0592
BY OVERNIGHT COURIER AND BY HAND United States Trust Company of New York
AFTER 4:30 PM ON THE EXPIRATION DATE ONLY: 770 Broadway, 13th Floor
New York, New York 10003
Attention: Corporate Trust Services
Telephone: 1(800) 548-6565
Facsimile: (212) 780-0592
</TABLE>
49
<PAGE>
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL: United States Trust Company of New York
Post Office Box 844
New York, New York 10276-0844
Attention: Corporate Trust Services, Cooper
Station
Telephone: 1(800) 548-6565
Facsimile: (212) 780-0592
</TABLE>
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the address and
telephone number set forth above.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSIONS OF
INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT
CONSTITUTE A VALID DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Issuers and are estimated in the aggregate to be
approximately $135,000 which includes fees and expenses of the Exchange Agent,
Trustee, registration fees, accounting, legal, printing and related fees and
expenses.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representation should
not be relied upon as having been authorized by the Issuers.
Neither the delivery of this Prospectus nor any exchange made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Issuers since the respective dates as of which
information is given herein. The Exchange Offer is not being made to (nor will
tenders be accepted from or on behalf of) holders of Senior Discount Debentures
in any jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction. However,
the Issuers may, at their discretion, take such action as it may deem necessary
to make the Exchange Offer in any such jurisdiction and extend the Exchange
Offer to holders of Senior Discount Debentures in such jurisdiction.
TRANSFER TAXES
The Issuers will pay all transfer taxes, if any, applicable to the exchange
of Senior Discount Debentures pursuant to the Exchange Offer. If, however,
certificates representing Exchange Debentures or Senior Discount Debentures for
principal amounts not tendered or accepted for exchange are to be delivered to,
or are to be issued in the name of, any person other than the registered holder
of the Senior Discount Debentures tendered, or if tendered Senior Discount
Debentures are registered in the name of any person other than the person
signing the Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the exchange of Senior Discount Debentures pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
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<PAGE>
ACCOUNTING TREATMENT
The Exchange Debentures will be recorded at the carrying value of the Senior
Discount Debentures as reflected in the Company's accounting records on the
Exchange Date. Accordingly, no gain or loss for accounting purposes will be
recognized by the Issuers upon the exchange of Exchange Debentures for Senior
Discount Debentures. Expenses incurred in connection with the issuance of the
Exchange Debentures will be amortized over the term of the Exchange Debentures.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Senior Discount Debentures who do not exchange their Senior
Discount Debentures for Exchange Debentures pursuant to the Exchange Offer will
continue to be subject to the restrictions on transfer of such Senior Discount
Debentures as set forth in the legend thereon. Senior Discount Debentures not
exchanged pursuant to the Exchange Offer will continue to remain outstanding in
accordance with their terms. In general, the Senior Discount Debentures may not
be offered or sold unless registered under the Securities Act, except pursuant
to an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Issuers do not currently anticipate that
they will register the Senior Discount Debentures under the Securities Act.
However, under certain limited circumstances the Issuers may be required to file
with the Commission a shelf registration statement to cover resales of the
Senior Discount Debentures by the Holders thereof who satisfy certain conditions
relating to the provision of information in connection with such shelf
registration statement. See "Description of Debentures--Registration Rights;
Liquidated Damages."
Participation in the Exchange Offer is voluntary, and holders of Senior
Discount Debentures should carefully consider whether to participate. Holders of
Senior Discount Debentures are urged to consult their financial and tax advisors
in making their own decision whether or not to tender their Senior Discount
Debentures. See "Certain Federal Income Tax Consequences."
As a result of the making of, and upon acceptance for exchange of all
validly tendered Senior Discount Debentures pursuant to the terms of, this
Exchange Offer, the Issuers will have fulfilled a covenant contained in the
Registration Rights Agreement. Holders of Senior Discount Debentures who do not
tender their Senior Discount Debentures in the Exchange Offer will continue to
hold such Senior Discount Debentures and will be entitled to all the rights and
limitations applicable thereto under the Indenture, except for any such rights
under the Registration Rights Agreement that by their terms terminate or cease
to have further effectiveness as a result of the making of this Exchange Offer.
To the extent that Senior Discount Debentures are tendered and accepted in the
Exchange Offer, the trading market for untendered, or tendered but unaccepted,
Senior Discount Debentures could be adversely affected. See "Risk
Factors--Adverse Consequences of Failure to Exchange"
The Issuers may in the future seek to acquire, subject to the terms of the
Indenture, untendered Senior Discount Debentures in open market or privately
negotiated transactions, through subsequent exchange offers or otherwise. The
terms of any such purchases or offers may differ form the terms of the Exchange
Offer. The Issuers have no present plan to acquire any Senior Discount
Debentures which are not tendered in the Exchange Offer.
RESALE OF EXCHANGE DEBENTURES
The Issuers are making the Exchange Offer in reliance on the position of the
Staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Issuers have not sought
their own interpretive letter and there can be no assurance that the Staff would
make a similar determination with respect to the Exchange Offer as it has in
such interpretive letters to third parties. Based on these interpretations by
the Staff, the Issuers believe that the Exchange Debentures issued pursuant to
the Exchange Offer in exchange for Senior Discount Debentures may be offered for
resale, resold and otherwise transferred by a holder (other than any holder
which is (i) an Affiliate of the Company or (ii) any broker-dealer that
purchases Debentures from the Issuers to resell pursuant to
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<PAGE>
Rule 144A or any other available exemption) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Debentures are acquired in the ordinary course of such
holder's business and such holder has no arrangement or understanding with any
person to participate in the distribution of such Exchange Debentures and
neither such holder nor any other such person is engaging in or intends to
engage in a distribution of such Exchange Debentures. However, any holder who is
an Affiliate of the Company or who has an arrangement or understanding with
respect to the distribution of the Exchange Debentures to be acquired pursuant
to the Exchange Offer, or any broker-dealer who purchased Senior Discount
Debentures from the Issuers to resell pursuant to Rule 144A or any other
available exemption under the Securities Act (i) cannot rely on the applicable
interpretations of the Staff and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act. A broker-dealer who
holds Senior Discount Debentures that were acquired for its own account as a
result of market-making or other trading activities may be deemed to be an
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Debentures. Each such broker-dealer that
receives Exchange Debentures for its own account in exchange for Senior Discount
Debentures, where such Senior Discount Debentures were acquired by such
broker-dealer as a result of market-making activities or other trading
activities must acknowledge in the Letter of Transmittal that it will deliver a
prospectus in connection with any resale of such Exchange Debentures. A
secondary resale transaction in the United States by a holder using the Exchange
Offer to participate in a distribution of Senior Discount Debentures must be
covered by an effective registration statement containing the selling security
holder information required by Item 507 of Regulation S-K. See "Plan of
Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the Exchange Debentures may not be offered or sold unless they have
been registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Issuers
have agreed, pursuant to the Registration Rights Agreement and subject to
certain specified limitations therein, to register or qualify the Exchange
Debentures for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Exchange Debentures reasonably requests. Such
registration or qualification may require the imposition of restrictions or
conditions (including suitability requirements for offerees or purchasers) in
connection with the offer or sale of any Exchange Debentures.
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<PAGE>
BUSINESS
Grove Worldwide is a leading international designer, manufacturer and
marketer of a comprehensive line of mobile hydraulic cranes, aerial work
platforms and truck-mounted cranes. In North America, Grove Crane, the Company's
largest operating division, has a number one market position and a 45% market
share. 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 believes it has achieved a leading position in each of its principal
markets due to its: (i) strong brand name and reputation for quality products;
(ii) superior customer service; (iii) established network of distributors; (iv)
broad product line; and (v) commitment to superior engineering design and
product innovation.
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 (67% of fiscal 1997 new equipment
sales), Europe (19% of fiscal 1997 new equipment sales), Africa and the Middle
East (4% of fiscal 1997 new equipment sales), Asia (7% of fiscal 1997 new
equipment sales) and Latin America (3% of fiscal 1997 new equipment sales). The
Company markets its products through three operating divisions:
- - GROVE CRANE (approximately 69% of fiscal 1997 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. From fiscal 1993 to fiscal 1997, Grove Crane's net
sales (including acquisitions) increased from $290 million to $587 million,
representing a CAGR of 19.4%.
- - GROVE MANLIFT (approximately 23% of fiscal 1997 net sales) designs and
manufactures over 60 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. From fiscal 1993 to fiscal 1997, Grove Manlift's
net sales (including acquisitions) increased from $57 million to $199 million,
representing a CAGR of 36.8%.
- - NATIONAL CRANE (approximately 8% of fiscal 1997 net sales) designs and
manufactures over 14 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. From fiscal 1993 to fiscal
1997, National Crane's net sales increased from $40 million to $71 million,
representing a CAGR of 15.4%.
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COMPETITIVE STRENGTHS
The Company believes that it benefits from the following competitive
strengths:
- - LEADING MARKET POSITIONS. The Company believes that its three operating
divisions have established a leading position in each of their principal
markets.
<TABLE>
<CAPTION>
MARKET
DIVISION PRODUCTS PRINCIPAL MARKETS POSITION(1) MARKET SHARE(1)
- ------------------- ----------------------- ----------------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Grove Crane Mobile Hydraulic Cranes North America 1 43%(2)
Europe (excluding Russia) 2 14%
Grove Manlift Aerial Work Platforms North America 3 10%
Europe (excluding Russia) 3 16%
National Crane Truck-Mounted Cranes: North America 1 43%
Telescoping North America 4 13%(3)
Articulating
</TABLE>
- - STRONG BRAND NAME AND REPUTATION FOR QUALITY PRODUCTS. The Company has created
significant brand equity as a result of its innovative designs, quality
products and product reliability. With over 100,000 units sold during the past
50 years, the Company believes that it currently has one of the industry's
largest installed bases of cranes and aerial work platforms. The quality of
the Company's products and the value of its brand name are reflected in the
North American marketplace, where the Company believes that its cranes
generally command premium prices and have higher residual values than
comparable products manufactured by its competitors. For example, Grove
Crane's products typically have residual values in excess of 50% of their
original cost after five years, which management believes is significantly
greater than the average residual value of its competitors' products.
- - SUPERIOR CUSTOMER SERVICE. The Company is committed to providing superior
training, sales and service support to its distributors and end-users as a
standard part of its sales and marketing effort. Management believes that no
other major competitor matches the extent and quality of its customer support
services and that such services significantly contribute to the Company's
ability to charge premium prices for its products. In addition, the Company
has focused on providing ready availability of service parts. For example, in
fiscal 1997, the Company shipped over 80% of its replacement parts worldwide
within 24 hours after receipt of an order. After-market sales for parts and
services accounted for 12% of the Company's net sales and 26% of gross profits
in fiscal 1997. Such sales typically have higher gross margins and are less
cyclical than new equipment sales.
- - ESTABLISHED NETWORK OF DISTRIBUTORS. 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 sold the Company's products for over 10 years. The Company believes that,
in many cases, its products represent an important portion of its
distributors' business. Many of these distributors also represent Caterpillar
Inc. or Komatsu Ltd. and, as such, are considered among the best-capitalized
in the industry. Management believes that the strength of its distributor
network is an important competitive advantage. For example, within twelve
months after acquiring the mobile hydraulic crane business of Krupp in August
1995, the Company leveraged Grove's brand name
- ------------------------
(1) All market share data are based on units shipped during fiscal 1997, except
for data on Grove Manlift's share of the North American and European aerial
work platform markets, which are based on fiscal 1997 revenues. With respect
to aerial work platforms, management believes that because the Company
primarily competes in the North American and European markets for larger,
high-end aerial work platforms, comparisons based on revenues are more
appropriate. Market data were derived from management estimates including,
management assumptions regarding unit price.
(2) Does not include industrial cranes.
(3) In the United States, the Company has a number three market position and a
17% market share. National Crane has a nominal presence in the Canadian
market for articulating cranes.
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and distribution network to increase annual sales in the United States of the
cranes, formerly manufactured by Krupp, by 100% from approximately 40 units in
1995 to approximately 80 units in 1996.
- - BROAD PRODUCT LINE. The Company believes it has the broadest product line in
the industry, with 10 product categories and over 120 models offered by its
three operating divisions. Management believes the breadth of the Company's
product offerings enables it to more effectively serve the equipment rental
market, which management estimates represents approximately 80% of the
Company's net sales. The Company's broad product line allows it to satisfy the
rental market's demand for models addressing specific end-user needs, while
also providing customers the opportunity to save on support, maintenance and
training costs by purchasing from a single manufacturer.
BUSINESS STRATEGY
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 the Operations Improvement Program in
cooperation with the George Group Inc. (the "George Group"), an acquisition and
management consulting firm that applies strategic and operations management
expertise to manufacturing businesses. Management is led by Salvatore J. Bonanno
who joined the Company in March 1998 from Foamex International Inc., where he
led an organizational restructuring designed to reduce manufacturing and
overhead costs. The Company will implement the Operations Improvement Program
and the other key elements of the Company's business strategy described below in
order to reach its objective of increased net sales and EBITDA.
- - OPERATIONS IMPROVEMENT PROGRAM. The Company, in cooperation with the George
Group, has developed a comprehensive program which it believes will enable the
Company to reduce its annual costs by approximately $35 million to $50 million
and achieve significant working capital efficiencies by fiscal 2001. The
Operations Improvement Program is intended to improve the Company's operating
efficiency and margins by: (i) rationalizing product lines; (ii) reducing
manufacturing costs; and (iii) reducing selling, general and administrative
expenses. In addition, the Company believes the Operations Improvement Program
should enable it to reduce its working capital requirements by decreasing
inventory levels by approximately $40 million to $50 million.
- - CONTINUE TO PROVIDE SUPERIOR PRODUCTS. The Company has maintained a commitment
to superior engineering design and technological innovation. The Company
believes that it has the most extensive engineering capability in the crane
industry, with an extensive engineering group focusing on developing
innovative, high performance, low maintenance products that satisfy the
demands of its customers. Together with the Company's manufacturing and
marketing staff, these engineers seek to utilize new technologies and
effectively introduce new products. For example, the Company has introduced
lighter booms with greater lifting capacity, electronic controls that
facilitate operations and product features that enhance safety and increase
versatility. The Company believes that the greater sophistication of its
products contributes to its ability to sustain higher residual values. The
Company intends to intensify its efforts to design products that meet evolving
customer needs while reducing manufacturing costs and the period from product
conception to introduction.
- - EXPAND EXISTING INTERNATIONAL BUSINESS. The Company intends to leverage its
significant brand equity and strong distribution network to opportunistically
expand its existing international business. As an industry leader, the Company
believes it is well-positioned to increase sales internationally as
infrastructure development in existing and emerging markets stimulates demand
for cranes and aerial work platforms. In 1995, the Company expanded its
product offerings and strengthened its manufacturing and distribution presence
in Europe by acquiring the mobile hydraulic crane business of Krupp in Germany
and the aerial work platform business of Delta in France. In addition, all of
the Company's manufacturing
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facilities have received ISO 9001 certifications, which enhances the Company's
international marketing efforts.
- - CAPITALIZE ON THE GROWTH OF THE WORLDWIDE AERIAL WORK PLATFORM MARKET. The
Company seeks to capitalize on the increasing recognition by end-users
worldwide that aerial work platforms are economical and safe alternatives to
scaffolding and ladders. The North American aerial work platform industry
experienced a CAGR in total unit shipments from 1992 to 1997 of 32%. In 1997,
approximately 41,000 aerial work platforms were shipped in North America while
only 13,000 units were shipped in markets outside of North America. The
Company expects to generate increased sales of aerial work platforms in
international markets as international end-users recognize the productivity
and safety advantages of aerial work platforms.
THE OPERATIONS IMPROVEMENT PROGRAM
The Company, in cooperation with George Group, has developed a comprehensive
program which it believes will enable it to reduce its annual costs by
approximately $35 million to $50 million and achieve significant working capital
efficiencies by fiscal 2001. The Operations Improvement Program is intended to
improve the Company's operating efficiency and its margins by: (i) rationalizing
product lines; (ii) reducing manufacturing costs; and (iii) reducing selling,
general and administrative expenses. In addition, the Company believes the
Operations Improvement Program should enable it to reduce its working capital
requirements by decreasing inventory levels by approximately $40 million to $50
million. It is expected that these cost savings will be offset by non-recurring
costs of up to approximately $25 million associated with the implementation of
the Operations Improvement Program. Estimates of potential cost savings and
implementation costs are inherently uncertain and the description of the
Operations Improvement Program should be read in conjunction with "Special Note
Regarding Forward Looking Statements" and "Risk Factors--Realization of Benefits
of Operations Improvement Program." The key components of the Operations
Improvement Program are as follows:
RATIONALIZE PRODUCT LINES. The Company expects to implement a product line
rationalization program which will position it to reduce both operating costs
and working capital requirements without diminishing the advantages derived from
its broad product line. The Company will monitor product line data to enable it
to simplify its engineering processes by reducing the number of models and
manufacturing components, standardizing options and using platform design
concepts. The Company believes this program will enable it to eliminate certain
models that have low demand, low margins or features and capabilities that are
redundant with other models. The product line rationalization program will
identify key product requirements by different customer groups within each of
the market segments which the Company serves. Such information will be used to
define a more focused product portfolio which, when compared to the existing
product lines, will help the Company identify opportunities to reduce
components, standardize features and eliminate models. Management believes that
these actions will (i) reduce inventory, (ii) increase labor productivity, (iii)
improve purchasing leverage and (iv) help reduce selling, general and
administrative expenses without negatively impacting revenue.
REDUCE MANUFACTURING COSTS. Management intends to reduce the annual costs
of goods sold by approximately $25 million to $30 million by fiscal 2001 by
rationalizing its product line and undertaking the following initiatives to
improve the Company's manufacturing process:
- - Accelerate the recently initiated DFMA program and continue to implement value
analysis programs. These established techniques are designed to lower material
and labor costs by redesigning products, incorporating more standardized
components and allowing a simplified fabrication and assembly process. Initial
efforts during fiscal 1997 resulted in a 28% reduction in labor costs for a
test model.
- - Consolidate sourcing by using fewer suppliers to fulfill the Company's global
requirements. As a result of its product rationalization and DFMA programs,
the Company expects to purchase a greater volume
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of fewer components, enabling it to significantly reduce its vendor base and
benefit from increased sourcing leverage.
- - Implement other procedures to reduce manufacturing costs, including: (i)
improving planning and scheduling by introducing continuous flow manufacturing
principles and integrating the Company's new management information system;
(ii) improving product flow and reducing cycle time in order to increase
manufacturing flexibility and capacity; and (iii) shifting the production of
certain models and components to facilities where they can be more efficiently
produced.
REDUCE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Management believes it
can reduce annual selling, general and administrative expenses by approximately
$10 million to $20 million by fiscal 2001 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. See "Business--Management Information System."
REDUCE WORKING CAPITAL REQUIREMENTS. Management believes the Operations
Improvement Program will enable the Company to reduce its working capital
requirements by reducing inventory levels by approximately $40 million to $50
million. The Company expects to reduce its inventory levels primarily as a
result of: (i) improved manufacturing processes; (ii) the shifting of production
of certain models and components to facilities where they can be more
efficiently produced; and (iii) product rationalization.
INDUSTRY OVERVIEW
The markets in which the Company competes include North America, (defined as
the United States and Canada), Latin America (defined as Central and South
America), Europe, Africa, the Middle East and Asia. All statistical and
numerical information set forth below are based on industry data, which the
Company has not independently verified, together with management estimates and
assumptions regarding unit prices.
MOBILE HYDRAULIC CRANES (GROVE CRANE)
The mobile hydraulic crane business was a $2.8 billion industry worldwide in
1997 with a demand for approximately 11,000 machines. Demand in this industry is
primarily dependent upon industrial and construction activity and replacement
cycles for existing cranes. Because of the different demands of each project,
such as boom lengths and lifting capacities, contractors, particularly those in
North America, tend to rent specific machines as needed rather than own a fleet
of machines with varying capabilities. Management estimates that 80% of all new
sales in North America are made to the equipment rental market. In periods of
economic recovery, rising end-user demand is initially reflected in rising
rental fleet utilization. Then, as rental fleet utilization reaches a maximum
level, new orders for cranes generally tend to increase.
In 1997, demand for mobile hydraulic cranes in North America was
approximately 2,400 machines, representing 22% of global demand. From 1992 to
1997, demand grew at a CAGR of 12.6%. The Company believes that, based on the
superior reputation of its products as well as the Company's strong network of
distributors, it is well positioned to capitalize on any growth in the North
American mobile hydraulic crane market. In addition, Grove's product line, which
is the broadest in the industry, enables rental fleet owners to provide a wide
range of models for end-users while maintaining low after-market maintenance and
service costs by buying from a single manufacturer. See "--Competitive
Strengths."
Demand for mobile hydraulic cranes in Europe was approximately 1,700
machines in 1997, representing 16% of global demand. Since 1992, demand in
Europe has experienced little growth. European construction activity has
remained at recessionary levels for the last five years. The Company believes
that this has been due initially to a cyclical downturn and more recently to
fiscal tightening as European
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countries attempt to meet the budget deficit targets established by the
Maastricht Treaty. The Company believes that it is well positioned to
participate in any cyclical improvements in Europe due to its local
manufacturing operations, strong local distribution and its established market
position in the region. The Company believes that European growth could act as a
buffer to a possible future economic downturn in the United States.
In addition to North America and Europe, markets for mobile hydraulic cranes
include Africa, the Middle East, Asia, notably Japan, and Latin America. These
markets represented 62% of global demand in 1997 with approximately 6,800 units
shipped. The Japanese market represents approximately 29% of the worldwide
market on a unit basis, with approximately 3,200 machines sold in 1997. The
Company, like other crane manufacturers in the United States and Europe, has
chosen not to compete in Japan due to economic fundamentals and certain barriers
to entry. Japanese crane manufacturers generally do not compete in the United
States or Europe. The Chinese market accounted for approximately 2,100 machines
sold in 1997, the majority of which were manufactured locally. However, the
People's Republic of China has been an emerging market for the Company, where it
has sold an average of 8 units per year since 1995, representing approximately
10% of imported units.
AERIAL WORK PLATFORMS (GROVE MANLIFT)
The aerial work platform industry in North America has developed over the
past 20 years as end-users realize that aerial work platforms are an efficient
and safer alternative to scaffolding and ladders. The products are used for
indoor or outdoor applications in a variety of construction, industrial and
commercial settings which require workers to be lifted to high elevations. Rapid
growth of the industry has been due to efficiency considerations as well as
regulations mandating safety standards for people working in elevated areas. The
Company believes that approximately 90% of all aerial work platform sales in
North America are to rental fleets. The rental market represents such a large
percentage of the overall market because: (i) contractors require workers to be
elevated only for limited periods during a given job, and different jobs require
different platform heights, making ownership of a single specification unit
uneconomical and (ii) industrial customers increasingly outsource their
equipment requirements to rental providers.
In terms of market penetration of aerial work platforms, the United States
is the most advanced market in the world, indicating strong fundamental growth
potential for the industry outside North America. Since 1992, demand in North
America has grown at a CAGR of 32%. In 1997, demand for aerial work platforms in
North America was approximately 41,000 machines, representing 76% of global
demand. The demand for aerial work platforms in the worldwide market, excluding
North America, in comparison, was only 13,000 units in 1997. The Company expects
increased sales of aerial work platforms in international markets, where the
number of aerial work platforms remains significantly lower than in the United
States.
The Company expects the aerial work platform division to be an important
factor in its long-term growth strategy. Growth in the aerial work platform
market is expected to be driven primarily by new product introductions and
applications, as well as continued compliance in the United States with
government-mandated safety regulations. Furthermore, as foreign governments
adopt stricter safety regulations and foreign end-users realize the efficiency
benefits of using aerial work platforms, the Company expects to capture its
share of international growth given its strong existing international market
presence and distribution capabilities, particularly in Europe.
TRUCK-MOUNTED CRANES (NATIONAL CRANE)
The truck-mounted crane division manufactures both telescoping cranes and
articulating cranes. These cranes are used primarily by contractors engaged in
the industrial, commercial, public works and residential construction, railroad
and oil field service industries and in maintenance applications to lift
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materials or personnel at the same job site or to move material to another job
site or location. In 1997, demand for truck-mounted telescoping cranes in North
America was approximately 2,100 machines, representing 48% of total North
American demand. Since 1992, demand has grown at a CAGR of 16%. Demand for
truck-mounted articulating cranes in North America was approximately 2,300
machines in 1997, representing 52% of total North American demand. Since 1992,
demand has grown at a CAGR of 5%. Telescoping cranes are more popular in the
United States while articulating cranes are more popular in Europe.
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
industries 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 Defence.
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 and long reach
high capacity booms and are capable of traveling from site to site at highway
speeds. These cranes are suitable for urban and suburban uses. Grove Crane
produces 10 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.
INDUSTRIAL CRANES are designed primarily for plant maintenance, storage yard
and material handling jobs. Grove Crane produces 5 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 60 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 on either a telescoping and/or articulating boom or on a vertical
lifting scissor mechanism. The boom truck 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
19 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
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areas over machines or structural obstacles. Grove Manlift produces 20 models of
articulating boom lifts capable of working heights of up to 131 feet and maximum
load capacities of up to 800 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 11
models of telescoping boom lifts capable of working heights of up to 116 feet
and 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 16 models of vertical mast lifts capable of
working heights of up to 46 feet and 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 the 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. The Company manufactures two
types of truck-mounted cranes: telescoping and articulating. The Company also
manufactures 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.
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. While the Company's distributors generally do not sell the
Company's products exclusively, management believes that, in many cases, the
Company's products represent a significant portion of the distributor's
business. Many of Grove Crane's distributors also represent Caterpillar Inc. or
Komatsu Ltd. and, as such, are considered among the best-capitalized in the
industry. Management believes that the strength of its distributor network is an
important competitive advantage. For example, within twelve months after
acquiring the mobile hydraulic crane business of Krupp in August 1995, the
Company leveraged its brand name and distribution network to increase annual
sales from approximately 40 units to approximately 80 units of the cranes
formerly manufactured by Krupp.
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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. The Company believes that its distribution network is one of
its key strengths.
In fiscal 1997, 67% of the Company's unit sales of mobile hydraulic cranes
were derived from units shipped to North American and Latin American
distributors. The Company has longstanding relationships with its 45 North
American and 24 Latin American distributors, of which over 40% have been
distributors for the Company for over 25 years. Shipments to Europe comprised
approximately 21% of the Company's shipments in fiscal 1997 through three
Company stores, located in the U.K., Germany and France, and 42 third-party
distributors. In fiscal 1997, shipments to Asia, Africa and the Middle East
comprised approximately 5%, 4%, and 2% of the Company's unit shipments,
respectively.
AERIAL WORK PLATFORMS
In fiscal 1997, aerial work platforms sold by North American distributors
represented approximately 63% 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. To take advantage of
growth in the aerial work platform market, the Company has increased the number
of North American distributors by 18% since 1992. Approximately 50% of the
Company's North American distributors carry only the Company's aerial work
platforms.
In fiscal 1997, sales to customers in Europe represented approximately 24%
of the Company's units shipped of aerial work platforms. The Company's 13
European distributors 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 50% of
aerial work platform net sales in Europe. Asian customers purchased
approximately 11% of the Company's units shipped in fiscal 1997. 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 2% of the Company's units shipped in fiscal
1997. African and Middle Eastern customers purchased less than 1% of the
Company's units shipped in fiscal 1997.
TRUCK-MOUNTED CRANES
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. Most of these distributors have been
with the Company for over 15 years. The Company believes that these distributors
account for a significant portion of the U.S. railroad market for articulating
truck-mounted cranes. The Company sells directly to E.I. du Pont de Nemours and
Company, The Hertz Corporation, the Tennessee Valley Authority, Union Pacific
Railroad Corporation and U.S. Rentals, Inc. In fiscal 1997, direct sales
accounted for 9% of all truck-mounted cranes sold by the Company.
END-USERS AND CUSTOMERS
Mobile hydraulic cranes are primarily used by contractors engaged in
industrial, commercial and public works construction and for plant maintenance
and material handling jobs. Aerial work platforms are primarily used by
contractors engaged in residential, commercial and industrial construction and
in maintenance projects. Truck-mounted cranes are primarily used by contractors
engaged in the industrial,
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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 30, 1995, September 28, 1996 and
September 27, 1997, approximately 20%, 20% and 19%, respectively, of the
Company's revenues were generated from sales to six major customers, with no one
customer accounting for more than 5% of total revenue. Approximately 15% and 31%
of the outstanding accounts and notes receivable balance as of September 28,
1996 and September 27, 1997, respectively, were due from these customers.
DEALER FINANCING PROGRAM
The Company offers certain of its distributors up to 360-day inventory
financing. Units sold under this program generate secured notes receivable,
which the Company sells, from time to time, to third party financial
institutions. 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 agreeement 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 360 days on a revolving basis. 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. See Note 4 of Notes to
Unaudited Condensed Financial Statements.
ENGINEERING AND DESIGN
The Company believes that its engineering and design capabilities are among
the Company's major strengths. 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. As part of its ongoing commitment to
provide superior products, the Company intends to intensify its efforts to
design products that meet evolving customer demands and reduce the period from
product conception to product introduction.
The Company believes its investment in systems and techniques will enable it
to continually improve its cost position in the industry. The Company is now
positioned to realize the benefits of this investment as it reduces costs,
improves productivity and product development times, and enhances inventory
management.
MANUFACTURING AND FACILITIES
The Company maintains major manufacturing and engineering facilities in
Shady Grove, Pennsylvania, Sunderland, United Kingdom, 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
service facilities in the United Kingdom, Germany and France, and offices in the
United Arab Emirates, Singapore, Australia and China.
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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) Manufacturing/Storage/Office 775,000 leased
Wilhelmshaven, Germany (2) Manufacturing/Storage/Office 410,400 owned/leased
Storage/Office/Field
Langenfeld, Germany (3) 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 expires on April 30, 2000. The Company has an option to purchase
the facility at any time prior to February 27, 1999 for a nominal amount.
The Company plans to close this facility as a result of recurring operating
losses. See "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 December 31, 2042, respectively.
(3) The lease for the Langenfeld, Germany facility is automatically renewed
annually unless either party gives notice of termination.
(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.
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.
COMPETITION
The markets in which the Company operates are highly competitive. 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
Company believes it benefits from the following competitive advantages: (i)
leading market positions; (ii) a strong brand name and reputation for quality
products and service; (iii) an established network of global distributors; (iv)
a broad product line and (v) a commitment to engineering design and product
innovation. The following table sets forth the Company's primary competitors in
each of its operating divisions:
<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 Genie Industries, JLG Industries, Inc., Sky Jack Inc., 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 valves and controls, hydraulic cylinders, electric controls and
motors, and a variety of other fabricated or manufactured items. Substantially
all materials are normally
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available from multiple suppliers. Current and potential suppliers are evaluated
on a regular basis on their ability to meet the Company's requirements and
standards.
EMPLOYEES
As of September 30, 1998, the Company had a total of approximately 4,960
employees, of which approximately 3,260 were employed in the United States.
Approximately 27% 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 January 1998. 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 SYSTEM
In fiscal 1995, the Company initiated the Year-2000 Project. The Year-2000
Project, which is expected to be completed at the end of the first quarter of
fiscal 1999, will have a total cost of approximately $38.0 million, of which
approximately $35.3 million had been expended at August 29, 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 resource planning 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 yield improved
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 project is expected to render all of the Company's
major computer systems Year-2000 compliant. See "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 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.
The Company is currently developing a remediation program with respect to an
area that has been contaminated by petroleum hydrocarbons at its Shady Grove,
Pennsylvania facility. The Company believes
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<PAGE>
that this contamination is confined to the Shady Grove site and has not migrated
to any adjacent properties. The Company also believes that the costs of
remediating this contamination will not have a material adverse effect on its
financial condition or results of operations.
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 effect on
the Company. The Company is also subject to product liability claims for which
it believes it has adequate insurance.
INTELLECTUAL PROPERTY
The Company's products are sold primarily under the logo
"G-Registered Trademark-", and the trademarks GROVE-Registered Trademark-,
MANLIFT-Registered Trademark-, GROVE WORLDWIDE-Registered Trademark-, G
MANLIFT-Registered Trademark-, G MEGA TRAK-Registered Trademark-,
MAXX-Registered Trademark- and SUPER-MAXX-Registered Trademark-. 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. The Company does not regard any portion of the
Company's business as being dependent upon any single patent or group of
patents.
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<PAGE>
MANAGEMENT
MANAGEMENT COMMITTEE AND EXECUTIVE OFFICERS OF HOLDINGS
The executive officers of Holdings serve at the discretion of the Management
Committee of Holdings (the "Management Committee"). The Management Committee is
identical in composition to the Company's management committee. The following
table sets forth information concerning executive officers of Holdings and the
members of the Management Committee:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Salvatore J. Bonanno................................. 57 Chairman and Chief Executive Officer, Grove Holdings
and Member of each Management Committee
Keith R. Simmons..................................... 48 Secretary
J Taylor Crandall.................................... 43 Member of each Management Committee
Michael L. George.................................... 58 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
</TABLE>
Mr. Bonanno serves as Chairman and Chief Executive Officer of Holdings 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 eliminating 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. Simmons serves as Secretary of Holdings. He has served as the Senior
Vice President, General Counsel and Senior Business Development Officer for
Grove Worldwide since May 1995, and is responsible for managing the legal
affairs of Grove Worldwide and its operating companies and for developing and
implementing all external growth initiatives. From April 1992 to May 1995, he
was Senior Vice President and General Counsel for Grove Worldwide.
Mr. Crandall serves as a member of each Management Committee. Since 1986,
Mr. Crandall has 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 currently a director of Bell & Howell Company, Quaker State
Corporation, Specialty Foods Corporation, Washington Mutual, Inc., Integrated
Orthopedic, Inc. and Signature Resorts, Inc. Mr. Crandall also serves on the
Board of Advisors of FEP Capital Holdings, L.P., and on the Investment
Committees of Insurance Partners 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 currently a Director of Reliant Building Products, Inc.
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<PAGE>
Mr. Grinstein serves as a member of each Management Committee. Since August
1997, Mr. Grinstein has been the non-executive Chairman of Delta Airlines. 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. and Imperial Holly Corp.
Mr. Gruber serves as a member of each Management Committee. Since March
1992, Mr. Gruber has been a Managing Director of Oak Hill Partners, Inc. 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 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 currently
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 of Williams Scotsman, Inc. prior thereto. He has
served as a director 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.
Mr. Scotto serves as a member of each Management Committee. Since 1992, he
has served as a Managing Director of Oak Hill Partners, Inc., the investment
advisor and management company for Acadia Partners, L.P. and Keystone. Mr.
Scotto is currently a director of Holophane Corporation, Ivex Packaging
Corporation and Specialty Foods Corporation.
MANAGEMENT COMMITTEE SUBCOMMITTEES AND FEES
Neither Management Committee has a compensation committee, audit committee
or nominating committee. The members of the Management Committees are not
compensated for their services as such.
EXECUTIVE COMPENSATION
The executive officers of Holdings are not compensated for their services as
such.
DESCRIPTION OF MANAGEMENT OPTION PLAN
In April 1998, Grove Investors adopted the Grove Investors LLC Management
Option Plan (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
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<PAGE>
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 option 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 EBITDA 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.
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."
Mr. Bonanno will also receive an amount equal to the positive difference between
the fair market value of shares of stock of Mr. Bonanno's former employer under
options that Mr. Bonanno held that were not exercisable when he terminated his
previous employment and the exercise price thereof. Further, the Company will
purchase Mr. Bonanno's former residence for $675,000.
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. In addition, the
Company loaned approximately $1.9 million to Mr. Bonanno to finance his
investment in the membership interests of Grove Investors. The loan is evidenced
by two promissory notes which bear interest at a rate per annum equal to the
prime rate of Wells Fargo Bank. The $1.0 million note is due in June 2008 and is
secured by a pledge of Mr. Bonanno's membership interests in Grove Investors.
The second note, for approximately $912,000, is due in June 2005, is unsecured
and will be forgiven upon the occurrence of certain events.
Mr. Shull entered into an executive agreement with the Company in June 1998.
Mr. Shull's term of employment is four months, beginning on June 1, 1998. Mr.
Shull is 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.
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<PAGE>
Mr. Cripe entered into an employment arrangement with the Company in July
1998. Under his arrangement, Mr. Cripe is entitled to an annual salary of
$250,000, STIP awards and severance payments. See "--Short-Term Incentive Plan."
In addition, Mr. Cripe will be compensated for the loss of certain payments that
he would have been entitled to if he had not terminated his previous employment.
He will also receive certain payments to compensate him for stock options that
were not exercisable when he terminated such employment. Mr. Cripe was also
granted an option under the Option Plan to purchase membership interests of
Grove Investors. See "--Description of Management Option Plan."
TERMINATION AND CHANGE OF CONTROL AGREEMENTS
Effective March 1, 1997, each of Messrs. Heidinger, Kolinski, Shull,
Simmons, Sliwa 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 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. Subject
to the terms of Mr. Shull's 1998 executive agreement, he has waived any rights
under his change of control agreement. See "--Employment Arrangements."
SHORT-TERM INCENTIVE PLAN
The Company's short-term incentive plan (the "STIP"), will permit 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
will be administered by the Committee of the Company or any person or persons
designated by the Committee to administer the STIP.
MANAGEMENT OF GROVE HOLDINGS CAPITAL
Messrs. Henske, Scotto and Bonanno are the directors of Grove Holdings
Capital. They are not compensated in any way for acting in their capacity as
such. The board of directors of Grove Holdings Capital does not have a
compensation committee, audit committee or nominating committee.
Mr. Bonanno is the Chief Executive Officer of Grove Holdings Capital. Mr.
Simmons is the Secretary of Grove Holdings Capital. Neither of the executive
officers of Grove Holdings Capital are compensated as such. See "--Management
Committee and Executive Officers of Holdings" for biographical information on
the members and executive officers of Grove Holdings Capital.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
All of the issued and outstanding membership interests of the Company are
beneficially owned by Holdings, whose principal address is 201 Main Street, Fort
Worth, Texas 76102. All shares of the issued and outstanding capital stock of
Grove Holdings Capital are beneficially owned by Holdings. All of the issued and
outstanding membership interests of 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
Holdings, by (i) each member of the Management Committee individually, (ii) each
Named Executive Officer and (iii) all executive officers and members of the
Management Committee as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF
GROVE INVESTORS
NAME OF BENEFICIAL OWNER MEMBERSHIP INTERESTS
- ------------------------------------------------------------------------------------------------------------ ---------------------
<S> <C>
FW Strategic Partners, L.P. (1)............................................................................. 43.83%
FW Grove Coinvestors, L.P. (2).............................................................................. 43.83%
GGEP-Grove, L.P............................................................................................. 2.68%
Squam Lake Investors, II, L.P............................................................................... *
Sunapee Securities, Inc..................................................................................... *
DLJ Capital Corporation..................................................................................... 1.27%
J Crandall.................................................................................................. --
M. George................................................................................................... 1.90%
G. Grinstein................................................................................................ --
S. Gruber................................................................................................... --
R. Henske................................................................................................... --
G. Holthaus................................................................................................. --
A. Scotto................................................................................................... --
S. Bonanno(3)............................................................................................... 2.67%
K. Simmons.................................................................................................. --
All executive officers and members of the Management Committee as a group (9 persons)....................... 4.57%
</TABLE>
- ------------------------
* Indicates less than one percent.
(1) The address of this entity is 201 Main Street, Suite 3200, Fort Worth, Texas
76102. 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) The address of this entity is 201 Main Street, Suite 3200, Fort Worth, Texas
76102. 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.
(3) Mr. Bonanno has options to acquire up to an additional 2.0% of the
outstanding membership interests of Grove Investors, calculated as of the
Closing Date.
Certain members of Senior Management of the Company (the "Senior Management
Members") have purchased approximately 5.0% of the membership interests of Grove
Investors. The purchase price of such interests was partially financed through
approximately $2.7 million in loans from the Company. The Senior Management
Members have also been granted options to purchase membership interests of Grove
Investors under the Option Plan. See "Management--Description of Management
Option Plan." Grove Investors membership interests held by Senior Management
Members are subject to calls by Grove Investors upon termination of employment.
See "Management--Description of Management Option Plan."
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OPERATING AGREEMENTS
GROVE WORLDWIDE LLC OPERATING AGREEMENT
The Company is wholly owned by Holdings, which is also the managing member.
As managing member, Holdings has delegated the management of the Company to the
Company's management committee. Subject to restrictions contained in the New
Credit Facility, all distributions in respect of membership interests of the
Company will be made to Holdings.
GROVE HOLDINGS LLC OPERATING AGREEMENT
Grove Holdings is wholly owned by Grove Investors, which is also the
managing member. As managing member, Grove Investors has delegated the
management of the Company to the Management Committee, which is identical in
composition to the Company's management committee. Subject to restrictions
contained in the Debenture Indenture, all distributions in respect of membership
interests of 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 strategic planning, operations and financial matters. For such
services, George Group will be paid cash fees equivalent to their costs and will
be reimbursed for its out-of-pocket expenses. George Group has advised the
Company that it estimates its engagement will be completed within 48 months and
that the total cash fees and expenses would approximate $14 million. 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 of George Group. See "The
Acquisition."
AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS
The Company has entered into certain agreements with Messrs. Bonanno, Stift,
Simmons, Urbanek, Kolinski and Shull. See "Management --Employment Arrangements"
and "--Termination and Change of Control Agreements." In addition, the Company
has entered into an executive agreement with Mr. Shull. See "Management
- --Employment Arrangements."
LOANS TO CERTAIN EXECUTIVE OFFICERS
The Company has provided approximately $2.7 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 a $912,000 note made by Mr. Bonanno, are secured by a pledge of
the executive's membership interests in Grove Investors and are due in June
2008. As of September 30, 1998, Mr. Bonanno, Mr. Bust, Mr. Kolinski and Mr. John
Wheeler, the Company's Senior Vice President of Worldwide Operations, were
indebted to the Company in the amount of approximately $1.9 million $375,000,
$250,000 and $150,000. respectively.
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 "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations." Prior to the
consummation of the Transactions, Hanson also purchased small quantities of the
Company's products on an arm's-length basis.
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<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW CREDIT FACILITY
As part of the Transactions, the Company entered into the New Credit
Facility with a syndicate of banks, as lenders, and Chase, as administrative
agent, DLJ, as documentation agent, and BankBoston, as syndication agent. Each
of Chase and DLJ is an affiliate of one of the Initial Purchasers. The New
Credit Facility consists of a $200 million term loan facility (the "Term Loan
Facility") and a $125 million revolving credit facility (the "Revolving Credit
Facility"). The Revolving Credit Facility enables the Issuers to obtain
revolving credit loans and the issuance of letters of credit for the account of
the Company from time to time 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 New Credit Facility will bear interest (a) in
the case of loans in U.S. dollars, at the highest of (x) 1 of 1% 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 Agent'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) as determined by the Agent, plus the Applicable Margin. The
Company will also pay certain fees with respect to the New Credit Facility. The
Term Loan Facility has a term of eight years unless terminated sooner upon an
event of default (as defined in the New Credit Facility). The Term Loan Facility
must be repaid in semi-annual installments until the date that is eight years
after the closing date of the Term Loan Facility (the "Closing Date") in an
aggregate amount for each year following the Closing Date of (i) $2 million for
the first six years, (ii) $88 million during the seventh year and (iii) $100
million during the eighth year. The Revolving Credit Facility has a term of
seven years, unless terminated sooner upon an event of default, and outstanding
revolving credit loans will be payable on such date or such earlier date as may
be accelerated following the occurrence of any event of default.
The obligations of the Company under the New Credit Facility are guaranteed
by Holdings and each of the Company's domestic subsidiaries (the "Guarantors").
The obligations of the Company under the New 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, all of the capital stock of the Company's
domestic subsidiaries and 65% of the capital stock of the Company's first-tier
foreign subsidiaries (such amount to be increased to 100% for a first-tier
foreign subsidiary if, and only for so long as, (i) such first-tier foreign
subsidiary has elected, and continues to elect, to be treated as a partnership
for United States federal income tax purposes (any such first-tier foreign
subsidiary, a "Partnership Subsidiary"), and (ii) the pledge of the greater
percentage does not result in material adverse tax consequences). Each
Partnership Subsidiary will pledge its equity interests in its subsidiaries to
secure any intercompany notes owing by it, but only so long as (i) such
Partnership Subsidiary continues to elect to be treated as a partnership for
United States federal income tax purposes and (ii) such pledge does not result
in material adverse tax consequences.
The New Credit Facility contains various covenants that restrict the Company
from taking various actions and that require the Company to achieve and maintain
certain financial covenants. The New Credit Facility includes covenants relating
to balance sheet, fixed charge coverage and leverage ratios, and limitations on,
among other things, capital expenditures, liens, indebtedness, guarantees,
mergers, acquisitions, disposition of assets, dividends, changes in business
activities and certain corporate activities. The New Credit Facility prohibits
the Company from prepaying the Notes.
The New Credit Facility also contains events of default, including
nonpayment of principal, interest or fees, violation of covenants, inaccuracy of
representations or warranties in any material respect, cross default and cross
acceleration to certain other indebtedness, bankruptcy, ERISA, material
judgments and certain changes in control of the Company or Holdings.
Oak Hill Securities Fund, L.P. ("OHSF") participated as a lender in the Term
Loan Facility and received customary fees in connection therewith. OHSF is a
Delaware limited partnership that acquires and actively manages a diverse
portfolio of investments principally in leveraged companies. Certain principals
of the general partner of OHSF and Oak Hill Advisors, Inc., the adviser of OHSF,
have business relationships with Keystone, and Keystone has an equity investment
in OHSF. Keystone is a member of the Investor Group. See "The Transactions."
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DESCRIPTION OF DEBENTURES
GENERAL
The Senior Discount Debentures were, and the Exchange Debentures will be,
issued pursuant to the Indenture between the Issuers and the Trustee, in a
private transaction that was not subject to the registration requirements of the
Securities Act. The form and terms of the Exchange Debentures are identical in
all material respects to those of the Senior Discount Debentures, except for
certain transfer restrictions and registration rights relating to the Existing
Debentures, which do not apply to the Exchange Debentures. The terms of the
Debentures include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act. The Debentures are subject to
all such terms, and Holders of Debentures are referred to the Indenture and the
Trust Indenture Act for a statement thereof. The following summary of the
material provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. Copies of the proposed form of
Indenture and Registration Rights Agreement are available as set forth below
under "--Additional Information." The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions." For
purposes of this summary, the term "Holdings" refers only to Grove Holdings LLC
and not to any of its Subsidiaries.
The Debentures are general unsecured obligations of the Issuers, rank equal
in right of payment with all existing and future senior indebtedness of the
Issuers and rank senior in right of payment to all subordinated indebtedness of
the Issuers. As indebtedness of the Issuers, however, the Debentures are
effectively subordinated to all indebtedness of Grove and its other
Subsidiaries. As of August 29, 1998, the Debentures were subordinated to
approximately $685.9 million of liabilities of Grove and its other Subsidiaries.
See "Risk Factors--Holding Company Structure; Effective Subordination."
The operations of Holdings are conducted through its Subsidiaries and,
therefore, the Issuers are dependent upon the cash flow of such Subsidiaries to
meet their obligations, including their obligations under the Debentures. As of
April 29, 1998, all of Holdings' Subsidiaries were Restricted Subsidiaries.
However, under certain circumstances, Holdings will be able to designate current
or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries
will not be subject to many of the restrictive covenants set forth in the
Indenture.
Grove Holdings Capital is a wholly owned subsidiary of Holdings that was
incorporated in Delaware solely for the purpose of serving as a co-issuer of the
Debentures in order to facilitate the Offering. Holdings believed that certain
prospective purchasers of the Senior Discount Debentures may have been
restricted in their ability to purchase debt securities of limited liability
companies, such as Holdings, unless such debt securities are jointly issued by a
corporation. Other than serving as a co-issuer of the Debentures and any
additional Debentures subsequently issued after the Offering, Grove Holdings
Capital does not have any assets, operations or revenues and is prohibited from
engaging in any business activities. As a result, holders of the Debentures
should not expect Grove Holdings Capital to participate in servicing the
interest and principal obligations on the Debentures.
PRINCIPAL, MATURITY AND INTEREST
The Debentures are limited in aggregate principal amount to $150.0 million
at maturity of which $88.0 million at maturity was issued in the Offering. The
Debentures will mature on May 1, 2009. The Debentures will accrete at a rate of
11 5/8% per annum, compounded semi-annually to an aggregate principal amount of
$88.0 million. Thereafter, interest on the Debentures will accrue at the rate of
11 5/8% per annum and will be payable semi-annually in arrears on May 1 and
November 1 of each year, commencing November 1, 2003, to Holders of record on
the immediately preceding April 15 and October 15. No cash interest will be
payable on the Debentures prior to May 1, 2003. Additional Debentures may be
issued from time to time after the Offering, subject to the provisions of the
Indenture described below under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of
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Disqualified Stock." The Debentures offered hereby and any additional Debentures
subsequently issued would be treated as a single class for all purposes under
the Indenture, including without limitations, waivers, amendments, redemptions
and offers to purchase. Interest on the Debentures will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from May 1, 2003. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium and Liquidated Damages, if
any, and interest on the Debentures will be payable at the office or agency of
the Issuers maintained for such purpose within the City and State of New York
or, at the option of the Issuers, payment of principal, premium, interest and
Liquidated Damages, if any, may be made by check mailed to the Holders of the
Debentures at their respective addresses set forth in the register of Holders of
Debentures; provided that all payments of principal, premium, interest and
Liquidated Damages, if any, with respect to Debentures the Holders of which have
given wire transfer instructions to the Issuers will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Issuers, the Issuers' office
or agency in New York will be the office of the Trustee maintained for such
purpose. The Debentures will be issued in denominations of $1,000 and integral
multiples thereof.
OPTIONAL REDEMPTION
The Debentures are redeemable at any time at the option of the Issuers, in
whole or in part upon not less than 30 nor more than 60 days' notice, in cash at
the redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on May 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2003.............................................................................. 105.813%
2004.............................................................................. 103.875%
2005.............................................................................. 101.938%
2006 and thereafter............................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to May 1, 2001, the Issuers
may (but will not have the obligation to) on any one or more occasions redeem up
to 35% of the aggregate principal amount at maturity of Debentures originally
issued at a redemption price equal to 111.625% of the Accreted Value (determined
at the date of redemption) thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the redemption date, with the net cash
proceeds of one or more Public Equity Offerings; PROVIDED that at least 65% of
the aggregate principal amount at maturity of Debentures originally issued
remain outstanding immediately after the occurrence of such redemption
(excluding Debentures held by Holdings and its Subsidiaries); and PROVIDED,
FURTHER, that such redemption shall occur within 60 days of the date of the
closing of such Public Equity Offering.
SELECTION AND NOTICE
If less than all of the Debentures are to be redeemed or repurchased at any
time, selection of Debentures for redemption or repurchase will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Debentures are listed, or, if the Debentures are
not so listed, on a pro rata basis, by lot or by such method as the Trustee
shall deem fair and appropriate; PROVIDED that no Debentures of $1,000 or less
shall be redeemed in part. Notices of redemption shall be mailed by first class
mail at least 30 but not more than 60 days before the redemption date to each
Holder of Debentures to be redeemed at its registered address. Notices of
redemption or repurchase may not be conditional. If any Debenture is to be
redeemed or repurchased in part only, the notice of redemption or repurchase
that relates to such Debenture shall state the portion of the principal amount
thereof to be redeemed or repurchased. A new Debenture in principal amount equal
to the
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unredeemed or unrepurchased portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Debenture. Debentures called
for redemption or repurchase become due on the date fixed for redemption or
repurchase. On and after the redemption or repurchase date, interest and
Liquidated Damages ceases to accrue on Debentures or portions of them called for
redemption or repurchase.
MANDATORY REDEMPTION
The Issuers are not required to make mandatory redemption or sinking fund
payments with respect to the Debentures.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Debentures will
have the right to require the Issuers to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Debentures pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the Accreted Value thereof on the date of purchase (if
such date of purchase is prior to May 1, 2003) or 101% of the aggregate
principal amount thereof (if such date of purchase is on or after May 1, 2003)
plus, in each case, accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase (the "Change of Control Payment"). Within 30
days following any Change of Control, the Issuers will mail a notice to each
Holder describing the transaction or transactions that constitute the Change of
Control and offering to repurchase Debentures on the date specified in such
notice, which date shall be no earlier than 30 days and no later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by the Indenture and described in such
notice. The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Debentures as a result of a Change of Control. To the extent
that the provisions of any securities laws or regulations directly conflict with
the provisions of the Indenture relating to such Change of Control Offer, the
Company will comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations described in the Indenture
by virtue thereof.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (1) accept for payment all Debentures or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all
Debentures or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Debentures so accepted together with an Officers'
Certificate stating the aggregate principal amount of Debentures or portions
thereof being purchased by the Issuers. The Paying Agent will promptly mail to
each Holder of Debentures so tendered the Change of Control Payment for such
Debentures, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Debenture equal in principal
amount to any unpurchased portion of the Debentures surrendered, if any;
PROVIDED that each such new Debenture will be in a principal amount of $1,000 or
an integral multiple thereof. The Issuers will publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Debentures to require that the Issuers
repurchase or redeem the Debentures in the event of a takeover, recapitalization
or similar transaction. Due to Change of Control repayment provisions in certain
indebtedness of Holdings' Subsidiaries (including the Senior Discount
Debentures) and the existence of a Change of Control event of
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default in the New Credit Facility, it is unlikely that the Issuers would be
able to repurchase all of the Debentures upon the occurrence of a Change of
Control. See "Risk Factors--Limitations on Ability to Make Change of Control
Payment." In addition, the Debentures will rank equal in right of payment with
other senior Indebtedness of Holdings. The ability of Holdings to redeem all of
the Debentures upon a Change of Control may also be limited by restrictions on
the ability of Holdings' Subsidiaries to pay dividends to Holdings. Finally, the
Debentures will be effectively subordinated to Obligations of Subsidiaries of
Holdings, including with respect to Change of Control Payments. See "--General."
The Issuers will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Issuers and
purchases all Debentures validly tendered and not withdrawn under such Change of
Control Offer.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of Holdings and its Subsidiaries (determined on
a consolidated basis), to any "person" (as such term is used in Section 13(d)(3)
of the Exchange Act) other than Holdings or a Wholly Owned Restricted Subsidiary
or any Permitted Holder or Permitted Holders, (ii) the adoption of a plan
relating to the liquidation or dissolution of one of both of the Issuers (other
than in a transaction which complies with the provisions described under
"--Merger, Consolidation or Sale of Assets"), (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other than one or more
Permitted Holders, becomes the "beneficial owner" (as such term is defined in
Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is currently exercisable or is exercisable
only upon the occurrence of a subsequent condition), directly or indirectly, of
more than 50% of the Voting Stock of Holdings (measured by voting power rather
than number of shares) and the Permitted Holders do not beneficially own as much
or more of the Voting Stock of Holdings (measured by voting power rather than by
number of shares) than such person, (iv) the first day on which a majority of
the members of the Management Committee of Holdings are not Continuing Members
or (v) the first day on which Holdings fails to own 100% of the issued and
outstanding Equity Interests of Grove Holdings Capital (other than by reason of
the merger of Grove Holdings Capital with and into a corporate successor to
Holdings).
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Holdings and its Subsidiaries (determined on a consolidated
basis). Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Debentures to
require the Issuers to repurchase such Debentures as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of the assets of
Holdings and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
"Continuing Members" means, as of any date of determination, any member of
the Management Committee of Holdings who (i) was a member of such Management
Committee on the date of the Indenture or (ii) was nominated for election or
elected to such Management Committee with the approval of a majority of the
Continuing Members who were members of such Management Committee at the time of
such nomination or election.
"Permitted Holders" means (i) any of Keystone, Inc., FW Grove Coinvestors,
L.P., FW Strategic Partners, L.P., George Group Employee Partners--Grove, L.P.
and Michael George and their respective Affiliates on the date of the Indenture;
(ii) any of the Permitted Transferees of the Persons referred to in clause (i);
and (iii) any person or group which holds, directly or indirectly, Equity
Interests in Holdings so
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long as a majority of the Equity Interests in Holdings are beneficially owned by
the Persons referred to in clauses (i) and (ii).
"Permitted Transferee" means, with respect to any Person: (a) in the case of
any Person who is a natural person, such individual's spouse or children, any
trust for such individual's benefit or the benefit of such individual's spouse
or children, or any corporation, partnership, limited liability company or
similar entity in which the direct and beneficial owner or owners of 80% or more
of the Equity Interests in such Person or such individual's spouse or children
or any trust for the benefit of such Persons; and (b) in the case of any Person
who is a natural person, the heirs, executors, administrators or personal
representatives upon death of such Person or upon the incompetence or disability
of such Person for purposes of the protection and management of such
individual's assets.
ASSET SALES
The Indenture provides that Holdings will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) Holdings (or
the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Management Committee set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by Holdings or such Restricted Subsidiary is in the form of cash and
Cash Equivalents; provided that the amount of (x) any liabilities (as shown on
the Holding's or such Restricted Subsidiary's most recent balance sheet), of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Debentures or any
guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases Holdings or such
Restricted Subsidiary from further liability and (y) any securities, Debentures
or other obligations received by Holdings or any such Restricted Subsidiary from
such transferee that are converted by Holdings or such Restricted Subsidiary
into cash (to the extent of the cash received) within 60 days following the
closing of such Asset Sale, shall be deemed to be cash for purposes of this
provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
Holdings or any of its Restricted Subsidiaries may apply such Net Proceeds, at
its option, (a) to repay Senior Debt (as defined in the Senior Subordinated Note
Indenture) or the Senior Discount Debentures, (b) to the acquisition of a
majority of the assets of, or a majority of the Voting Stock of, another
Permitted Business, the making of a capital expenditure or the acquisition of
other long-term assets that are used or useful in a Permitted Business or (c)
for a combination of uses described in clauses (a) and (b). Pending the final
application of any such Net Proceeds, Holdings and its Restricted Subsidiaries
may temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $10.0 million, the Issuers will
be required to make an offer to all Holders of Debentures (an "Asset Sale
Offer") to purchase the maximum principal amount of Debentures that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the Accreted Value thereof on the date of purchase (if such
date of purchase is prior to May 1, 2003) or 100% of the principal amount
thereof on the date of purchase (if such purchase date is on or after May 1,
2003) plus, in each case, accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of repurchase, in accordance with the procedures
set forth in the Indenture. To the extent that any Excess Proceeds remain after
consummation of an Asset Sale Offer, Holdings may use such Excess Proceeds for
any purpose not otherwise prohibited by the Indenture. If the aggregate
principal amount of Debentures tendered into such Asset Sale Offer surrendered
by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall
select the Debentures to be purchased on a pro rata basis. Upon completion of
such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
Notwithstanding the foregoing, Holdings will not be
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required to make an Asset Sale Offer if (i) Holdings' obligation to make such
Asset Sale Offer is due to an Asset Sale by one or more of Holdings'
Subsidiaries, (ii) as a result of such Asset Sale (or Asset Sales) Grove is
required to make and does make an offer similar to an Asset Sale Offer to the
Holders of the Senior Discount Debentures in accordance with the terms of the
Senior Subordinated Note Indenture and (iii) to the extent that the aggregate
amount of Senior Discount Debentures tendered pursuant to such offer is less
than the Excess Proceeds, Holdings makes an Asset Sale Offer to all Holders of
Debentures with such remaining Excess Proceeds.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that Holdings will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of Holdings' or
any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
Holdings or any of its Restricted Subsidiaries) or to the direct or indirect
holders of Holdings' or any of its Restricted Subsidiaries' Equity Interests in
their capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of Holdings or dividends or
distributions payable to Holdings or a Restricted Subsidiary of Holdings); (ii)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving the
Issuers) any Equity Interests of Holdings (other than Equity Interests owned by
Holdings or any Restricted Subsidiary of Holdings) or any direct or indirect
parent of Holdings; (iii) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is subordinated to the Debentures (other than any subordinated indebtedness held
by Holdings), except a payment of interest or principal at Stated Maturity; or
(iv) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) Holdings would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "--Incurrence of Indebtedness and Issuance
of Disqualified Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Holdings and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv), (vi), (viii), (x), (xi) and (xiii) of the next
succeeding paragraph), is less than the sum, without duplication, of (i) 50%
of the Consolidated Net Income of Holdings for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing
after the date of the Indenture to the end of Holdings' most recently ended
fiscal quarter for which internal financial statements are available at the
time of such Restricted Payment (or, if such Consolidated Net Income for
such period is a deficit, less 100% of such deficit), plus (ii) 100% of the
aggregate net cash proceeds received by Holdings since the date of the
Indenture as a contribution to its equity capital or from the issue or sale
of Equity Interests of Holdings (other than Disqualified Stock) or from the
issue or sale of Disqualified Stock or debt securities of Holdings that have
been converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
Holdings), plus (iii) to the extent that any Restricted Investment that was
made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of capital
with respect to such
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Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (iv) 50% of any dividends
received by Holdings or a Wholly Owned Restricted Subsidiary after the date
of the Indenture from an Unrestricted Subsidiary of Holdings, to the extent
that such dividends were not otherwise included in Consolidated Net Income
of Holdings' for such period, plus (v) to the extent that any Unrestricted
Subsidiary is redesignated as a Restricted Subsidiary after the date of the
Indenture, the lesser of (A) the fair market value of the Holdings'
Investment in such Subsidiary as of the date of such redesignation or (B)
such fair market value as of the date on which such Subsidiary was
originally designated as an Unrestricted Subsidiary.
The foregoing provisions will not prohibit: (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any PARI PASSU or subordinated Indebtedness or Equity Interests
of Holdings in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of Holdings) of, other
Equity Interests of Holdings (other than any Disqualified Stock); PROVIDED that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (c) (ii) of the preceding paragraph; (iii) the defeasance,
redemption, repurchase or other acquisition of subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(iv) the payment of any dividend or making of any distribution by a Subsidiary
of Holdings to the holders of its Equity Interests on a pro rata basis; (v) the
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of Grove Investors, Holdings or any Subsidiary of Holdings held
by any former member of Holdings' (or any of its Subsidiaries') Management
Committee or any former officer, employee or director of Holdings or any of its
Subsidiaries pursuant to the Holdings Operating Agreement or Grove Investors
Operating Agreement, any equity subscription agreement, stock option agreement,
employment agreement or other similar agreement and any dividends or
distributions to Grove Investors to fund such purchase, redemption or other
acquisition or retirement; PROVIDED that (A) the aggregate price paid for all
such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed (1) $5.0 million in any calendar year (with unused amounts in any
calendar year being carried over to succeeding calendar years subject to a
maximum (without giving effect to clause (2)) of $10.0 million PLUS (2) the
aggregate cash proceeds received by Holdings during such calendar year from any
reissuance of Equity Interests by Grove Investors, Holdings or the Company to
members of management of Holdings and its Restricted Subsidiaries and (B) no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction; PROVIDED, FURTHER that the aggregate cash proceeds
referred to in (2) above shall be excluded from clause (c)(ii) of the preceding
paragraph; (vi) so long as Holdings is a limited liability company either
treated as a partnership or disregarded as an entity separate from its owner for
federal income tax purposes (as evidenced by a certificate of an officer of
Holdings, prepared based on such officer's best knowledge, at least annually),
distributions to members of Holdings in an amount with respect to any period
after December 31, 1997 not to exceed the Tax Amount of Holdings for such
period; PROVIDED, HOWEVER, that such distributions shall be allowed to be made
quarterly based on an estimation and after the end of a taxable year based on
the partnership tax return of Holdings (or, if Holdings is disregarded as an
entity separate from its owner, its nearest owner that is not so disregarded)
for such taxable year (or at such other times as reasonably appropriate
including in connection with an audit adjustment), taking into account any
previous payments of Tax Amount for such taxable year or, if Holdings becomes
included in a consolidated tax group for federal income tax purposes, payments
to the common parent of the taxable group in an amount, with respect to any
period after December 31, 1997, not to exceed the tax liability attributable to
Holdings and its Subsidiaries on a stand-alone basis for such period; (vii) any
Investment to the extent that the consideration therefor consists of the net
cash proceeds of the concurrent issue and sale (other than to a Restricted
Subsidiary) of Equity Interests of Holdings (other than any Disqualified Stock);
(viii) the payment of dividends or the making of loans or advances for costs and
expenses incurred by Grove Investors or Holdings in its capacity as a holding
company in an aggregate amount not to exceed
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$2.0 million in each calendar year pursuant to this clause (viii); (ix) so long
as no Default or Event of Default has occurred and is continuing and Holdings
can incur at least $1.00 of additional indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant described
below under caption "--Incurrence of Indebtedness and Issuance of Disqualified
Stock," the declaration and payment of dividends to holders of any class or
series of Disqualified Stock of Holdings, issued after the date of the Indenture
in accordance with the covenant described below under the caption "Incurrence of
Indebtedness and Issuance of Disqualified Stock"; (x) Investments made by
Holdings or one of its Restricted Subsidiaries within 30 days of the date of the
Indenture, the proceeds of which are used to fund the Transactions or capitalize
Restricted Subsidiaries; (xi) repurchase of Equity Interests deemed to occur
upon exercise of stock options if such Equity Interests represent a portion of
the exercise price of such options; (xii) Restricted Investments having an
aggregate fair market value, taken together with all other Restricted
Investments made pursuant to this clause (xii) that are at that time
outstanding, not to exceed $30.0 million (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value); (xiii) distributions or payments of Receivables
Fees; (xiv) dividends or distributions to Grove Investors to fund severance
costs incurred by Grove Investors in connection with the Transactions and (xv)
Restricted Payments not to exceed $20.0 million since the date of the Indenture.
The Management Committee may designate any Restricted Subsidiary, other than
Grove Holdings Capital, to be an Unrestricted Subsidiary if such designation
would not cause a Default. For purposes of making such determination, all
outstanding Investments by Holdings and its Restricted Subsidiaries (except to
the extent repaid in cash) in the Subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation and will reduce the amount
available for Restricted Payments under the first paragraph of this covenant.
All such outstanding Investments will be deemed to constitute Investments in an
amount equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary.
For purposes of determining compliance with this covenant, in the event that
a Restricted Payment meets the criteria of more than one of the exceptions
described in (i) through (xiv) above or is entitled to be made pursuant to the
first paragraph of this covenant, Holdings shall, in its sole discretion,
classify such Restricted Payment in any manner that complies with the covenant.
The amount of all Restricted Payments (other than cash) shall be the fair market
value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by Holdings or such Restricted Subsidiary,
as the case may be, pursuant to the Restricted Payment. The fair market value of
any non-cash Restricted Payment shall be determined by the Management Committee
whose resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5.0 million. Not later than the date of making any Restricted
Payment, the Issuers shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "Restricted Payments" were
computed, together with a copy of any fairness opinion or appraisal required by
the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The Indenture provides that Holdings will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that Holdings will not issue any Disqualified Stock and will
not permit any of its Subsidiaries to issue any shares of Disqualified Stock;
PROVIDED, HOWEVER, that the Issuers may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock and Holdings' Subsidiaries may incur
Indebtedness or issue preferred equity if the Fixed Charge Coverage Ratio for
Holdings' most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding
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the date on which such additional Indebtedness is incurred or such Disqualified
Stock is issued would have been at least 1.75 to 1, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant does not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Issuers and the Restricted Subsidiaries of
Indebtedness under the New Credit Facility; PROVIDED that the aggregate
principal amount of all term Indebtedness outstanding under the New Credit
Facility after giving effect to such incurrence does not exceed an amount
equal to $200.0 million plus (in the case of any refinancing thereof) the
aggregate amount of fees, underwriting discounts, premiums and other costs
and expenses incurred in connection with such refinancing less the aggregate
amount of all scheduled or mandatory repayments of the principal of any term
Indebtedness under the New Credit Facility (other than repayments that are
immediately reborrowed) that have been made since the date of the Indenture;
(ii) the incurrence by the Issuers and the Restricted Subsidiaries of
Indebtedness and letters of credit under Credit Facilities; PROVIDED that
the aggregate principal amount of all revolving credit Indebtedness (with
letters of credit being deemed to have a principal amount equal to the
maximum face amount thereunder) outstanding under all Credit Facilities
after giving effect to such incurrence does not exceed an amount equal to
the greater of (A) the amount of the Borrowing Base and (B) $125.0 million
less, in the case of clause (B), the aggregate amount of all Net Proceeds of
Asset Sales applied to permanently reduce revolving credit commitments under
a Credit Facility pursuant to the covenant described above under the caption
"--Asset Sales";
(iii) the incurrence by Holdings and its Restricted Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence by (A) the Issuers of Indebtedness represented by
the Debentures sold in the Offering and (B) the incurrence by Grove and
Grove Capital of Indebtedness represented by the Senior Subordinated Notes
and the incurrence by the Subsidiary Guarantors (as defined in the Senior
Subordinated Note Indenture) of Indebtedness represented by the guarantees
of such Senior Subordinated Notes;
(v) the incurrence by Holdings or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations or similar financings, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of Holdings or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $10.0 million at any time outstanding;
(vi) the incurrence by Holdings or any of its Restricted Subsidiaries of
Indebtedness in connection with the acquisition of assets or a new
Subsidiary; PROVIDED that such Indebtedness was incurred by the prior owner
of such assets or such Subsidiary prior to such acquisition by Holdings or
one of its Restricted Subsidiaries and was not incurred in connection with,
or in contemplation of, such acquisition by Holdings or one of it Restricted
Subsidiaries; and PROVIDED further that the principal amount (or accreted
value, as applicable) of such Indebtedness, together with any other
outstanding Indebtedness incurred pursuant to this clause (vi) and any
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (vi), does not exceed
$10.0 million;
(vii) the incurrence by Holdings or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred under the first paragraph hereof or clauses (iii), (iv), (v), (vi)
or (x) of this paragraph;
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(viii) the incurrence by Holdings or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among Holdings and any of its Wholly
Owned Subsidiaries, including a pledge of assets in connection therewith;
PROVIDED, HOWEVER, that (i) if one of the Issuers is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Debentures
and (ii)(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than Holdings
or a Restricted Subsidiary thereof and (B) any sale or other transfer of any
such Indebtedness to a Person that is not either Holdings or a Wholly Owned
Restricted Subsidiary thereof shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by Holdings or such Restricted
Subsidiary, as the case may be, that was not permitted by this clause
(viii);
(ix) the incurrence by Holdings or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
(i) interest rate risk with respect to any floating rate Indebtedness that
is permitted by the terms of this Indenture to be outstanding, (ii) the
value of foreign currencies purchased or received by Holdings in the
ordinary course of business as conducted by Holdings or (iii) commodity risk
relating to commodity agreements to the extent entered into in the ordinary
course of business to protect Holdings and its Restricted Subsidiaries from
fluctuations in the prices of raw materials used in its business;
(x) the incurrence by Holdings or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (x), not to exceed $40.0 million;
(xi) the incurrence by Holdings' Unrestricted Subsidiaries of
Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of Holdings that was not permitted by this clause (xi);
(xii) the Guarantee by Issuers or any of its Restricted Subsidiaries of
Indebtedness of Holdings or a Subsidiary of Holdings, which Indebtedness was
permitted to be incurred by another provision of this covenant;
(xiii) the incurrence of Indebtedness (including letters of credit) in
respect of workers' compensation claims, self-insurance obligations,
performance, surety, bid or similar bonds and completion guarantees provided
by Holdings or a Restricted Subsidiary in the ordinary course of business
and consistent with past practices;
(xiv) the incurrence of Indebtedness, including Guarantees, by Holdings
or any of its Restricted Subsidiaries in connection with a Dealer Financing
Program;
(xv) the incurrence of Equipment Financing Guarantees; and
(xvi) the incurrence of Indebtedness arising from agreements of Holdings
or any Restricted Subsidiary providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or assumed in
connection with the disposition or acquisition of any business, assets or
Capital Stock of a Subsidiary; PROVIDED that the maximum aggregate liability
of such Indebtedness shall at no time exceed the gross proceeds actually
received by Holdings and its Restricted Subsidiaries in connection with any
such disposition or the gross proceeds actually paid by Holdings and its
Restricted Subsidiaries in connection with any such acquisition.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xvi) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Issuers shall, in
their sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant. Accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any
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Indebtedness in the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this covenant;
PROVIDED, in each such case, that the amount thereof is included in Fixed
Charges of Holdings as accrued.
LIENS
The Indenture provides that the Issuers will not, and will not permit any of
their Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien securing Indebtedness or trade payables on any asset
now owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that Holdings will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to Holdings or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to Holdings or any of
its Restricted Subsidiaries, (ii) make loans or advances to Holdings or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
Holdings or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the date of the Indenture,
(b) the New Credit Agreement as in effect as of the date of the Indenture, and
any amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, PROVIDED that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the New Credit Agreement as in effect on the date of the Indenture, (c) the
Debentures, the Indenture, the Senior Discount Debentures and the Senior
Subordinated Note Indenture, (d) applicable law, (e) any instrument governing
Indebtedness or Capital Stock of a Person acquired by Holdings or any of its
Restricted Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, PROVIDED that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (f) customary non-assignment provisions in leases and other
agreements entered into in the ordinary course of business and consistent with
past practices, (g) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, (h) any agreement for the sale
of a Restricted Subsidiary that restricts distributions by that Restricted
Subsidiary pending its sale, (i) Permitted Refinancing Indebtedness, PROVIDED
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced, (j)
secured Indebtedness otherwise permitted to be incurred pursuant to the
provisions of the covenant described above under the caption "--Liens" that
limits the right of the debtor to dispose of the assets securing such
Indebtedness, (k) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business, (l) restrictions on cash or
other deposits or net worth imposed by customers under contracts entered into in
the ordinary course of business, (m) purchase money obligations or other
Indebtedness or contractual requirements incurred in connection with or
permitted by the covenant described below under the caption "--Sales of Accounts
Receivable," (n) any Equipment
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Financing Guarantees, and (o) restrictions on transfers of assets pursuant to
agreements relating to a Dealer Financing Program.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that neither Issuer may consolidate or merge with or
into (whether or not such Issuer is the surviving corporation), or sell, assign,
transfer, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless (i) such Issuer is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than one of
the Issuers) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation or other entity
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; (ii) the entity or Person formed by or surviving any
such consolidation or merger (if other than one of the Issuers) or the Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of such Issuer under the
Registration Rights Agreement, the Debentures and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) except in the case of a merger of one of the Issuers with or into a Wholly
Owned Subsidiary of Holdings, the Issuer or the entity or Person formed by or
surviving any such consolidation or merger (if other than one of the Issuers),
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made will, at the time of such transaction and after
giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Disqualified Stock."
Notwithstanding the foregoing, Holdings is permitted to reorganize as a
corporation in accordance with the procedures established in the Indenture (and
Grove Holdings Capital may thereafter liquidate); PROVIDED that Holdings shall
have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that such reorganization (and,
if applicable, liquidation of Grove Holdings Capital) is not adverse to holders
of the Debentures (it being recognized that such reorganization shall not be
deemed adverse to the holders of the Debentures solely because (i) of the
accrual of deferred tax liabilities resulting from such reorganization or (ii)
the successor or surviving corporation (a) is subject to income tax as a
corporate entity or (b) is considered to be an "includible corporation" of an
affiliated group of corporations within the meaning of the Code or any similar
state or local law) and certain other conditions are satisfied.
LIMITATION ON LEASES
The Indenture provides that Holdings will not, directly or indirectly, lease
all or substantially all of its properties or assets to any Person.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that Holdings will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
Holdings or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by Holdings or such Restricted Subsidiary
with an unrelated Person and (ii) the Issuers deliver to the Trustee (a) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $2.0 million, a resolution of the
Management Committee set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested
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members of the Management Committee and (b) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $10.0 million, an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national standing.
Notwithstanding the foregoing, the following items shall not be deemed to be
Affiliate Transactions: (i) any employment agreement, compensation or employee
benefit arrangements and incentive arrangements with any officer, director,
member or employee entered into by Grove Investors or any of its Restricted
Subsidiaries in the ordinary course of business of Grove Investors or such
Restricted Subsidiary, as well as customary change of control and severance
payments, (ii) transactions between or among the Issuers and/or its Restricted
Subsidiaries, (iii) payment of reasonable managers and directors fees to Persons
who are not otherwise Affiliates of the Issuers, (iv) Restricted Payments,
Permitted Investments and other payments and distributions that are permitted by
the provisions of the Indenture described above under the caption "--Restricted
Payments," (v) any Permitted George Group Transaction; (vi) loans and advances
to officers, directors and employees of the Company or any Restricted Subsidiary
for travel, entertainment, moving and other relocation expenses, in each case
made in the ordinary course of business; (vii) transactions permitted by the
provisions of the covenant described below under the caption "--Sales of
Accounts Receivables"; (viii) transactions permitted by clauses (xii) and (xiv)
of the covenant described above under the caption "--Incurrence of Indebtedness
and Issuance of Disqualified Stock"; and (ix) transactions pursuant to any
contract or agreement in effect on the date of the Indenture as the same may be
amended, modified or replaced from time to time so long as such amendment,
modification or replacement is no less favorable to Holdings and its Restricted
Subsidiaries than the contract or agreement as in effect on the date of the
Indenture.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that Holdings will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that Holdings or any of its Restricted Subsidiaries may enter into a
sale and leaseback transaction if (i) Holdings or such Restricted Subsidiary
could have (a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant described
above under the caption "--Incurrence of Additional Indebtedness and Issuance of
Disqualified Stock" and (b) incurred a Lien to secure such Indebtedness pursuant
to the covenant described above under the caption "--Liens," (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Management Committee and set
forth in an Officers' Certificate delivered to the Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and, if
applicable, the Issuers apply the proceeds of such transaction in compliance
with, the covenant described above under the caption "--Asset Sales."
Notwithstanding the foregoing, Delta Manlift, S.A. and Grove France, S.A. and
its successor, may enter into any sale and leaseback transaction; PROVIDED that
such sale and leaseback transaction is in the ordinary course of business
consistent with past practices as in effect on the date of the Indenture and the
aggregate amount of any Attributable Debt in connection with such transaction
does not exceed $4.0 million in any calendar year.
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RESTRICTIONS ON PREFERRED STOCK OF SUBSIDIARIES
The Indenture provides that Holdings will not permit any of its Restricted
Subsidiaries to issue any preferred stock (other than Grove, which may issue
preferred stock that is not Disqualified Stock), or permit any Person to own or
hold an interest in any preferred stock of any such Subsidiary, except for
preferred stock issued to Holdings.
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN WHOLLY OWNED
SUBSIDIARIES
The Indenture provides that Holdings (i) will not, and will not permit any
Wholly Owned Restricted Subsidiary of Holdings to, transfer, convey, sell, lease
or otherwise dispose of any Equity Interests in any Wholly Owned Restricted
Subsidiary of Holdings to any Person (other than Holdings or a Wholly Owned
Restricted Subsidiary of Holdings), unless (a) such transfer, conveyance, sale,
lease or other disposition is of all the Equity Interests in such Wholly Owned
Restricted Subsidiary and (b) the cash Net Proceeds from such transfer,
conveyance, sale, lease or other disposition are applied in accordance with the
covenant described above under the caption "--Asset Sales," and (ii) will not
permit any Wholly Owned Restricted Subsidiary of Holdings to issue any of its
Equity Interests (other than, if necessary, shares of its Capital Stock
constituting directors' qualifying shares) to any Person other than to the
Company or a Wholly Owned Restricted Subsidiary of Holdings.
BUSINESS ACTIVITIES
Holdings will not, and will not permit any Restricted Subsidiary to, engage
in any business other than Permitted Businesses, except to such extent as would
not be material to Holdings and its Restricted Subsidiaries taken as a whole.
RESTRICTIONS ON ACTIVITIES OF GROVE HOLDINGS CAPITAL
The Indenture provides that Grove Holdings Capital may not hold any assets,
become liable for any obligations or engage in any business activities; PROVIDED
that Grove Holdings Capital may be a co-obligor with respect to Debentures
issued pursuant to the Indenture and engage in any activities directly related
or necessary in connection therewith.
PAYMENTS FOR CONSENT
The Indenture provides that neither Holdings nor any of its Restricted
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Debentures for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the Indenture or the Debentures unless such
consideration is offered to be paid or is paid to all Holders of the Debentures
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
SALES OF ACCOUNTS RECEIVABLE
Holdings may, and any of its Restricted Subsidiaries may, sell at any time
and from time to time, accounts receivable and or notes receivable and related
assets to an Accounts Receivable Subsidiary; PROVIDED that (i) the aggregate
consideration received in each such sale is at least equal to the aggregate fair
market value of the receivables sold, as determined by the Management Committee
in good faith, (ii) no less than 80% of the consideration received in each such
sale consists of either cash or a promissory note (a "Promissory Note") which is
subordinated to no Indebtedness or obligation other than the financial
institution or other entity providing the financing to the Accounts Receivable
Subsidiary with respect to such accounts receivable (the "Financier") or an
Equity Interest in such Accounts Receivable Subsidiary; PROVIDED FURTHER that
the initial sale will include all accounts receivable of Holdings and/or its
Restricted Subsidiaries that are party to such arrangements that constitute
eligible receivables under such
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arrangements, (iii) the cash proceeds received from the initial sale less
reasonable and customary transaction costs will be deemed to be Net Proceeds and
will be applied in accordance with the second paragraph of the covenant
described above under the caption entitled "--Repurchase at the Option of
Holders--Assets Sales," and (iv) Holdings and its Restricted Subsidiaries will
sell all accounts receivable that constitute eligible receivables under such
arrangements to the Accounts Receivable Subsidiary no less frequently than on a
weekly basis.
Holdings (i) will not permit any Accounts Receivable Subsidiary to sell any
accounts receivable purchased from Holdings or any of its Restricted
Subsidiaries to any other person except on an arms-length basis and solely for
consideration in the form of cash or Cash Equivalents, (ii) will not permit the
Accounts Receivable Subsidiary to engage in any business or transaction other
than the purchase, financing and sale of accounts receivable of Holdings and its
Restricted Subsidiaries and activities incidental thereto, (iii) will not permit
any Accounts Receivable Subsidiary to incur Indebtedness in an amount in excess
of the book value of such Accounts Receivable Subsidiary's total assets, as
determined in accordance with GAAP, (iv) will, at least as frequently as
monthly, cause the Accounts Receivable Subsidiary to remit to Holdings or any of
its Restricted Subsidiaries as payment on the Promissory Notes or a dividend,
all available cash or Cash Equivalents not held in a collection account pledged
to a Financier, to the extent not applied to pay or maintain reserves for
reasonable operating expenses of the Accounts Receivable Subsidiary or to
satisfy reasonable minimum operating capital requirements and (v) will not, and
will not permit any of its Subsidiaries to, sell accounts receivable to any
Accounts Receivable Subsidiary upon (1) the occurrence of a Default with respect
to Holdings and its Restricted Subsidiaries and (2) the occurrence of certain
events of bankruptcy or insolvency with respect to such Accounts Receivable
Subsidiary.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Debentures are outstanding,
Holdings will furnish to the Holders of Debentures (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if Holdings was required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Issuers and their consolidated Subsidiaries and, with respect
to the annual information only, a report thereon by the Issuers' certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if Holdings was required to file such
reports, in each case within the time periods specified in the Commission's
rules and regulations. In addition, following the consummation of the exchange
offer contemplated by the Registration Rights Agreement, whether or not required
by the rules and regulations of the Commission, Holdings will file a copy of all
such information and reports with the Commission for public availability within
the time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, (i) at
all times the Commission does not accept the filings provided for in the
preceding sentence or (ii) such filings provided for in the preceding sentence
do not contain the information required to be delivered upon request pursuant to
Rule 144A(d)(4) under the Securities Act, then, in each case, Holdings has
agreed that, for so long as any Debentures remain outstanding, it will furnish
to the Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Debentures; (ii) default in payment when
due of the principal of or premium, if any, on the Debentures; (iii) failure by
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Holdings or any of its Restricted Subsidiaries for 30 days after notice by the
Trustee or by the Holders of at least 25% in principal amount of Debentures then
outstanding to comply with the provisions described under the captions "--Change
of Control," "--Asset Sales," "--Restricted Payments" or "--Incurrence of
Indebtedness and Issuance of Disqualified Stock"; (iv) failure by Holdings or
any of its Restricted Subsidiaries for 60 days after notice by the Trustee or by
the Holders of at least 25% in principal amount of Debentures then outstanding
to comply with any of its other agreements in the Indenture or the Debentures;
(v) default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by Holdings or any of its Restricted Subsidiaries (or the payment of
which is guaranteed by Holdings or any of its Restricted Subsidiaries) whether
such Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its stated maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10.0 million or more and PROVIDED that in the case
of any guarantees, a default shall not be deemed to occur unless Holdings or
such Restricted Subsidiary, as applicable, defaults in its payment obligations
under such guarantee after demand has been made in accordance with the terms of
such guarantee; (vi) failure by Holdings or any of its Restricted Subsidiaries
to pay final judgments aggregating in excess of $10.0 million (net of any amount
with respect to which a reputable insurance company with assets over $100.0
million has acknowledged liability in writing), which judgments are not paid,
discharged or stayed for a period of 60 days; (vii) failure by the Company or
its Subsidiaries to apply the proceeds from the Offering as set forth under the
caption "Use of Proceeds" above prior to the 10th Business Day after the date of
the Indenture; and (viii) certain events of bankruptcy or insolvency with
respect to Holdings or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Debentures may
declare all the Debentures to be due and payable immediately; PROVIDED, that so
long as any Indebtedness permitted to be incurred pursuant to the New Credit
Agreement or the Senior Discount Debentures shall be outstanding, such
acceleration shall not be effective until the earlier of (i) an acceleration of
any such Indebtedness under the New Credit Agreement or the Senior Discount
Debentures or (ii) five business days after receipt by the Issuers of written
notice of such acceleration. Upon such declaration, the principal of (or, if
prior to May 1, 2003, the Accreted Value of), premium, if any, and accrued and
unpaid interest on the Debentures shall be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Issuers, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Debentures will become due
and payable without further action or notice. Holders of the Debentures may not
enforce the Indenture or the Debentures except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Debentures may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of the Debentures notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuers with
the intention of avoiding payment of the premium that the Issuers would have had
to pay if the Issuers then had elected to redeem the Debentures pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Debentures. If an Event of Default occurs prior to
May 1, 2003 by reason of any willful action (or inaction) taken (or not taken)
by or on behalf of the Issuers with the intention of avoiding the prohibition on
redemption of the
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Debentures prior to May 1, 2003, then the premium specified in the Indenture
shall also become immediately due and payable to the extent permitted by law
upon the acceleration of the Debentures.
The Holders of a majority in aggregate principal amount of the Debentures
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Debentures waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Debentures.
The Issuers are required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuers are required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, MEMBERS AND
STOCKHOLDERS
No director, officer, employee, incorporator, member or stockholder of the
Issuers, as such, shall have any liability for any obligations of the Issuers
under the Debentures or, the Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of Debentures
by accepting a Debenture waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Debentures. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuers may, at their option and at any time, elect to have all of their
obligations discharged with respect to the outstanding Debentures ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Debentures to
receive payments in respect of the principal of, premium and Liquidated Damages,
if any, and interest on such Debentures when such payments are due from the
trust referred to below, (ii) the Issuers' obligations with respect to the
Debentures concerning issuing temporary Debentures, registration of Debentures,
mutilated, destroyed, lost or stolen Debentures and the maintenance of an office
or agency for payment and money for security payments held in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and the Issuers'
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Issuers may, at their option and at any time,
elect to have the obligations of the Issuers released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Debentures. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Debentures.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Issuers must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Debentures, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages on
the outstanding Debentures on the stated maturity or on the applicable
redemption date, as the case may be, and the Issuers must specify whether the
Debentures are being defeased to maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, the Issuers shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that (A) the Issuers have received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, subject to customary assumptions and exceptions, the Holders of
the outstanding Debentures will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same
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manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Issuers shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that, subject to
customary assumptions and exceptions, the Holders of the outstanding Debentures
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indenture) to which Holdings or
any of its Subsidiaries is a party or by which Holdings or any of its
Subsidiaries is bound; (vi) the Issuers must have delivered to the Trustee an
opinion of counsel to the effect that, subject to customary assumptions and
exceptions, after the 91st day following the deposit, the trust funds will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
Issuers must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Issuers with the intent of preferring the Holders of
Debentures over the other creditors of the Issuers with the intent of defeating,
hindering, delaying or defrauding creditors of the Issuers or others; and (viii)
the Issuers must deliver to the Trustee an Officers' Certificate and an opinion
of counsel, each stating that all conditions precedent provided for relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Debentures in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuers may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuers are not required to transfer or exchange
any Debenture selected for redemption. Also, the Issuers are not required to
transfer or exchange any Debenture for a period of 15 days before a selection of
Debentures to be redeemed.
The registered Holder of a Debenture will be treated as the owner of it for
all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Debentures may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount at maturity of the Debentures then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, Debentures), and any
existing default or compliance with any provision of the Indenture or the
Debentures may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Debentures (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Debentures).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Debenture held by a non-consenting Holder): (i) reduce the
principal amount of Debentures whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Debenture or alter the provisions with respect to the redemption of the
Debentures (other than provisions relating to the covenants described above
under the caption "--Repurchase at the Option of Holders"), (iii) reduce the
rate of or change the time for payment of interest on any Debenture, (iv) waive
a Default or Event of Default in the payment of principal of or premium, if any,
or interest on the Debentures (except a rescission of acceleration of the
Debentures by the Holders of at least a majority
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in aggregate principal amount of the Debentures and a waiver of the payment
default that resulted from such acceleration), (v) make any Debenture payable in
money other than that stated in the Debentures, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Debentures to receive payments of principal of or premium, if any,
or interest on the Debentures, (vii) waive a redemption payment with respect to
any Debenture (other than a payment required by one of the covenants described
above under the caption "--Repurchase at the Option of Holders") or (viii) make
any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Debentures, the Issuers and the Trustee may amend or supplement the Indenture or
the Debentures to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Debentures in addition to or in place of certificated Debentures,
to provide for the assumption of the Issuers' or a Subsidiary Guarantor's
obligations to Holders of Debentures in the case of a merger or consolidation or
sale of all or substantially all of the Issuers' assets, to make any change that
would provide any additional rights or benefits to the Holders of Debentures or
that does not adversely affect the legal rights under the Indenture of any such
Holder, or to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuers, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding
Debentures will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Debentures, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to the Issuers at 1565
Buchanan Trail East, Shady Grove, Pennsylvania 17256, Attention: Keith R.
Simmons, Secretary.
BOOK-ENTRY; DELIVERY AND FORM
The Exchange Debentures will initially be issued in the form of one or more
registered Exchange Debentures in global form without coupons (collectively, the
"Global Debentures").The Global Debentures will be deposited on the date of the
closing of the exchange of the Exchange Debentures for Senior Discount
Debentures with, or on behalf of, DTC and registered in the name of DTC or its
nominee, in each case for credit to an account of a direct or indirect
participant as described below.
Except as set forth below, the Global Debentures may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor DTC or
its nominee. Beneficial interests in the Global Debentures may not be exchange
for Debentures in certificated form except in the limited circumstances
described below. In addition, transfers of beneficial interests in the Global
Debentures will be subject to
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the applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time.
The Debentures may be presented for registration of transfer and exchange at
the offices of the Registrar.
DEPOSITARY PROCEDURES
DTC has advised the Issuers that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry changes in accounts of Participants. The Direct Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities that clear through or maintain
a direct or indirect, custodial relationship with a Direct Participant
(collectively, the "Indirect Participants"). DTC may hold securities
beneficially owned by other persons only through the Direct Participants or
Indirect Participants and such other persons' ownership interest and transfer of
ownership interest will be recorded only on the records of the Direct
Participant and/or Indirect Participant, and not on the records maintained by
DTC.
DTC has also advised the Issuers that, pursuant to DTC's procedures, (i)
upon deposit of the Global Debentures, DTC will credit the accounts of the
Direct Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Debentures allocated by the Initial Purchasers to
such Direct Participants, and (ii) DTC will maintain records of the ownership
interests of such Direct Participants in the Global Debentures and the transfer
of ownership interests by and between Direct Participants. DTC will not maintain
records of the ownership interests of, or the transfer of ownership interests by
and between, Indirect Participants or other owners of beneficial interests in
the Global Debentures. Direct Participants and Indirect Participants must
maintain their own records of the ownership interests of, and the transfer of
ownership interests by and between, Indirect Participants and other owners of
beneficial interests in the Global Debentures.
Investors in the Global Debentures may hold their interests therein directly
through DTC if they are Direct Participants in DTC or indirectly through
organizations that are Direct Participants in DTC. All ownership interests in
any Global Debentures may be subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery
in definitive, certificated form of securities that they own. This may limit or
curtail the ability to transfer beneficial interests in a Global Debenture to
such persons. Because DTC can act only on behalf of Direct Participants, which
in turn act on behalf of Indirect Participants and others, the ability of a
person having a beneficial interest in a Global Debenture to pledge such
interest to persons or entities that are not Direct Participants in DTC, or to
otherwise take actions in respect of such interests, may be affected by the lack
of physical certificates evidencing such interests. For certain other
restrictions on the transferability of the Debentures.
Except as described in "Transfers of Interests in Global Debentures for
Certificated Debentures," owners of beneficial interests in the Global
Debentures will not have Debentures registered in their names, will not receive
physical delivery of Debentures in certificated form and will not be considered
the registered owners or holders thereof under the Indenture for any purpose.
Under the terms of the Indenture, the Issuers and the Trustee will treat the
persons in whose names the Debentures are registered (including Debentures
represented by Global Debentures) as the owners thereof for the purpose of
receiving payments and for any and all other purposes whatsoever. Payments in
respect of the principal, premium, Liquidated Damages, if any, and interest on
Global Debentures registered in the name of DTC or its nominee will be payable
by the Trustee to DTC or its nominee as the registered holder under the
Indenture. Consequently, neither the Issuers, the Trustee nor any agent of the
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Issuers or the Trustee has or will have any responsibility or liability for (i)
any aspect of DTC's records or any Direct Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Debentures or for maintaining, supervising or
reviewing any of DTC's records or any Direct Participant's or Indirect
Participant's records relating to the beneficial ownership interests in any
Global Debenture or (ii) any other matter relating to the actions and practices
of DTC or any of its Direct Participants or Indirect Participants.
DTC has advised the Issuers that its current payment practice (for payments
of principal, interest and the like) with respect to securities such as the
Debentures is to credit the accounts of the relevant Direct Participants with
such payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global Debentures as shown
on DTC's records. Payments by Direct Participants and Indirect Participants to
the beneficial owners of the Debentures will be governed by standing
instructions and customary practices between them and will not be the
responsibility of DTC, the Trustee or the Issuers. Neither the Issuers nor the
Trustee will be liable for any delay by DTC or its Direct Participants or
Indirect Participants in identifying the beneficial owners of the Debentures,
and the Issuers and the Trustee may conclusively rely on and will be protected
in relying on instructions from DTC or its nominee as the registered owner of
the Debentures for all purposes.
Interests in the Global Debentures are expected to be eligible to trade in
DTC's Same-Day Funds Settlement System and, therefore, transfers between Direct
Participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in immediately available funds. Transfers between Indirect
Participants who hold an interest through a Direct Participant will be effected
in accordance with the procedures of such Direct Participant but generally will
settle in immediately available funds.
DTC has advised the Issuers that it will take any action permitted to be
taken by a holder of Debentures only at the direction of one or more Direct
Participants to whose account interests in the Global Debentures are credited
and only in respect of such portion of the aggregate principal amount of the
Debentures as to which such Direct Participant or Direct Participants has or
have given direction. However, if there is an Event of Default under the
Debentures, DTC reserves the right to exchange Global Debentures (without the
direction of one or more of its Direct Participants) for legended Debentures in
certificated form, and to distribute such certificated forms of Debentures to
its Direct Participants. See "-- Transfers of Interests in Global Debentures for
Certificated Debentures."
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Debentures among Direct Participants, they are under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Issuers, the Initial
Purchasers or the Trustee will have any responsibility for the performance by
DTC, Direct and Indirect Participants of their respective obligations under the
rules and procedures governing any of their operations.
The information in this section concerning DTC, and its book-entry system
has been obtained from sources that the Issuers believe to be reliable, but the
Issuers take no responsibility for the accuracy thereof.
TRANSFERS OF INTERESTS IN GLOBAL DEBENTURES FOR CERTIFICATED DEBENTURES
An entire Global Debenture may be exchanged for definitive Debentures in
registered, certificated form without interest coupons ("Certificated
Debentures") if (i) DTC (x) notifies the Issuers that it is unwilling or unable
to continue as depositary for the Global Debentures and the Issuers thereupon
fail to appoint a successor depositary within 90 days or (y) has ceased to be a
clearing agency registered under the Exchange Act, (ii) the Issuers, at their
option, notify the Trustee in writing that they elect to cause the issuance of
Certificated Debentures or (iii) there shall have occurred and be continuing a
Default or an Event of Default with respect to the Debentures. In any such case,
the Issuers will notify the Trustee in writing that, upon surrender by the
Direct and Indirect Participants of their interest in such Global
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Debenture, Certificated Debentures will be issued to each person that such
Direct and Indirect Participants and DTC identify as being the beneficial owner
of the related Debentures.
Beneficial interests in Global Debentures held by any Direct or Indirect
Participant may be exchanged for Certificated Debentures upon request to DTC, by
such Direct Participant (for itself or on behalf of an Indirect Participant),
but only upon at least 20 days' prior written notice given to the Trustee by or
on behalf of DTC in accordance with customary DTC procedures. Certificated
Debentures delivered in exchange for any beneficial interest in any Global
Debenture will be registered in the names, and issued in any approved
denominations, requested by DTC on behalf of such Direct or Indirect
Participants (in accordance with DTC's customary procedures).
Neither the Issuers nor the Trustee will be liable for any delay by the
holder of the Global Debentures or the DTC in identifying the beneficial owners
of Debentures, and the Issuers and the Trustee may conclusively rely on, and
will be protected in relying on, instructions from the holder of the Global
Debenture or the DTC for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Debentures
represented by the Global Debentures (including principal, premium, if any,
interest and Liquidated Damages, if any) be made by wire transfer of immediately
available funds to the accounts specified by the holder of such Global
Debenture. With respect to Certificated Debentures, the Issuers will make all
payments of principal, premium, if any, interest and Liquidated Damages, if any,
by wire transfer of immediately available funds to the accounts specified by the
holders thereof or, if no such account is specified, by mailing a check to each
such holder's registered address. The Issuers expect that secondary trading in
the Certificated Debentures will also be settled in immediately available funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Issuers and the Initial Purchasers entered into the Registration Rights
Agreement on April 29, 1998. Pursuant to the Registration Rights Agreement, the
Issuers agreed to file with the Commission this Registration Statement under the
Securities Act with respect to the Debentures. As required by the Registration
Rights Agreement, upon the effectiveness of the Registration Statement, the
Issuers will offer to the Holders of Transfer Restricted Securities (as defined)
that are able to make certain representations the opportunity to exchange their
Transfer Restricted Securities for Exchange Debentures. If (i) the Issuers are
not required to file the Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any Holder of Transfer Restricted Securities notifies
the Issuers prior to the 20th day following consummation of the Exchange Offer
that (A) such Holder is prohibited by law or Commission policy from
participating in the Exchange Offer or (B) that it may not resell the Exchange
Debentures acquired by it in the Exchange Offer to the public without delivering
a Prospectus and the Prospectus contained in the Registration Statement is not
appropriate or available for such resales or (C) that it is a broker-dealer and
owns Debentures acquired directly from the Issuers or an affiliate of the
Issuers, the Issuers will file with the Commission a shelf registration
statement to cover resales of the Transfer Restricted Securities by the Holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the shelf registration statement. The Issuers will use their
best efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the Commission. For purposes of the
foregoing, "Transfer Restricted Securities" means each Senior Discount Debenture
until the date on which such Senior Discount Debenture (i) is exchanged in the
Exchange Offer for an Exchange Debenture which is entitled to be resold to the
public by the holder thereof without complying with prospectus delivery
requirements of the Securities Act, (ii) has been disposed of in accordance with
a shelf registration statement (and the purchasers thereof have been issued
Exchange Debentures), or (iii) is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k) under the
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Securities Act and each Exchange Debenture until the date on which such Exchange
Debenture is disposed of by a broker-dealer pursuant to the "Plan of
Distribution" contemplated by this Registration Statement.
Pursuant to the Registration Rights Agreement, the Issuers were obligated to
file this Registration Statement with the Commission on or before June 29, 1998
(60 days after the Closing Date). In addition, the Registration Rights Agreement
provides that (i) the Issuers will use their best efforts to have the
Registration Statement declared effective by the Commission on or prior to
October 29, 1998 (180 days after the Closing Date), (ii) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, the Issuers
will commence the Exchange Offer and use their best efforts to issue on or prior
to 30 business days after the date on which the Registration Statement is
declared effective by the Commission, Exchange Debentures in exchange for all
Debentures tendered prior thereto in the Exchange Offer and (iii) if obligated
to file a shelf registration statement, the Issuers will use their best efforts
to file the shelf registration statement with the Commission on or prior to 60
days after such filing obligation arises and to cause the shelf registration
statement to be declared effective by the Commission on or prior to 120 days
after such obligation arises. If (a) the Issuers fail to file any of the
registration statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such registration
statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) the
Issuers fail to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Registration Statement, or (d)
this Registration Statement or a shelf registration statement is declared
effective but thereafter ceases to be effective or usable in connection with
resales of Transfer Restricted Securities during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then the Issuers will pay
Liquidated Damages to each Holder of Debentures, with respect to the first
90-day period immediately following the occurrence of the first Registration
Default in an amount equal to $.05 per week per $1,000 principal amount of
Debentures held by such Holder. The amount of the Liquidated Damages will
increase by an additional $.05 per week per $1,000 principal amount of
Debentures with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages for all
Registration Defaults of $.50 per week per $1,000 principal amount of
Debentures. All accrued Liquidated Damages will be paid by the Issuers on each
Damages Payment Date to the Global Debenture Holder by wire transfer of
immediately available funds or by federal funds check and to Holders of
Certificated Securities by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Holders of Debentures are required to make certain representations to the
Issuers (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and are required to deliver certain
information to be used in connection with a shelf registration statement and to
provide comments on the shelf registration statement within the time periods set
forth in the Registration Rights Agreement in order to have their Debentures
included in the shelf registration statement and benefit from the provisions
regarding Liquidated Damages set forth above. See "The Exchange Offer."
The foregoing description of the Registration Rights Agreement is a summary
only and does not purport to be complete. This summary is qualified in its
entirety by reference to all provisions of the Registration Rights Agreement
which as been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
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"ACCOUNTS RECEIVABLE SUBSIDIARY" means a Wholly Owned Subsidiary of
Holdings (i) which is formed solely for the purpose of, and which engages in no
activities other than activities in connection with, financing accounts
receivable and/or notes receivable and related assets of Holdings and/or its
Restricted Subsidiaries, (ii) which is designated by the Management Committee of
Holdings as an Accounts Receivables Subsidiary pursuant to a Management
Committee resolution set forth in an Officers' Certificate and delivered to the
Trustee, (iii) that has total assets at the time of such designation with a book
value not exceeding $100,000 plus the reasonable fees and expenses required to
establish such Accounts Receivable Subsidiary and any accounts receivable
financing, (iv) no portion of Indebtedness or any other obligation (contingent
or otherwise) of which (a) is at any time recourse to or obligates Holdings or
any Restricted Subsidiary of Holdings in any way, other than pursuant to (I)
representations and covenants entered into in the ordinary course of business in
connection with the sale of accounts receivable and/or notes receivable to such
Accounts Receivable Subsidiary or (II) any guarantee of any such accounts
receivable financing by Holdings that is permitted to be incurred pursuant to
the covenant described under the caption entitled "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock," or
(b) subjects any property or asset of Holdings or any Restricted Subsidiary of
Holdings, directly or indirectly, contingently or otherwise, to the satisfaction
thereof, other than pursuant to (I) representations and covenants entered into
in the ordinary course of business in connection with sales of accounts
receivable and/or notes receivable or (II) any guarantee of any such accounts
receivable financing by Holdings that is permitted to be incurred pursuant to
the covenant described under the caption entitled "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock," (v)
with which neither Holdings nor any Restricted Subsidiary of Holdings has any
contract, agreement, arrangement or understanding other than contracts,
agreements, arrangements and understandings entered into in the ordinary course
of business in connection with sales of accounts receivable and/or notes
receivable in accordance with the covenant described under the caption
"--Certain Covenants--Sales of Accounts Receivable" and fees payable in the
ordinary course of business in connection with servicing accounts receivable
and/or notes receivable and (vi) with respect to which neither Holdings nor any
Restricted Subsidiary of Holdings has any obligation (a) to subscribe for
additional shares of Capital Stock or other Equity Interests therein or make any
additional capital contribution or similar payment or transfer thereto other
than in connection with the sale of accounts receivable and/or notes receivable
to such Accounts Receivable Subsidiary in accordance with the covenant described
under "--Certain Covenants--Sales of Accounts Receivable" or (b) to maintain or
preserve solvency or any balance sheet item, financial condition, level of
income or results of operations thereof.
"ACCRETED VALUE" means, for each $1,000 face amount of Debentures, as of
any date of determination prior to May 1, 2003, the sum of (i) the initial
offering price of each Debenture and (ii) that portion of the excess of the
principal amount of each Debenture over such initial offering price which shall
have been accreted thereon through such date, such amount to be so accreted on a
daily basis and compounded semi-annually on each May 1 and November 1 at the
rate of 11 5/8% per annum from the date of issuance of the Debentures through
the date of determination.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person,
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whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than (A) in the ordinary course of business or (B) sales or
other dispositions of accounts receivable and/or notes receivable and related
assets to (x) the Accounts Receivable Subsidiary in accordance with the covenant
described under the caption "--Certain Covenants--Sale of Accounts Receivable"
and (y) one or more financial institutions in connection with a Dealer Financing
Program or factoring arrangements as in existence on the date of the Indenture
(provided that, in each case, the sale, lease, conveyance or other disposition
of all or substantially all of the assets of Holdings and its Subsidiaries
(determined on a consolidated basis) are governed by the provisions of the
Indenture described above under the caption "--Change of Control" and/or the
provisions described above under the caption "--Limitation on Leases" and not by
the provisions of the Asset Sale covenant), and (ii) the issue or sale by
Holdings or any of its Subsidiaries of Equity Interests of any of the Holdings'
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $2.5 million or (b) for net proceeds in excess of $2.5
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (i) a transfer of assets by the Issuers to a Wholly Owned
Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Issuers
or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity
Interests by a Wholly Owned Restricted Subsidiary to the Issuers or to another
Wholly Owned Restricted Subsidiary, (iii) a Restricted Payment that is permitted
by the covenant described above under the caption "--Restricted Payments," (iv)
the sale and leaseback of any assets within 90 days of the acquisition of such
assets; PROVIDED that such sale and leaseback complies with the covenant
described above under the caption "--Sale and Leaseback Transactions", (v)
foreclosures of assets, and (vi) the sale at fair market value of property or
equipment that has become worn out, obsolete or damaged or otherwise unsuitable
for use in connection with the business of Holdings or any Restricted
Subsidiary, as the case may be, in the ordinary course of business.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"BORROWING BASE" means, as of any date, an amount equal to the sum of 85%
of the face amount of all accounts receivable and notes receivable owned by
Holdings and its Restricted Subsidiaries as of such date that are not more than
90 days past due, as calculated on a consolidated basis and in accordance with
GAAP. To the extent that information is not available as to the amount of
accounts receivable and notes receivable as of a specific date, Holdings may
utilize the most recent available information for purposes of calculating the
Borrowing Base.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
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"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than one year from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of one year or less from the date
of acquisition, bankers' acceptances with maturities not exceeding one-year and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million, (iv) repurchase obligations with
a term of not more than thirty days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
obligations issued or fully guaranteed by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc., (vi) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within one year after the date of acquisition and (vii) money
market funds at least 95% of the assets of which constitute Cash Equivalents of
the kinds described in clauses (i) through (vii) of this definition.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary or nonrecurring loss plus any net loss realized in
connection with an Asset Sale or the extinguishment of any Indebtedness (to the
extent such losses were deducted in computing such Consolidated Net Income),
plus (ii) provision for taxes based on income or profits or the Tax Amount of
such Person and its Subsidiaries for such period or, following the
reorganization of Holdings as a corporation, any tax sharing payment made
pursuant to a tax sharing agreement executed in connection therewith, in each
case, to the extent that such provision for taxes was included in computing such
Consolidated Net Income, plus (iii) consolidated interest expense of such Person
and its Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, plus (v) any interest expense on
Indebtedness of another person that is guaranteed by such person or a Subsidiary
of such person or secured by a Lien on the assets of such person or one of its
Subsidiaries (to the extent that such interest expense was deducted in computing
Consolidated Net Income in such period), plus (vi) any charges of up to $30.0
million relating to a facility closing, plus (vii) any charges of up to $16.0
million resulting from fees payable to the George Group in connection with the
consulting arrangements with Holdings or its Restricted Subsidiaries, plus
(viii) one-time expenses associated with inventory, research and development and
other write-ups resulting from purchase accounting adjustments at the time of
the Transactions or any other permitted acquisition (to the extent such expenses
were deducted in computing Consolidated Net Income in such period), plus (ix)
any expenses or charges related to any Equity Offering, Permitted Investment or
Indebtedness permitted to be incurred by the Indenture (including such expenses
or charges related to the Transactions) and deducted in such period in computing
Consolidated Net Income, minus (x) non-cash items increasing such Consolidated
Net Income for such period, in each case, on a consolidated basis and determined
in
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accordance with GAAP. Notwithstanding the foregoing, the provision for taxes
based on the income or profits of, and the depreciation and amortization and
other non-cash charges of, a Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in the same proportion) that the Net Income of such Subsidiary was included
in calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to Holdings by such Subsidiary without prior approval (that has not
been obtained), pursuant to the terms of its charter and all judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; PROVIDED
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary
(other than Holdings) or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash (or converted into cash) to the referent Person or a
Wholly Owned Restricted Subsidiary thereof, (ii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
stockholders, unless such restriction with respect to the payment of dividends
or in similar distributions has been legally waived, provided that Consolidated
Net Income of Holdings shall be increased by the amount of dividends or other
distributions or other payments paid in cash (or to the extent converted into
cash) to the referent person or a Wholly Owned Restricted Subsidiary thereof in
respect of such period, (iii) the Net Income of any Person acquired in a pooling
of interests transaction for any period prior to the date of such acquisition
shall be excluded, (iv) the cumulative effect of a change in accounting
principles shall be excluded and (v) the Net Income (but not loss) of any
Unrestricted Subsidiary shall be excluded, whether or not distributed to
Holdings or one of its Subsidiaries.
"CREDIT FACILITIES" means, with respect to the Issuers or their Restricted
Subsidiaries, one or more debt facilities (including, without limitation, the
New Credit Facility) or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale or factoring of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"DEALER FINANCING PROGRAM" means (x) that certain financing program
pursuant to which (i) distributors of Holdings and its Restricted Subsidiaries
can obtain up to 366-day inventory financing for the purchase of the Holdings'
Subsidiaries' products, (ii) units financed will generate secured notes
receivable, accounts receivable, chattel paper, instruments or other intangibles
(collectively, "Receivables"), which Holdings or its Restricted Subsidiaries may
sell, from time to time, to financial institutions at 100% of face value and
(iii) Holdings or its Restricted Subsidiaries will insure (with a nationally
recognized insurance company with at least $100.0 million in assets) at least
85% of the payment obligations relating to such Receivables and (y) factoring or
discounting arrangements as in effect on the date of the Indenture or entered
into in the ordinary course of business consistent with past practice.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date
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that is 91 days after the date on which the Debentures mature; PROVIDED,
HOWEVER, that any Capital Stock that would constitute Disqualified Stock solely
because the holders thereof have the right to require the Issuers to repurchase
such Capital Stock upon the occurrence of a Change of Control or an Asset Sale
shall not constitute Disqualified Stock if the terms of such Capital Stock
provide that the Issuers may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
the covenant described above under the caption "--Certain Covenants-- Restricted
Payments"; and PROVIDED FURTHER, that Capital Stock issued to any plan for the
benefit of employees of Holdings or its subsidiaries or by any such plan to such
employees shall not constitute Disqualified Stock solely because it may be
required to be repurchased by Holdings in order to satisfy applicable statutory
or regulatory obligations.
"EQUIPMENT FINANCING GUARANTEES" means guarantees (including but not
limited to repurchase or remarketing obligations, residual value guarantees,
conditional loss guarantees or first loss guarantees) by Holdings or a
Restricted Subsidiary incurred in the ordinary course of business consistent
with past practice of Indebtedness incurred by a distributor, or other purchaser
or lessor, for the purchase of inventory manufactured or sold by Holdings or a
Restricted Subsidiary, the proceeds of which Indebtedness is used solely to pay
the purchase price of such inventory to such distributor or other purchaser or
lessor and any related reasonable fees and expenses (including financing fees);
PROVIDED, HOWEVER, that (1) to the extent commercially practicable, the
Indebtedness so guaranteed is secured by a Lien on such inventory in favor of
the holder of such Indebtedness, and (2) if Holdings or such Restricted
Subsidiary is required to make payment with respect to such guarantee, Holdings
or such Restricted Subsidiary will have the right to receive either (q) title to
such inventory, (r) a valid assignment of a Lien in such inventory or (s) the
net proceeds of any resale of such inventory.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means up to $15.0 million in aggregate principal
amount of Indebtedness of Holdings and its Subsidiaries (other than Indebtedness
under the New Credit Agreement) in existence on the date of the Indenture, until
such amounts are permanently repaid.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
referent Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues or redeems preferred equity subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but prior
to the date on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred equity, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by Holdings or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income and shall
reflect any pro forma adjustments for expenses and cost reductions attributable
to such acquisitions (to the extent such adjustments are (x) realizable within
twelve months of the date of the acquisition and (y) based on pro forma
financial statements reviewed by Holdings' accountants), (ii) the Consolidated
Cash Flow attributable to discontinued operations, as determined in accordance
with GAAP, and operations or businesses disposed of prior to the Calculation
Date, shall be excluded, (iii) the Fixed Charges attributable to discontinued
operations, as
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determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Restricted Subsidiaries following the Calculation
Date, and (iv) the amount of interest expense attributable to financings
pursuant to the Dealer Financing Program shall be subtracted from the numerator
and excluded from the denominator in calculating the Fixed Charge Coverage Ratio
PROVIDED that the interest income from such financings exceeds interest expense.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations; PROVIDED, however, that in no event shall any
amortization of deferred financing costs incurred in connection with the
Transactions be included in fixed charges) and (ii) the consolidated interest of
such Person and its Restricted Subsidiaries that was capitalized during such
period, and (iii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Subsidiaries (whether or not such
Guarantee or Lien is called upon) excluding, however, guarantees incurred in
connection with (a) any Equipment Financing Guarantee or (b) residual value
guarantees, conditional loss guarantees and similar financings allowed to be
incurred pursuant to the covenant described above under the caption "Incurrence
of Indebtedness and Issuance of Preferred Stock" and (iv) if and for so long as
such Person is taxed as a partnership for federal income tax purposes, all cash
dividend payments or other distributions of property on any series of preferred
stock of such Person or, if such Person is taxed as a corporation for federal
income tax purposes, the product of (a) all cash dividend payments or other
distributions of property (and non-cash dividend payments in the case of a
Person that is a Subsidiary) on any series of preferred equity of such Person
times (b) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory tax
rate of such Person expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"GEORGE GROUP" means The George Group, Inc. a Texas corporation, and its
successors.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate or currency swap agreements, interest rate
cap agreements and interest rate collar agreements, (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest or
currency exchange rates and (iii) commodities purchase and sale agreements and
other similar agreements designed to protect such Person against fluctuations in
the price of raw materials used by Holdings or its Restricted Subsidiaries in
the ordinary course of business.
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"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness (other than Hedging Obligations and guarantees) outstanding as of
any date shall be (i) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount, and (ii) the principal amount
thereof, together with any interest thereon that is more than 30 days past due,
in the case of any other Indebtedness.
"INVESTMENT GRADE SECURITIES" means (i) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof (other than Cash Equivalents), (ii) debt securities or
debt instruments with a rating of BBB- or higher by Standard and Poor's
Corporation or Baa3 or higher by Moody's Investors Services, Inc. or the
equivalent of such rating by such rating organization, or, if no rating of
Standard and Poor's Corporation or Moody's Investors Services, Inc. then exists,
the equivalent of such rating by any other nationally recognized securities
rating agency, but excluding any debt securities or instruments constituting
loans or advances among Holdings and its Subsidiaries, and (iii) investments in
any fund that invests exclusively in investments of the type described in
clauses (i) and (ii) which fund may also hold immaterial amounts of cash pending
investment and/or distribution.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
PROVIDED that an acquisition of assets, Equity Interests or other securities by
the Issuers or any of their Restricted Subsidiaries for consideration consisting
solely of Equity Interests (other than Disqualified Stock) of Holdings shall not
be deemed to be an Investment. If Holdings or any Restricted Subsidiary of
Holdings sells or otherwise disposes of any Equity Interests of any direct or
indirect Restricted Subsidiary of Holdings such that, after giving effect to any
such sale or disposition, such Person is no longer a Restricted Subsidiary of
Holdings, Holdings shall be deemed to have made an Investment on the date of any
such sale or disposition equal to the fair market value of the Equity Interests
of such Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "--Restricted Payments."
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"MANAGEMENT COMMITTEE" means (i) for so long as Holdings is a limited
liability company, the Management Committee of Holdings and (ii) otherwise the
Board of Directors of Holdings.
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"NET INCOME" means, with respect to any Person for any period, (i) the net
income (loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of dividends on preferred interests, excluding, however,
(a) any gain (but not loss), together with any related provision for taxes or
Tax Distributions on such gain (but not loss), realized in connection with (1)
any Asset Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or (2) the disposition of any securities by such Person
or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness
of such Person or any of its Restricted Subsidiaries and (b) any extraordinary
or nonrecurring gain (but not loss), together with any related provision for
taxes or Tax Distributions on such extraordinary or nonrecurring gain (but not
loss) less (ii) in the case of any Person that is a partnership or limited
liability company, the Tax Amount of such person for such period.
"NET PROCEEDS" means the aggregate cash proceeds received by Holdings or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, any taxes or Tax Distributions paid or payable as
a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"NEW CREDIT AGREEMENT" means that certain New Credit Agreement, dated as of
the date of the Indenture by and among Grove, Grove Capital and Chase Bank of
Texas, National Association, as administrative agent, BankBoston N.A., as
syndication agent and Donaldson, Lufkin & Jenrette Securities Corporation, as
documentation agent, and certain other lenders party thereto, providing for up
to $125 million of revolving credit borrowings and $200 million, of term
borrowings, including any related Debentures, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, modified, renewed, refunded, replaced or refinanced from time to time.
"NEW CREDIT FACILITY" means, with respect to the Issuers and the Restricted
Subsidiaries, one or more debt facilities (including, without limitation, the
New Credit Agreement) or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither Holdings nor
any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Debentures being offered hereby) of Holdings or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of Holdings or any of its Restricted
Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities and obligations
payable under the documentation governing any Indebtedness.
"PERMITTED BUSINESS" means any of the businesses and any other businesses
related to the businesses engaged in by Holdings and its respective Restricted
Subsidiaries on the date of the Indenture.
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"PERMITTED GEORGE GROUP TRANSACTIONS" means, for purposes of the covenant
described above under the caption "--Transactions with Affiliates," consulting
arrangements with the George Group and its affiliates and any payments for fees
and expenses thereunder made, provided that such payments shall not exceed $8.0
million in any fiscal year (with such amount being subject to reasonable
adjustments in connection with advisory and consulting services rendered in
connection with Permitted Investments).
"PERMITTED INVESTMENTS" means (a) any Investment in Holdings or in a Wholly
Owned Restricted Subsidiary of Holdings and is engaged in a Permitted Business;
(b) any Investment in Cash Equivalents and Investment Grade Securities; (c) any
Investment by Holdings or any Restricted Subsidiary of the Company in a Person,
if as a result of such Investment (i) such Person becomes a Wholly Owned
Restricted Subsidiary of the Company and is engaged in a Permitted Business or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Wholly Owned Restricted Subsidiary of the Company that is
engaged in Permitted Business; (d) any Investment made as a result of the
receipt of assets not constituting Cash Equivalents from an Asset Sale that was
made pursuant to and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales"; (e) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of Holdings; (f) other Investments in any Person
having an aggregate fair market value (measured on the date each such Investment
was made and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (f) that are at
the time outstanding, not to exceed $10 million; (g) Investments in securities
of customers received in settlement of obligations or pursuant to a plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; (h) Investments existing on the date of the
Indenture or made in connection with the Transactions; (i) Investments
consisting of receivables owing to Holdings and its Restricted Subsidiaries and
advances or loans to or the receipt of notes or drafts from, distributors and
customers, in each case, in connection with the sale or lease of inventory in
the ordinary course of business and consistent with past practices, including
such Investments made in connection with or pursuant to a Dealer Financing
Program; (j) loans and advances to officers, directors, members and employees
for business-related travel expenses, moving expenses and other similar
expenses, in each case, incurred in the ordinary course of business and
consistent with past practices not to exceed $1.0 million; (k) any Hedging
Obligation; (l) Investments in an Accounts Receivable Subsidiary made in
connection with the formation of an Accounts Receivable Subsidiary or received
in consideration of sales of accounts receivable, in each case, in accordance
with the covenant described above under the caption entitled "--Certain
Covenants-- Sales of Accounts Receivable," (m) Investments consisting of
intercompany loans from Holdings and its Restricted Subsidiaries to Restricted
Subsidiaries; (n) Investments consisting of capital contributions from Holdings
or any Restricted Subsidiaries to Restricted Subsidiaries in an aggregate amount
at any one time outstanding not to exceed $25.0 million ; (o) Equipment
Financing Guarantees permitted by the terms of clause (xv) of the covenant
described above under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock" and (p) loans to and promissory
notes or other instruments of managers and officers of Grove Investors, Holdings
or its Restricted Subsidiaries issued in connection with the purchase of Equity
Interests of Grove Investors or Holdings.
"PERMITTED LIENS" means (i) Liens securing Senior Debt (as defined in the
Senior Subordinated Note Indenture) and Liens on assets of Restricted
Subsidiaries securing Senior Debt permitted by the terms of the Senior
Subordinated Note Indenture to be incurred; (ii) Liens in favor of the Issuers
or a Restricted Subsidiary; (iii) Liens on property of a Person existing at the
time such Person becomes a Restricted Subsidiary of Holdings or is merged into
or consolidated with one of Holdings or any Subsidiary of Holdings; PROVIDED
that such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with Holdings or any Subsidiary of Holdings; (iv)
Liens on property existing at the time of acquisition thereof by Holdings or any
Subsidiary of Holdings, PROVIDED that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure Indebtedness (including
Capital Lease Obligations)
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permitted by clause (v) of the second paragraph of the covenant entitled
"Incurrence of Indebtedness and Issuance of Disqualified Stock" covering only
the assets acquired, constructed or improved with such Indebtedness; (vi) Liens
existing on the date of the Indenture; (vii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, PROVIDED that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(viii) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse
Debt of Unrestricted Subsidiaries; (ix) Liens incurred in the ordinary course of
business of the Issuers or any Subsidiary of the Issuers with respect to
obligations that do not exceed $5.0 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Issuers or such Subsidiary; (x) liens on assets of the Subsidiary
Guarantors (as defined in the Senior Subordinated Note Indenture) to secure
Senior Debt of such Subsidiary Guarantors that was permitted to be incurred
under the Senior Subordinated Note Indenture; (xi) statutory Liens of landlords
and Liens of carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen and other Liens imposed by law incurred in the ordinary course of
business; (xii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security or similar obligations, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money); (xiii) judgment or attachment Liens not giving rise to an Event of
Default; (xiv) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary course of the business of Holdings or any of
its Restricted Subsidiaries; (xv) any interest or title of a lessor under any
lease, whether or not characterized as capital or operating; provided that such
Liens do not extend to any property or assets which is not leased property
subject to such lease; (xvi) Liens upon specific items of inventory or other
goods and proceeds of any Person securing such Person's obligations in respect
of bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other goods;
(xvii) Liens securing reimbursement obligations with respect to letters of
credit and products and proceeds thereof; (xviii) Liens securing Hedging
Obligations which Hedging Obligations relate to Indebtedness that is otherwise
permitted under the Indenture; (xix) Liens arising out of consignment,
conditional purchase or similar arrangements for the sale of goods entered into
by Holdings or any Restricted Subsidiary in the ordinary course of business;
(xx) Liens securing Permitted Refinancing Indebtedness which is incurred to
refinance any Indebtedness which has been secured by a Lien permitted under the
Indenture and which has been incurred in accordance with the provisions of the
Indenture; (xxi) Liens with respect to Equipment Financing Guarantees and
related inventory and equipment; (xxii) Liens incurred in connection with the
Equipment Financing Program and (xxiii) Liens incurred in the ordinary course of
business on equipment and inventory held for lease by the Company or any of its
Restricted Subsidiaries.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Issuers
or any of their Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used within 60 days after the incurrence thereof to
extend, refinance, renew, replace, defease or refund other Indebtedness of the
Issuers or any of their Restricted Subsidiaries (other than intercompany
Indebtedness); provided that: (i) the principal amount (or accreted value, if
applicable) of such permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus accrued interest
on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses, premiums, penalties, fees and
interest incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the
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Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Debentures, such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and is subordinated in right of payment to, the Debentures on terms at
least as favorable to the Holders of Debentures as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Issuers or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"PUBLIC EQUITY OFFERING" means a public offering pursuant to an effective
registration statement under the Securities Act of Equity Interests (other than
Disqualified Stock) of Holdings (or any other person that owns, directly or
indirectly, 100% of the common equity of the Issuers to the extent the net
proceeds thereof are contributed to Holdings as a capital contribution), that,
in each case, results in the net proceeds to Holdings of at least $25.0 million.
"RECEIVABLES FEES" means distributions or payments made directly or by
means of discounts with respect to any participation interests issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any receivables financing permitted pursuant to
the covenant entitled "Sales of Accounts Receivable."
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SENIOR SUBORDINATED NOTES" means the 9 1/4% Senior Subordinated Notes due
2008 of Grove Worldwide LLC and Grove Capital, Inc.
"SENIOR SUBORDINATED NOTE INDENTURE" means the Indenture relating to the
Senior Subordinated Notes.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TAX AMOUNT" means, with respect to Holdings for any period, the product of
(i) the taxable income of Holdings for such period and (ii) the maximum combined
Federal, state and local income tax rates applicable to an individual resident
in New York City or California, whichever is higher; PROVIDED, HOWEVER, that in
determining the Tax Amount, the effect thereon of any net operating loss
carryforwards or other carryforwards or tax attributes, such as alternative
minimum tax carryforwards shall be taken into account,
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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 Holdings for state and local income tax
purposes.
"TAX DISTRIBUTION" means a distribution in respect of taxes to the members
of Holdings pursuant to clause (vi) of the second paragraph of the covenant
described above under the caption "Certain Covenants--Restricted Payments."
"TRANSACTIONS" means each of (i) the acquisition by Holdings through
certain of its subsidiaries of the mobile hydraulic crane, aerial work platform
and truck-mounted crane businesses of Hanson Funding (G) PLC and certain of its
subsidiaries, for aggregate cash consideration of approximately $583.0 million
plus certain assumed liabilities (the "Acquisition"); (ii) approximately $203.0
million of borrowings under the New Credit Facility; (iii) approximately $225.0
million of estimated gross proceeds from the offering of the Senior Subordinated
Notes; and (iv) an approximately $168.0 million equity contribution to the Grove
Worldwide by Holdings (the "Equity Contribution"), a portion of which was
financed with $50.0 million in gross proceeds from the offering of the
Debentures.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary (other than Grove
Holdings Capital) or any successor to any of them that is designated by the
Management Committee as an Unrestricted Subsidiary pursuant to a resolution of
the Management Committee; but only to the extent that such Subsidiary: (a) has
no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with Holdings or any Restricted
Subsidiary of Holdings unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to Holdings or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of Holdings; (c) is a Person with respect to which
neither Holdings nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
Holdings or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of Holdings or any of its Restricted Subsidiaries and has at least one executive
officer that is not a director or executive officer of Holdings or any of its
Restricted Subsidiaries. Any such designation by the Management Committee shall
be evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described above under --he caption "Certain
Covenants]Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of Holdings as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant
described under the caption "Incurrence of Indebtedness and Issuance of
Disqualified Stock," the Issuers shall be in default of such covenant). The
Management Committee of Holdings may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of
Holdings of any outstanding Indebtedness of such Unrestricted Subsidiary and
such designation shall only be permitted if (i) such Indebtedness is permitted
under the covenant described under the caption "Certain Covenants--Incurrence of
Indebtedness and Issuance of Disqualified Stock," calculated on a pro forma
basis as if such designation had occurred at the beginning of the four-quarter
reference period, and (ii) no Default or Event of Default would be in existence
following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Management
Committee of such Person.
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"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than (x) directors' qualifying shares and
(y) shares required to be held by a second shareholder pursuant to the laws of
France in an amount not to exceed one-tenth of one percent of the outstanding
shares) shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the
Issuers, the following discussion is an accurate general description of certain
of the material anticipated Federal income tax consequences of the purchase,
ownership and disposition of the Debentures. This summary is based on laws,
regulations, rulings and decisions now in effect, all of which are subject to
change. This summary deals only with holders that will hold Debentures as
capital assets and does not address tax considerations applicable to investors
that may be subject to special tax rules such as banks, insurance companies,
tax-exempt organizations, dealers in securities or currencies, persons that will
hold Debentures as part of an integrated investment (including a "straddle")
comprised of Debentures and one or more other positions, persons that have a
"functional currency" other than the U.S. dollar or holders of Debentures that
did not acquire the Debentures in the initial distribution thereof at their
original issue price. In addition, this discussion does not consider the effect
of any estate, gift or other tax laws. Investors considering the purchase of
Debentures should consult their own tax advisors with respect to the application
of the Federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
UNITED STATES HOLDERS
As used herein, the term "United States Holder" means the beneficial owner
of Debentures that is, for United States Federal income tax purposes, (i) a
citizen or resident of the United States, (ii) a domestic corporation or other
entity taxable as a corporation, (iii) an estate or trust the income of which is
subject to United States Federal income taxation regardless of its source or
(iv) otherwise subject to United States Federal income taxation with respect to
its worldwide income on a net income basis.
TAXATION OF UNITED STATES HOLDERS ON EXCHANGE
In the opinion of Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the
Issuers, the exchange of a Senior Discount Debenture for an Exchange Debenture
will not be a taxable event to a United States Holder of a Senior Subordinated
Debenture, and a United States Holder will not recognize any taxable gain or
loss as a result of such an exchange. Accordingly, a United States Holder will
have the same adjusted basis and holding period in an Exchange Debenture as it
had in a Senior Subordinated Debenture immediately before the exchange. Further,
the tax consequences of ownership and disposition of any Exchange Debenture will
be the same as the tax consequences of ownership and disposition of a Senior
Subordinated Debenture.
ORIGINAL ISSUE DISCOUNT
United States Holders of Debentures generally will be subject to the special
tax accounting rules for original issue discount obligations provided by the
Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, as
described in more detail below, United States Holders of the Debentures will be
required to include original issue discount in gross income as ordinary income
as it accrues, in advance of the receipt of cash attributable to that income.
In general, a debt obligation that is issued for an amount less than its
stated redemption price at maturity will be considered to have been issued with
original issue discount for U.S. Federal income tax purposes. Under the
applicable regulations, the stated redemption price at maturity will equal the
sum of all payments to be made on a Debenture, whether denominated as interest
or principal.
Each United States Holder of a Debenture, whether such holder uses the cash
or the accrual method of tax accounting, will be required to include in gross
income the sum of the "daily portions" of original issue discount on that
Debenture for all days during the taxable year that the United States Holder
owns the Debentures. The daily portions of original issue discount on a
Debenture are determined by allocating to each day in any "accrual period" a
ratable portion of the original issue discount allocable to that accrual
109
<PAGE>
period. At the election of each United States Holder, accrual periods may be of
any length and may vary in length over the term of the Debentures, provided that
each accrual period is no longer than one year and each scheduled payment occurs
either on the final or first day of an accrual period. The amount of original
issue discount allocable to each accrual period is determined by multiplying the
"adjusted issue price" (as defined below) at the beginning of the accrual period
by the annual yield to maturity of the Debentures. The "adjusted issue price" of
a Debenture at the beginning of any accrual period will be the sum of its issue
price (generally, the first price at which a substantial amount of Debentures
are sold, disregarding sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents or
wholesalers) and the amount of original issue discount allocable to all prior
accrual periods, reduced by the amount of all payments previously received on
the Debenture. As a result of this "constant yield" method of including original
issue discount in income, the amounts includible in income by a United States
Holder in respect of a Debenture generally are less in the early years and
greater in the later years than the amounts that would be includible on a
straight-line basis.
SALE, EXCHANGE OR RETIREMENT OF DEBENTURES
Upon the sale, exchange or retirement of a Debenture, a United States Holder
generally will recognize capital gain or loss equal to the difference between
the amount realized on the sale, exchange or retirement and such holder's
adjusted tax basis in the Debentures. A United States Holder's adjusted tax
basis in a Debenture will generally be equal to the amount paid for the
Debentures by such holder, increased by any original issue discount included in
income by the holder, and reduced by the amount of all payments previously
received on the Debenture. Such capital gain or loss will be long-term capital
gain or loss if the United States Holder's holding period in the Debenture is
more than one year at the time of disposition. The distinction between capital
gain or loss and ordinary income or loss is important for purposes of the
limitations on a United States Holder's ability to offset capital losses against
ordinary income and because United States Holders that are individuals may be
entitled to a preferential rate on long-term capital gains. The Taxpayer Relief
Act of 1997 further reduces tax rates on capital gains recognized by individuals
in respect of assets held for more than 18 months. United States Holders are
advised to consult with their own tax advisers regarding the application of the
Taxpayer Relief Act of 1997 to their particular circumstances.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest (including original issue discount) on
a Debenture, and payment of the proceeds of the sale of a Debenture to certain
non-corporate, not otherwise exempt, United States Holders, and a 31% backup
withholding tax may apply to such payments if the United States Holder (i) fails
to furnish or certify its correct taxpayer identification number to the payor in
the manner required, (ii) is notified by the Internal Revenue Service (the
"IRS") that it has failed to report payments of interest and dividends properly,
or (iii) under certain circumstances, fails to certify that it has not been
notified by the IRS that it is subject to backup withholding for failure to
report interest and dividend payments. Any amounts withheld under the backup
withholding rules from a payment to a United States Holder will be allowed as a
credit against such holder's United States Federal income tax liability and may
entitle the United States Holder to a refund.
REPORTING REQUIREMENTS
Holdings will provide annual information statements to holders of the
Debentures and to the IRS, setting forth the amount of original issue discount
determined to be attributable to the Debentures for that year.
110
<PAGE>
NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means a beneficial owner
of Debentures that, for United States Federal income tax purposes, is not a
United States Holder.
TAXATION OF NON-UNITED STATES HOLDERS ON EXCHANGE
The exchange of a Senior Subordinated Debenture for an Exchange Debenture
will not be a taxable event to a Non-United States Holder of a Senior
Subordinated Debenture, and a Non-United States Holder will not recognize any
taxable gain or loss as a result of such an exchange. Accordingly, a Non-United
States Holder will have the same adjusted basis and holding period in an
Exchange Debenture as it had in a Senior Subordinated Debenture immediately
before the exchange. Further, the tax consequences of ownership and disposition
of any Exchange Debenture will be the same as the tax consequences of ownership
and disposition of a Senior Subordinated Debenture.
INTEREST
Subject to the discussion of information reporting and backup withholding
below, payments of interest (including original issue discount) on the
Debentures to or on behalf of any Non-United States Holder will not be subject
to United States Federal income or withholding tax if such interest is not
effectively connected with the conduct of a trade or business within the United
States by such Non-United States Holder, provided that (i) such Non-United
States Holder is not a bank for United States Federal income tax purposes, (ii)
such Non-United States Holder is not a "10-percent shareholder" within the
meaning of section 871(h)(3)(B) of the Code, (iii) such Non-United States Holder
is not a controlled foreign corporation for United States Federal income tax
purposes that is related to Holdings through stock ownership, and (iv) certain
certification requirements are met. A Non-United States Holder that is not
exempt from tax under these rules generally will be subject to United States
Federal income tax withholding at a rate of 30% (or lower applicable treaty
rate) on interest payments.
If the interest is effectively connected with the conduct of a trade or
business within the United States of such Non-United States Holder, such
interest will be subject to the United States Federal income tax on net income
that applies to United States persons generally (and with respect to corporate
holders under certain circumstances, the branch profits tax).
GAIN ON DISPOSITION
Any capital gain realized upon a sale, exchange or retirement of a Debenture
by or on behalf of a Non-United States Holder generally will not be subject to
United States Federal withholding or income tax, unless (i) such gain is
effectively connected with a United States trade or business of such Non-United
States Holder, (ii) the Non-United States Holder is an individual that is
present in the United States for 183 days or more during the taxable year of the
sale, exchange or retirement and certain other requirements are met, or (iii)
the Non-United States Holder is subject to tax pursuant to provisions of the
United States Federal tax law applicable to certain United States expatriates.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under temporary Treasury Regulations now in effect, information reporting
and backup withholding will not apply to payments by Holdings or any middleman
to a Non-United States Holder, provided that the holder (and, in certain cases
the custodian, nominee or other agent of such holder) meets certain
certification requirements as to the status of the holder as a Non-United States
Holder (provided that the payor does not have actual knowledge that the holder
is a United States person or that the conditions of any other exemption are not
in fact satisfied).
111
<PAGE>
Recently published final Treasury Regulations (the "Final Withholding
Regulations") make a number of important changes to the procedures for income
tax withholding and certification of eligibility for the portfolio interest
exemption or for a reduced rate of income tax withholding based on an applicable
income tax treaty. In general, the Final Withholding Regulations do not
significantly alter substantive withholding requirements but unify certification
procedures and clarify reliance standards. The Final Withholding Regulations are
scheduled to be effective for payments made on or after January 1, 2000, subject
to certain transition rules.
Initial Non-United States Holders will be required to submit certification
complying with the temporary Treasury Regulations upon purchase of the
Debentures. Certification that complies with the procedures in the Final
Withholding Regulations, where required, must be provided not later than the
earlier of (i) the date after December 31, 1999 on which such Non-United States
Holders' certification is no longer accurate or has expired, and (ii) December
31, 2000 by initial Non-United States Holders that remain holders on such date,
unless such Non-United States Holders receive payments on the Debentures through
a qualified intermediary (as defined in the Final Withholding Regulations) that
has certified on such Non-United States Holders' behalf. Non-United States
Holders claiming under an income tax treaty (and not relying on the portfolio
interest exemption) should be aware that they may be required to obtain taxpayer
identification numbers and to certify their eligibility under the applicable
treaty's limitations on benefits article in order to comply with the Final
Withholding Regulations' certification requirements. THE FINAL WITHHOLDING
REGULATIONS ARE QUITE COMPLEX. NON-UNITED STATES HOLDERS ARE STRONGLY URGED TO
CONSULT THEIR OWN TAX ADVISORS REGARDING POTENTIAL APPLICATION OF THE FINAL
WITHHOLDING REGULATIONS TO PAYMENTS ON THE DEBENTURES IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES.
Backup withholding is not an additional tax; any amounts so withheld may be
refunded or credited against a Non-United States Holder's United States Federal
income tax liability, provided the required information is furnished to the IRS.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF DEBENTURES IN LIGHT OF
HIS PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. EACH HOLDER OF DEBENTURES
SHOULD CONSULT HIS OWN ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH
HOLDER OF THE OWNERSHIP AND DISPOSITION OF THE DEBENTURES, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, OR
SUBSEQUENT VERSIONS THEREOF.
ERISA CONSIDERATIONS
Sections 406 and 407 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and Section 4975 of the Code prohibit certain employee
benefit plans, individual retirement accounts, individual retirement annuities,
and employee annuity plans ("Plans") from engaging in certain transactions with
persons who, with respect to such Plan, are "parties in interest" under ERISA or
"disqualified persons" under the Code. A violation of these "prohibited
transactions" rules may generate excise taxes under the Code and other
liabilities under ERISA for such persons. Possible violations of the prohibited
transaction rules occur if the Debentures are purchased with the assets of any
Plan if Holdings or any of its affiliates is a party in interest or disqualified
person with respect to such Plan, unless such acquisition is subject to a
statutory or administrative exemption.
The foregoing discussion is general in nature and is not intended to be
all-inclusive. Any fiduciary of a Plan considering the purchase of the
Debentures should consult its legal advisors regarding the consequences of such
purchases under ERISA and the Code. If the Plan is not subject to ERISA, the
fiduciary should consult its legal advisors regarding the consequences of any
state law or Code considerations.
112
<PAGE>
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Issuers believe that a holder (other than a person that is
an affiliate of the Company within the meaning of Rule 405 under the Securities
Act or a "broker" or "dealer" registered under the Exchange Act (a "Broker
Dealer") that purchases Debentures from the Issuers to resell pursuant to Rule
144A under the Securities Act or any other exemption) that exchanges Senior
Discount Debentures for Exchange Debentures in the ordinary course of business
and that is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of the Exchange Debentures will be allowed to resell the Exchange Debentures to
the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Debentures a prospectus that
satisfies the requirements of Section 10 thereof. However, if any holder
acquires Exchange Debentures in the Exchange Offer for the purpose of
distributing or participating in a distribution of the Exchange Debentures, such
holder cannot rely on the position of the Staff enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988) or similar no-action or
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction, and such secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K if the
resales are of Exchange Debentures obtained by such holder in exchange for
Senior Discount Debentures acquired by such holder directly from the Issuers or
an affiliate thereof, unless an exemption from registration is otherwise
available.
As contemplated by the above no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Issuers in the Letter of Transmittal that (A) it is not an Affiliate of the
Issuers; (B) it is not participating in, and does not intend to participate in,
and has no arrangement or understanding with any Person to participate in, a
distribution of the Senior Discount Debentures or the Exchange Debentures; (C)
it is acquiring the Exchange Debentures in the ordinary course of business; and
(D) if such holder is a Broker Dealer, it will receive the Exchange Debentures
for its own account in exchange for the Senior Discount Debentures that were
acquired as a result of market-making activities or other trading activities.
Each Broker Dealer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Debentures.
Any Broker Dealer registered under the Exchange Act who holds Senior
Discount Debentures that were acquired for its own account as a result of
market-making activities or other trading activities (other than Senior Discount
Debentures acquired directly from the Issuers or any Affiliate of the Issuers)
may exchange such Senior Discount Debentures for Exchange Debentures pursuant to
the Exchange Offer; however, such Broker Dealer may be deemed an "underwriter"
within the meaning of the Securities Act and, therefore, must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of the Exchange Debentures received by it in the Offer, which prospectus
delivery requirement may be satisfied by the delivery by such Broker Dealer of
this Prospectus, as it may be amended or supplemented from time to time. The
Issuers have agreed to use their reasonable best efforts to cause the
Registration Statement, of which this Prospectus is a part, to remain
continuously effective for a period of one year from the Exchange Date, and to
make this Prospectus, as amended or supplemented, available to any such Broker
Dealer for use in connection with resales. Any Broker Dealer participating in
the Exchange Offer will be required to acknowledge that it will deliver a
prospectus in connection with any resales of Exchange Debentures received by it
in the Exchange Offer. The Letter of Transmittal states that, by acknowledging
that it will deliver and by delivering a prospectus meeting the requirements of
the Securities Act, a Broker Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Issuers will not receive any proceeds from any sale of Exchange
Debentures by a Broker Dealer. Exchange Debentures received by Broker Dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
113
<PAGE>
transactions, through the writing of options on the Exchange Debentures or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchaser or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Broker Dealers and/or the purchasers of any such
Exchange Debentures. Any Broker Dealer that resells Exchange Debentures that
were received by it for its own account pursuant to the Exchange Offer and any
Broker Dealer that participates in a distribution of such Exchange Debentures
may be deemed to be an "underwriter" within the meaning of the Securities Act
and any profit on any such resale of Exchange Debentures and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act.
The Issuers have agreed to pay all expenses incident to the Exchange Offer
(including the reasonable expenses of one counsel for holders of the Senior
Discount Debentures) other than commissions and concessions of Broker Dealers,
and will indemnify the holders of the Senior Discount Debentures (including any
Broker Dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Debentures offered
hereby will be passed upon for Holdings and Grove Holdings Capital, by Paul,
Weiss, Rifkind, Wharton & Garrison, New York, New York.
EXPERTS
The historical financial statements of the Company as of September 28, 1996
and September 27, 1997 and for the fiscal years then ended, included in this
Prospectus have been so included in reliance on the report of Ernst & Young LLP
("Ernst & Young"), independent auditors, given on the authority of said firm as
experts in auditing and accounting. The historical financial statements of the
Company for the fiscal year ended September 30, 1995, included in this
Prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent auditors, given on the authority of said
firm as experts in auditing and accounting.
CHANGE IN ACCOUNTANTS
As indicated above, 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.
114
<PAGE>
INDEX TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Introduction............................................................................................... P-2
Unaudited Pro Forma Combined Statement of Operations for the year ended September 27, 1997................. P-3
Unaudited Pro Forma Combined Statement of Operations for the nine months ended June 27, 1998............... P-4
Notes to Unaudited Pro Forma Combined Statements of Operations............................................. P-5
</TABLE>
P-1
<PAGE>
GROVE HOLDINGS LLC
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data of Holdings have
been derived by the application of pro forma adjustments to the historical
combined and consolidated financial statements of the Company appearing
elsewhere in this Prospectus. The unaudited pro forma combined balance sheet
gives effect to the Transactions as if they were consummated on June 27, 1998.
The unaudited pro forma combined statements of operations for the nine months
ended June 27, 1998 (the "fiscal 1998 nine months") and the year ended September
27, 1997 ("fiscal 1997") give effect to the Transactions as if they were
consummated at the beginning of fiscal 1997.
The pro forma adjustments are described in the accompanying notes and are
based upon available information and upon certain assumptions that management
believes are reasonable. The unaudited pro forma combined information and
accompanying notes should be read in conjunction with the Combined and
Consolidated Financial Statements and related notes, and other financial
information pertaining to Holdings and the Company, including "Capitalization"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere in this Prospectus.
The unaudited pro forma combined financial data are provided for
informational data only and are not necessarily indicative of the operating
results that would have occurred had the Transactions been consummated on the
dates described above, nor are they necessarily indicative of the Holdings'
future results of operations or financial position.
The unaudited pro forma combined financial data have been prepared
accounting for the Acquisition using the purchase method. The estimated total
purchase price of $583 million and related acquisition fees and expenses of
approximately $6.5 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. Such allocation is based on studies which
have not yet been completed. Accordingly, the allocation reflected in the
unaudited pro forma combined financial data is preliminary and subject to
revision. Such revision could be material.
The unaudited pro forma combined statements of operations data do not
include annual costs savings Holdings estimates the Company can achieve by
fiscal 2001 through the implementation of a detailed program to improve the
manufacturing process and reduce selling, general and administrative expenses
described elsewhere in this Prospectus. It is expected that cost savings during
the next four years will be offset by non-recurring costs of approximately $25.0
million associated with the implementation of the Operations Improvement
Program.
P-2
<PAGE>
GROVE HOLDINGS LLC
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 27, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO
HISTORICAL ADJUSTMENTS FORMA
---------- ----------- ----------
<S> <C> <C> <C>
Net sales................................................................ $ 856,812 $ -- $ 856,812
Cost of goods sold....................................................... 653,539 1,421(a) 654,960
---------- ----------- ----------
Gross profit......................................................... 203,273 (1,421) 201,852
Selling, engineering, general and administrative expenses................ 120,909 587(a) 120,092
(1,404)(c)
Restructuring costs...................................................... 1,960 -- 1,960
Business process reengineering costs associated with new computer system
installation........................................................... 1,283 -- 1,283
Amortization of goodwill................................................. 9,054 (1,899)(d) 7,155
Management fees paid to Hanson........................................... 2,176 (2,176)(e) --
---------- ----------- ----------
Operating profit..................................................... 67,891 3,471 71,362
Other income (expense):
Interest income........................................................ 2,085 (1,606)(f) 479
Interest expense....................................................... (2,042) 1,404(g) (46,318)
(45,680)(h)
Other income, net...................................................... 535 -- 535
---------- ----------- ----------
Income before income taxes........................................... 68,469 (42,411) 26,058
Income taxes............................................................. 26,249 (22,543)(i) 3,706
---------- ----------- ----------
Net income........................................................... $ 42,220 $ (19,868) $ 22,352
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
See notes to unaudited pro forma combined statements of operations
P-3
<PAGE>
GROVE HOLDINGS LLC
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 27, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
------------- COMPANY
SEVEN -------------
MONTHS ENDED TWO
APRIL 28, MONTHS ENDED PRO FORMA
1998 JUNE 27, 1998 ADJUSTMENTS PRO FORMA
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.............................................. $ 476,199 $ 154,780 $ -- $ 630,979
Cost of goods sold..................................... 375,732 121,144 829(a) 497,705
Write-off of amount assigned to inventory in excess of
historical costs resulting from purchase accounting
adjustments.......................................... -- 10,000 (10,000)(b) --
------------- ------------- ----------- -----------
Gross profit......................................... 100,467 23,636 9,171 133,274
Selling, engineering, general and administrative
expenses............................................. 72,893 23,162 342(a)
(1,484)(c) 94,913
Restructuring costs.................................... -- -- -- --
Business process reengineering costs associated with
new computer system installation..................... 142 -- -- 142
Amortization of goodwill............................... 5,215 1,164 (1,013)(d) 5,366
Management fees paid to Hanson......................... 162 -- (162)(e) --
------------- ------------- ----------- -----------
Operating profit (loss).............................. 22,055 (690) 11,488 32,853
Other income (expense):
Interest income...................................... 3,484 340 (3,144)(f) 680
Interest expense..................................... (2,437) (8,325) 2,174(g)
(26,176)(h) (34,764)
Other income (expense), net.......................... (6,993) 6 -- (6,987)
------------- ------------- ----------- -----------
Income (loss) before income taxes.................. 16,109 (8,669) (15,658) (8,218)
Income taxes........................................... 11,673 1,751 (9,007)(i) 4,417
------------- ------------- ----------- -----------
Net income (loss).................................. $ 4,436 $ (10,420) $ (6,651) $ (12,635)
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
</TABLE>
See notes to unaudited pro forma combined statements of operations
P-4
<PAGE>
GROVE HOLDINGS LLC
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(a) To reflect additional depreciation expense as a result of the fair values
assigned to property, plant and equipment.
<TABLE>
<CAPTION>
FISCAL 1998
FISCAL 1997 NINE MONTHS
----------- ------------
<S> <C> <C>
Additional depreciation expense:
Included in cost of goods sold................................... $ 1,421 $ 829
Included in selling, engineering, general and administrative
expenses....................................................... 587 342
----------- ------------
$ 2,008 $ 1,172
----------- ------------
----------- ------------
</TABLE>
(b) In connection with the allocation of the purchase price, the Company has
assumed that it will assign a value to inventory of approximately $25,000 in
excess of its net book value. The amount in excess of net book value will be
charged against operations over the first six months following the
Acquisition. The charge of $10,000 for the two months ended June 27, 1998 is
eliminated in the pro forma combined statements of operations for the nine
months ended June 27, 1998 since such charge is non-recurring.
(c) To adjust selling, engineering, general and administrative expenses for
costs increases and reductions resulting from the Acquisition and the
operation of the Company on a stand-alone basis.
<TABLE>
<CAPTION>
FISCAL 1998
FISCAL 1997 NINE MONTHS
----------- ------------
<S> <C> <C>
Elimination of long-term incentive plan for senior executives...... $ (750) $ (190)
Elimination of other executive perquisites......................... (600) (350)
Adjustment to pension and postretirement expense resulting from
purchase accounting adjustments.................................. (1,054) (615)
Estimated additional costs to replace certain administrative costs
provided by Hanson............................................... 1,000 583
Professional fees and expenses in connection with the sale of the
Company.......................................................... -- (412)
----------- ------------
Net reduction in expenses........................................ $ (1,404) $ (1,484)
----------- ------------
----------- ------------
</TABLE>
In connection with the Acquisition, the Company replaced the long-term
incentive plan with an option plan which provides for the granting of
options to purchase membership interests at fair market value.
(d) To adjust goodwill amortization to $7,155 in fiscal 1997 and $5,366 in the
fiscal 1998 nine months based on goodwill of $286,180 amortized over 40
years.
(e) To eliminate management fees paid to Hanson ($2,176 in fiscal 1997 and $162
in the fiscal 1998 nine months).
(f) To eliminate interest income ($1,606 in fiscal 1997 and $3,144 in the fiscal
1998 nine months) earned on notes receivable from customers using the
special North American dealer financing program. Virtually all notes
receivable outstanding under this dealer financing program at the date of
the Acquisition were retained by Hanson. The Company intends to continue the
dealer financing program and in July 1998 entered into an agreement with a
third-party to purchase notes receivable as they are issued. The Company
will generate interest income generally at the prime rate from new notes
issued
P-5
<PAGE>
GROVE HOLDINGS LLC
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS) (CONTINUED)
under the dealer financing program. No interest income from the notes
receivable has been assumed in the pro forma combined statements of
operations for periods prior to the Acquisition.
(g) To eliminate interest expense paid to Hanson ($1,404 in fiscal 1997 and
$2,174 in the fiscal 1998 nine months) with respect to intercompany
obligations.
(h) To reflect interest expense based upon the pro forma debt of the Company,
including pro forma borrowings under the Revolving Credit Facility, as
follows for fiscal 1997 and the fiscal 1998 nine months:
<TABLE>
<CAPTION>
FISCAL 1998
FISCAL 1997 NINE MONTHS
----------- ------------
<S> <C> <C>
Revolving Credit Facility (7.95% per annum)........................ $ 488 $ 352
Term Loan Facility (8.20% per annum)............................... 16,400 12,300
9 1/4% Senior Subordinated Notes due 2008.......................... 20,813 15,610
11 5/8% Senior Discount Debentures................................. 5,979 4,442
Other borrowing costs.............................................. 638 560
Amortization of deferred financing costs........................... 2,000 1,500
----------- ------------
$ 46,318 $ 34,764
----------- ------------
----------- ------------
</TABLE>
Interest expense on the Revolving Credit Facility includes the unused
facility fee (0.375%) of $457 and $352 in fiscal 1997 and fiscal 1998 nine
months, respectively.
Interest rates with respect to borrowings under the Revolving Credit Facility
and the Term Loan Facility are variable. A 25-basis point increase in
interest rates on borrowings under the Revolving Credit Facility and the
Term Loan Facility would increase pro forma interest expense by $500
annually.
(i) To eliminate certain United States Federal and state income taxes. Following
the Acquisition, a significant portion of the Company's business will be
operated as a United States limited liability company, whereby the limited
liability company will not itself be subject to income tax, the taxable
income of the limited liability company in the United States will be
allocated to the equity holders of Holdings and such equity holders will be
responsible for income taxes on such taxable income. The Company expects to
make distributions in the form of dividends to equity holders of Holdings to
enable them to meet their tax obligations with respect to income allocated
to them by the Company. Foreign and domestic taxes payable on taxable income
generated by the Company's foreign subsidiaries and its truck-mounted crane
business will continue to be the responsibility of the Company. The pro
forma adjustment does not reflect income tax planning techniques which may
be implemented to reduce such foreign and domestic taxes.
P-6
<PAGE>
INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
THE GROVE COMPANIES:
Report of Independent Auditors............................................................................. F-2
Report of Independent Accountants.......................................................................... F-3
Combined Balance Sheets as of September 28, 1996 and September 27, 1997.................................... F-4
Combined Statements of Operations for the years ended September 30, 1995, September 28, 1996 and September F-5
27, 1997.................................................................................................
Combined Statements of Changes in Invested Capital for the years ended September 30, 1995, September 28, F-6
1996 and September 27, 1997..............................................................................
Combined Statements of Cash Flows for the years ended September 30, 1995, September 28, 1996 and September F-7
27, 1997.................................................................................................
Notes to Combined Financial Statements..................................................................... F-8
GROVE HOLDINGS LCC:
Unaudited Condensed Consolidated Balance Sheet as of June 27, 1998......................................... F-32
Unaudited Condensed Combined Statements of Operations for the nine months ended June 28, 1997 and seven F-33
months ended April 28, 1998 and Unaudited Condensed Consolidated Statement of Operations for the two
months ended June 27, 1998...............................................................................
Unaudited Condensed Combined Statements of Cash Flows for the nine months ended June 28, 1997, and seven F-34
months ended April 28, 1998 and Unaudited Condensed Consolidated Statement of Cash Flows for and the two
months ended and June 27, 1998...........................................................................
Notes to Unaudited Condensed Financial Statements.......................................................... F-35
</TABLE>
Grove Holdings LLC, Grove Holdings Capital, Inc., Grove Worldwide LLC and
Grove Capital, Inc. were formed in December 1997, March 1998, December 1997 and
March 1998, respectively, with nominal capital contributions and had no
operations prior to the Acquisition. Accordingly, Holdings has not provided
herein any financial statements for such entities for any period prior to the
Acquisition.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Shareholder of
The Grove Companies
We have audited the accompanying combined balance sheets as of September 27,
1997 and September 28, 1996 of the Grove Companies (as listed in Note 1), and
the related combined statements of income, changes in invested capital, and cash
flows for each of the two years in the period ended September 27, 1997. Our
audits also included the financial statements schedule listed in the Index at
Item 21(b). These financial statements and schedules are the responsibility of
the Companies' management. Our responsibility is to express an opinion on the
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position at September 27, 1997
and September 28, 1996, 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 schedule, when
considered in relation to the basis financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
December 15, 1997
except for Note 19, as to which the date is
April 29, 1998
Baltimore, Maryland
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of
The Grove Companies
In our opinion, the combined statements of operations, of cash flows and of
changes in invested capital for the year ended September 30, 1995 present
fairly, in all material respects, the results of operations and cash flows of
The Grove Companies for the year ended September 30, 1995, in conformity with
generally accepted accounting principles. Our audit also included the financial
statement schedule listed in the Index as Item 21(b). These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above. We have not
audited the combined statements of The Grove Companies for any period subsequent
to September 30, 1995.
PricewaterhouseCoopers LLP
December 15, 1997
Florham Park, NJ
F-3
<PAGE>
THE GROVE COMPANIES
COMBINED BALANCE SHEETS
AS OF SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................... $ 8,184 $ 5,024
Trade receivables (net)................................................................. 121,044 149,164
Notes receivable........................................................................ -- 68,450
Inventories............................................................................. 222,542 215,332
Other current assets.................................................................... 6,680 7,633
Deferred tax assets..................................................................... -- 14,936
---------- ----------
Total current assets.................................................................. 358,450 460,539
Property, plant, and equipment (net)...................................................... 101,176 147,588
Goodwill.................................................................................. 264,844 254,728
Deferred tax assets....................................................................... -- 11,415
Other non-current assets.................................................................. 5,688 7,226
---------- ----------
Total assets.......................................................................... $ 730,158 $ 881,496
---------- ----------
---------- ----------
LIABILITIES AND INVESTED CAPITAL
Current liabilities:
Trade accounts payable.................................................................. $ 70,779 $ 70,327
Short-term borrowings................................................................... 7,443 7,265
Income taxes payable.................................................................... -- 4,622
Deferred tax liability.................................................................. 4,828 --
Other payables and accrued liabilities.................................................. 90,206 86,112
---------- ----------
Total current liabilities............................................................. 173,256 168,326
Non-current liabilities:
Deferred tax liability.................................................................. 4,047 --
Deferred revenue........................................................................ 21,154 46,509
Other non-current liabilities........................................................... 29,147 38,169
---------- ----------
Total liabilities..................................................................... 227,604 253,004
Total invested capital.................................................................... 502,554 628,492
---------- ----------
Total liabilities and invested capital................................................ $ 730,158 $ 881,496
---------- ----------
---------- ----------
</TABLE>
See notes to combined financial statements.
F-4
<PAGE>
THE GROVE COMPANIES
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1995,
SEPTEMBER 28, 1996, AND SEPTEMBER 27, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
<S> <C> <C> <C>
SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 27,
1995 1996 1997
------------- ------------- -------------
Net sales........................................................... $ 503,815 $ 794,209 $ 856,812
Cost of goods sold.................................................. 377,226 609,130 653,539
------------- ------------- -------------
Gross profit.................................................... 126,589 185,079 203,273
Selling, engineering, general, and administrative expenses.......... 84,826 128,804 131,246
Management fees..................................................... 3,390 5,655 2,176
Restructuring charges............................................... -- -- 1,960
------------- ------------- -------------
Operating profit................................................ 38,373 50,620 67,891
Net interest (expense) income, net of interest income of $302, $535,
and $2,085 respectively........................................... (2,312) (2,791) 43
Other (expense) income, net......................................... (279) (193) 535
------------- ------------- -------------
Income before income taxes...................................... 35,782 47,636 68,469
Income taxes........................................................ 19,013 22,188 26,249
------------- ------------- -------------
Net income...................................................... $ 16,769 $ 25,448 $ 42,220
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to combined financial statements.
F-5
<PAGE>
THE GROVE COMPANIES
COMBINED STATEMENTS OF CHANGES IN INVESTED CAPITAL
FOR THE YEARS ENDED SEPTEMBER 30, 1995,
SEPTEMBER 28, 1996, AND SEPTEMBER 27, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
MINIMUM
PENSION TOTAL
INVESTED LIABILITY TRANSLATION INVESTED
CAPITAL ADJUSTMENT ADJUSTMENT CAPITAL
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Balance at October 1, 1994...................................... $ 420,401 $ (975) $ (19,664) $ 399,762
Net income.................................................... 16,769 -- -- 16,769
Dividend paid to parent....................................... (11,097) -- -- (11,097)
Net transactions with affiliates.............................. 61,825 -- -- 61,825
Change in minimum pension liability........................... -- (1,102) -- (1,102)
Change in foreign currency translation........................ -- -- 1,149 1,149
---------- ----------- ----------- ----------
Balance at September 30, 1995................................... 487,898 (2,077) (18,515) 467,306
Net income.................................................... 25,448 -- -- 25,448
Dividend paid to parent....................................... (30,057) -- -- (30,057)
Net transactions with affiliates.............................. 42,394 -- -- 42,394
Change in minimum pension liability........................... -- (162) -- (162)
Change in foreign currency translation........................ -- -- (2,375) (2,375)
---------- ----------- ----------- ----------
Balance at September 28, 1996................................... 525,683 (2,239) (20,890) 502,554
Net income.................................................... 42,220 -- -- 42,220
Net transactions with affiliates.............................. 88,524 -- -- 88,524
Change in minimum pension liability........................... -- 601 -- 601
Change in foreign currency translation........................ -- -- (5,407) (5,407)
---------- ----------- ----------- ----------
Balance at September 27, 1997................................... $ 656,427 $ (1,638) $ (26,297) $ 628,492
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
</TABLE>
See notes to combined financial statements.
F-6
<PAGE>
THE GROVE COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1995,
SEPTEMBER 28, 1996, AND SEPTEMBER 27, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
<S> <C> <C> <C>
SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 27,
1995 1996 1997
------------- ------------- -------------
OPERATING ACTIVITIES
Net income........................................................ $ 16,769 $ 25,448 $ 42,220
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................. 13,765 17,313 17,985
Depreciation of equipment held for rent....................... 196 3,805 8,352
(Gain)/loss on sale of fixed assets........................... (1,297) 5 (600)
Deferred tax expense.......................................... 183 126 1,969
Changes in operating assets and liabilities:
Trade receivables (net)..................................... (13,241) (48,405) (23,266)
Notes receivable............................................ -- -- (68,450)
Inventories................................................. (33,766) (27,528) (162)
Trade accounts payable...................................... (1,022) 21,559 564
Other assets and liabilities (net).......................... 25,366 17,503 33,383
------------- ------------- -------------
Net cash provided by operating activities......................... 6,953 9,826 11,995
------------- ------------- -------------
INVESTING ACTIVITIES
Capital expenditures.............................................. (7,385) (19,443) (32,491)
Investment in equipment held for rent............................. (552) (22,527) (37,904)
Proceeds from sales of property, plant, and equipment............. 1,733 432 1,603
Acquisition of businesses......................................... (40,370) (3,703) --
------------- ------------- -------------
Net cash used in investing activities............................. (46,574) (45,241) (68,792)
------------- ------------- -------------
FINANCING ACTIVITIES
Net proceeds from short-term borrowings........................... (127) 7,443 204
Net amounts received from parent.................................. 61,825 48,366 54,145
Cash dividends paid to parent..................................... (11,097) (30,057) --
------------- ------------- -------------
Net cash provided by financing activities......................... 50,601 25,752 54,349
------------- ------------- -------------
Effect of exchange rate changes on cash........................... 570 (838) (712)
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents.............. 11,550 (10,501) (3,160)
Cash and cash equivalents at beginning of year.................... 7,135 18,685 8,184
------------- ------------- -------------
Cash and cash equivalents at end of year.......................... $ 18,685 $ 8,184 $ 5,024
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to combined financial statements.
F-7
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
The Grove Companies (the "Company") and the accompanying combined financial
statements 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 Holding Inc., Delta Manlift SAS, Grove France
SA, Deutsche Grove GmbH, and Grove Manlift Pty. Ltd. All of the Grove Companies
are either directly or indirectly wholly owned by Hanson PLC, a United Kingdom
company.
All significant intercompany transactions have been eliminated in the
accompanying combined financial statements.
DESCRIPTION OF BUSINESS
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 manufacturing plants and primary related
facilities are located in: Shady Grove and Chambersburg, Pennsylvania and
Waverly, Nebraska, United States; 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.
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 invested capital. 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make reasonable estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company defines cash equivalents as highly liquid investments with a
maturity of less than three months when purchased.
TRADE RECEIVABLES AND NOTES RECEIVABLE
Trade receivables are net of allowance for doubtful accounts of $2,553 and
$2,717 as of September 28, 1996 and September 27, 1997, respectively.
Notes receivable relate to sales of new equipment to North American
distributors on terms of up to 360 days. Payment of interest and principle are
due at the maturity of the note unless the dealer sells the
F-8
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 for financial reporting purposes. The
depreciation periods for these assets are as follows:
<TABLE>
<S> <C>
Land improvements............................................... 3-20 years
Buildings and improvements...................................... 10-50
years
Machinery and equipment......................................... 3-12 years
Equipment held for rent......................................... Lease term
Furniture and fixtures.......................................... 3-10 years
</TABLE>
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 periods of up to 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
In accordance with FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," 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.
POSTRETIREMENT BENEFITS
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. Prior service costs and
F-9
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
unrecognized gains or losses in excess of the corridor for defined benefit plans
are generally amortized on the straight-line method over the estimated remaining
service periods of participants.
Certain employees of the Company are covered by defined contribution plans.
The Company's contributions to the plans are based on percentage of employee
compensation or employee contributions. The plans are funded on a current basis.
In addition to pension benefits, the Company provides certain postretirement
medical, and prescription drug benefits, principally to certain former United
States employees. These plans are unfunded. Retirees in other countries are
generally covered by government-sponsored programs.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are utilized by the Company to reduce
foreign currency exchange risks and consist primarily of forward 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. If and when the hedged transactions are no longer likely to occur,
the derivative financial instruments are marked-to-market and recognized through
the income statement as other income or expense.
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 take the form of end-of-term residual value guarantees or
reducing residual value guarantees. Reducing residual value guarantees represent
guarantees of residual value that decline with the passage of time. End-of-term
guarantees and reducing residual value guarantees are generally over periods of
five years. The Company records these transactions in accordance with the lease
principles established by FASB Statement 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 income statement. 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 28, 1996 and September 27, 1997, the amount of deferred revenue
relating to transactions involving residual value guarantees which is included
in other current or noncurrent liabilities was $24,179 and $53,150,
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 to each owner
of a
F-10
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
model that is experiencing a particular problem. Estimated obligations beyond
one year are classified as other non-current liabilities.
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as incurred.
Research and development costs were $9,337, $14,976, and $15,427 for the years
ended September 30, 1995, September 28, 1996, and September 27, 1997,
respectively.
ADVERTISING
All costs associated with advertising and promoting products are expensed
when incurred. Advertising expense amounted to $3,952, $3,887, and $4,802 for
the years ended September 30, 1995, September 28, 1996, and September 27, 1997,
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 compensation arrangements.
ADOPTION OF NEW ACCOUNTING STANDARDS
In October 1996, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
(SOP) 96-1, "Environmental Remediation Liabilities." The SOP provides
authoritative guidance on the recognition, measurement, display, and disclosure
of environmental liabilities.
The SOP provides benchmarks that should be considered when evaluating the
probability that a loss has been incurred and the extent to which the amount of
any loss is reasonably estimable at each benchmark. Management does not believe
that the adoption of this SOP will have a material effect on the Company's
financial position or on its results of operations.
In June 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 year 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 in which
they operate, and their major customers. Management will adopt the provisions of
this standard in fiscal year 1999.
F-11
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
2. ACQUISITIONS
On August 30, 1995, the Company acquired certain assets and liabilities of
Krupp Mobilkrane GmbH and affiliates of the Fried.Krupp AG Hoesch-Krupp's
("Krupp") mobile hydraulic crane business, for approximately $40,370. The
acquisition was accounted for under the purchase method. The purchase price was
allocated based on the fair values of the assets and liabilities acquired, with
the excess allocated to goodwill. In connection with the acquisition, the
Company recognized $10,454 in goodwill which is being amortized on the
straight-line basis over a period of 15 years. Results of the Company's
operations from the date of acquisition, including the amortization of goodwill,
have been reflected in the statement of operations.
Pro forma unaudited combined operating results of the Company for the year
ended September 30, 1995, assuming that the acquisition had been made as of
October 2, 1994 are summarized below:
<TABLE>
<S> <C>
Net sales......................................................... $ 639,203
Operating profit.................................................. $ 38,210
Net income........................................................ $ 15,799
</TABLE>
These pro forma results have been prepared for comparative purposes only and
include certain adjustments, including the recognition of additional
amortization expense as a result of goodwill. They do not purport to be
indicative of the results of operations which actually would have resulted had
the combination been in effect on October 2, 1994 or of future results of
operations of the combined entities.
A summary of the fair value of assets acquired and liabilities assumed as of
August 30, 1995 are as follows:
<TABLE>
<S> <C>
Inventories........................................................ $ 58,492
Property, plant, and equipment..................................... 14,203
Goodwill........................................................... 10,454
Other non-current assets........................................... 1,571
---------
Total assets..................................................... 84,720
---------
---------
Trade accounts payable............................................. 10,535
Other payables and accrued liabilities............................. 33,410
Other non-current liabilities...................................... 405
---------
Total liabilities................................................ 44,350
---------
Total cash paid.................................................. $ 40,370
---------
---------
</TABLE>
In 1996, the Company acquired the operations of Delta Manlift SAS for a
purchase price of $3,703. The acquisition was accounted for under the purchase
method and is not significant to the Company's operations.
3. RESTRUCTURING
In 1996, the Company restructured certain operations obtained in the
acquisition of Krupp's mobile hydraulic crane business and recorded a purchase
accounting reserve (and increase to goodwill) of $1,642.
F-12
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
3. RESTRUCTURING (CONTINUED)
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.
4. INVENTORY
The components of inventory are as follows as of September 28, 1996 and
September 27, 1997:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Raw materials and supplies............................................ $ 58,749 $ 76,573
Work in process....................................................... 88,005 78,993
Finished goods........................................................ 75,788 59,766
---------- ----------
$ 222,542 $ 215,332
---------- ----------
---------- ----------
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are as follows as of
September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Land and improvements................................................. $ 12,789 $ 12,765
Buildings and improvements............................................ 60,348 63,052
Machinery and equipment............................................... 62,904 71,864
Equipment held for rent............................................... 24,845 58,455
Furniture and fixtures................................................ 15,845 17,016
Construction in progress.............................................. 7,090 20,329
---------- ----------
183,821 243,481
Less accumulated depreciation and amortization........................ (82,645) (95,893)
---------- ----------
$ 101,176 $ 147,588
---------- ----------
---------- ----------
</TABLE>
Depreciation expense for the years ended September 30, 1995, September 28,
1996, and September 27, 1997 was $5,898, $11,933 and $17,295, respectively.
Gains and losses on the sale of fixed assets are included in other (expense)
income.
Construction in progress consists primarily of costs related to the
Company's installation of new manufacturing and administrative systems,
including computer hardware and software components. The project is expected to
be completed during the latter part of fiscal year 1998. As of September 28,
1996 and September 27, 1997, total capitalized costs related to this project
were approximately $4,286 and $18,328, respectively. Project costs related to
reengineering, training of personnel, and the current and future operational
state assessments have been expensed as incurred.
F-13
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
6. GOODWILL
Goodwill consists of the following as of September 28, 1996 and September
27, 1997:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Goodwill.............................................................. $ 338,505 $ 337,443
Accumulated amortization.............................................. (73,661) (82,715)
---------- ----------
$ 264,844 $ 254,728
---------- ----------
---------- ----------
</TABLE>
7. SHORT-TERM BORROWINGS AND LINES OF CREDIT
The Company's European operations maintain credit facilities. As of
September 27, 1997, the Company had $14,998 of credit facilities available for
discounting certain accounts receivable. As of September 28, 1996 and September
27, 1997, $7,443 and $7,265 were drawn against these facilities. The interest
rate charged on the outstanding borrowings was 3.25% and 3.0% at September 28,
1996 and September 27, 1997, respectively. As of September 27, 1997, the Company
also had available revolving lines-of-credit in the amount of $14,072. These
arrangements do not have termination dates and are reviewed periodically. No
material commitment fees are required to be paid on the undrawn portion of the
credit facilities and the revolving lines of credit.
8. OTHER PAYABLES AND ACCRUED LIABILITIES
The components of other payables and accrued liabilities are as follows as
of September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Salaries and wages...................................................... $ 18,639 $ 21,036
Employee benefits....................................................... 8,511 8,603
Accrued warranty........................................................ 23,940 18,044
Deferred revenue associated with equipment held for rent................ 3,025 6,641
Product, workers' compensation and general liability.................... 12,923 12,757
All other............................................................... 23,168 19,031
--------- ---------
$ 90,206 $ 86,112
--------- ---------
--------- ---------
</TABLE>
All other consists primarily of accruals for advertising, commissions, and
accruals for inventory receipts.
9. CREDIT AND FOREIGN EXCHANGE RISK
Trade receivables subject the Company to concentration of credit risk,
because they are concentrated in distributors and rental companies which serve
the heavy industrial and construction industries, which are subject to business
cycle variations. For the fiscal years ended September 30, 1995, September 28,
1996 and September 27, 1997, approximately 20%, 20% and 19%, respectively, of
revenues were generated from six major customers, with no one customer
accounting for more than 5% of total revenue. Approximately 15%
F-14
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
9. CREDIT AND FOREIGN EXCHANGE RISK (CONTINUED)
and 31% of the outstanding trade and notes receivable balance as of September
28, 1996 and September 27, 1997, respectively, were due from these customers.
This risk is managed by the periodic evaluation of customers' financial
condition.
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 the
year ended September 27, 1997, the Company offered a special financing program
primarily to its U.S. distributors which provides credit terms of periods up to
360 days in exchange for an interest-bearing note. The Company generally retains
a security interest in the machinery sold.
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 or
from the Company's parent, Hanson PLC. Some of the contracts involve the
exchange of two foreign currencies according to the local needs of the
companies.
The following table summarizes the contractual amounts of the Company's
forward exchange contracts as of September 28, 1996 and September 27, 1997,
including details by major currency as of September 27, 1997. 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 28, 1996............................................... $ 48,856 $ (49,145)
--------- ----------
--------- ----------
As of September 27, 1997:
United States Dollars................................................ $ 2,098 $ (6,880)
Japanese Yen......................................................... -- (208)
German Marks......................................................... 10,651 (1,687)
Pounds Sterling...................................................... 7,347 (5,175)
French Francs........................................................ 21 (6,443)
--------- ----------
$ 20,117 $ (20,393)
--------- ----------
--------- ----------
</TABLE>
The Company's credit exposure on its foreign currency derivatives was $352
and $259 as of September 28, 1996 and September 27, 1997, respectively,
including $17 and $38, respectively with Hanson PLC. Gross deferred realized
gains and losses on firm commitments were not significant as of September 28,
1996 and September 27, 1997. Substantially all of the amounts deferred at
September 27, 1997 are expected to be recognized in income during fiscal year
1998, when the gains or losses on the underlying transactions will also be
recognized.
F-15
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
10. 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 combined balance sheets
approximate fair value.
Foreign currency contracts: The fair value of forward exchange contracts
is estimated using prices established by financial institutions for
comparable instruments. As of September 28, 1996 and September 27, 1997, the
carrying amounts of forward currency contracts reported in the balance
sheets were in a net liability of $225 and $276, respectively. The fair
value of the forward contracts approximated the carrying amounts as of
September 28, 1996 and September 27, 1997.
11. INCOME TAXES
For the period presented, federal and state income taxes are provided as if
the Company filed its own separate income tax returns. The Company files its
foreign income tax returns separately for each subsidiary. In the U.S., certain
of the Company's operations were included in a U.S. consolidated return with
other Hanson PLC affiliates until the demerger of Millennium Chemicals Inc.
("Millennium"). As a result of transactions consummated pursuant to the
demerger, the U.S. operations now file separate U.S. federal and state income
tax returns. The Company is charged for its share of taxes by Hanson PLC. These
charges are reflected in invested capital. In 1995 and 1996, Hanson PLC did not
charge the Company for its share of federal taxes.
The Company uses the liability method in accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax bases of assets and liabilities
and are measured using enacted tax rates and laws that will be in effect when
the differences are expected to reverse.
Income (losses) from continuing operations before income taxes were as
follows for the fiscal years ended September 30, 1995, September 28, 1996 and
September 27, 1997:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
United States................................................ $ 39,979 $ 47,535 $ 66,721
Other Countries.............................................. (4,197) 101 1,748
--------- --------- ---------
$ 35,782 $ 47,636 $ 68,469
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-16
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
11. INCOME TAXES (CONTINUED)
The provision for income taxes is comprised of the following for the fiscal
years ended September 30, 1995, September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Current:
United States.............................................. $ 18,979 $ 21,623 $ 23,979
Other Countries............................................ (149) 439 301
--------- --------- ---------
18,830 22,062 24,280
Deferred:
United States.............................................. 183 126 1,969
Other Countries............................................ -- -- --
--------- --------- ---------
183 126 1,969
--------- --------- ---------
$ 19,013 $ 22,188 $ 26,249
--------- --------- ---------
--------- --------- ---------
</TABLE>
Significant components of the Company's deferred tax liabilities and assets
are as follows as of September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Deferred tax liabilities:
Intercompany basis differences...................................... $ (7,557) $ (7,557)
Fixed assets........................................................ (7,492) --
Other............................................................... (6,423) (122)
---------- ----------
Total deferred tax liabilities.................................... (21,472) (7,679)
---------- ----------
Deferred tax assets:
Fixed assets........................................................ -- 6,977
Tax-deductible goodwill............................................. -- 5,074
Inventory differences............................................... -- 1,881
Accrued expenses.................................................... 1,114 12,221
Foreign net operating losses and AMT credits........................ 6,957 6,323
Other............................................................... 11,483 7,877
---------- ----------
Total deferred tax assets........................................... 19,554 40,353
---------- ----------
Valuation allowance................................................. (6,957) (6,323)
---------- ----------
Net deferred tax assets (liabilities)............................... $ (8,875) $ 26,351
---------- ----------
---------- ----------
</TABLE>
As stated above, the Company's ultimate parent, Hanson PLC, demerged several
of their businesses. In connection with the Millennium demerger, one of the
Company's U.S. subsidiaries as well as the Company's German subsidiaries were
owned by Millennium Chemicals Inc. from September 29, 1996 to October 6, 1996.
On October 6, 1996, these subsidiaries were reacquired by Hanson PLC, which
resulted in a new tax basis in certain assets and liabilities. The impact of
this "step-up" in basis, generated additional deferred tax assets, of which
$37,195 has been recorded as a component of invested capital. The combined
financial statements reflect the results of operations of these entities for the
full year.
F-17
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
11. INCOME TAXES (CONTINUED)
Tax carryforwards at September 28, 1996 and September 27, 1997 consist of
alternative minimum tax credit carryforwards of $700 which do not expire, and
other foreign net operating loss carryforwards of $17,878 and $16,066, which do
not expire.
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 30,
1995, September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Applicable income taxes based on federal statutory tax rate....... $ 12,524 $ 16,673 $ 23,964
State taxes, net of federal tax benefit........................... 1,879 1,130 2,520
Goodwill amortization............................................. 2,822 2,955 333
Foreign operating loss benefits not previously recognized......... (229) (1,020) (1,409)
Foreign operating loss valuation allowances....................... 1,915 2,182 1,405
Other............................................................. 102 268 (564)
--------- --------- ---------
$ 19,013 $ 22,188 $ 26,249
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company does not provide for income taxes on the undistributed earnings
of a subsidiary not consolidated for U.S. federal income tax purposes since it
intends to retain these earnings in the business. The additional taxes payable
if these earnings were distributed would principally represent the difference
between applicable U.S. income tax rates and credits allowed for taxes
previously paid by such subsidiary.
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 30, 1995, September 28, 1996,
and September 27, 1997 are summarized below:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Service cost..................................................... $ 1,480 $ 1,787 $ 2,172
Interest cost.................................................... 2,149 2,482 3,128
Actual return on assets.......................................... (1,773) (1,895) (2,748)
Net amortization and deferral.................................... 122 341 539
--------- --------- ---------
Net periodic pension costs....................................... $ 1,978 $ 2,715 $ 3,091
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-18
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
12. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following tables set forth the U.S. plans' funded status at September
28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
PLANS WHOSE PLANS WHOSE
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS
------------ ------------
<S> <C> <C>
As of September 28, 1996
Projected benefit obligation for service rendered to date........................... $ (25,587) $ (14,179)
Plan assets at fair value, primarily marketable securities.......................... 17,436 11,889
------------ ------------
Underfunded projected benefit obligation............................................ (8,151) (2,290)
Unrecognized net loss............................................................... 3,764 3,445
Unrecognized prior service cost..................................................... 835 3,491
Adjustment to recognize the required minimum pension liability...................... -- (6,936)
------------ ------------
Pension liability recognized in the balance sheets.................................. $ (3,552) $ (2,290)
------------ ------------
Actuarial present value of accumulated benefit obligation, including vested benefits
of $15,380 and $14,088, respectively................................................ $ 15,565 $ 14,179
------------ ------------
------------ ------------
As of September 27, 1997
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)
------------ ------------
------------ ------------
Actuarial present value of accumulated benefit obligation, including vested benefits
of $18,574 and $16,776, respectively.............................................. $ 18,859 $ 17,259
------------ ------------
------------ ------------
</TABLE>
The weighted average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation shown in the above domestic plan tables were 7.5%
and 4.25%, respectively, for all periods presented above. The expected return on
plan assets was 9.0% for all periods presented above.
The plans' assets relating to the domestic plans are included in the HM
Holdings Master Trust (the "Trust"). The Trust invests principally in listed
stocks and bonds, including common stock of Hanson PLC which, at market values,
comprised 2.1% of the Trust's assets at September 28, 1996. These assets were
subsequently transferred to the Hanson North America Inc. Master Trust effective
November 1, 1996.
F-19
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
12. EMPLOYEE BENEFIT PLANS (CONTINUED)
The components of the net periodic pension costs for all foreign defined
benefit plans for the years ended September 30, 1995, September 28, 1996, and
September 27, 1997 are summarized below:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Service cost..................................................... $ 1,216 $ 1,804 $ 1,978
Interest cost.................................................... 1,108 1,481 1,782
Actual return on assets.......................................... (1,870) (2,176) (3,038)
Net amortization and deferral.................................... 220 80 802
--------- --------- ---------
Net periodic pension costs....................................... $ 674 $ 1,189 $ 1,524
--------- --------- ---------
--------- --------- ---------
</TABLE>
The following table sets forth the foreign plans' unfunded status at
September 30, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Projected benefit obligation for service rendered to date............. $ (22,093) $ (25,906)
Plan assets at fair value, primarily marketable securities............ 15,940 19,911
---------- ----------
Underfunded projected benefit obligation.............................. (6,153) (5,995)
Unrecognized net loss (gain).......................................... 77 (367)
---------- ----------
Pension liability recognized in the balance sheets.................... $ (6,076) $ (6,362)
---------- ----------
---------- ----------
Actuarial present value of accumulated benefit obligation, including
vested benefits of $19,056 and $22,792, respectively................ $ 19,813 $ 23,449
---------- ----------
---------- ----------
</TABLE>
The weighted average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation shown in the above foreign plan tables were at
rates ranging from 6.5% to 8.0% and 6.0%, respectively for all periods presented
above. The expected return on plan assets was 9.0% for all periods presented.
Assets of the 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 30, 1995, September 28, 1996 and
September 27, 1997 were approximately $1,532, $1,797, and $1,902, 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 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, copayment provisions and other limitations.
F-20
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
12. EMPLOYEE BENEFIT PLANS (CONTINUED)
Net periodic postretirement benefit expense included the following
components as of September 30, 1995, September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Service expense.................................................. $ 149 $ 797 $ 833
Interest expense................................................. 597 1,423 1,464
Net amortization and deferral.................................... 305 550 458
--------- --------- ---------
Net periodic postretirement benefit cost......................... $ 1,051 $ 2,770 $ 2,755
--------- --------- ---------
--------- --------- ---------
</TABLE>
The reconciliation of the accumulated postretirement benefit obligation to
the liability recognized in the combined balance sheet at September 30, 1996 and
1997 is as follows:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................................ $ 4,822 $ 5,542
Fully eligible active participants.................................. 3,796 5,214
Other active participants........................................... 11,243 14,503
--------- ---------
Total................................................................... 19,861 25,259
Unrecognized prior service (cost) benefit............................... (251) 3,407
Unrecognized net loss................................................... (2,720) (9,807)
--------- ---------
Net postretirement benefit liability recognized in the balance sheets... $ 16,890 $ 18,859
--------- ---------
--------- ---------
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% for 1996 and 1997. The assumed health care cost trend rate
used in measuring the accumulated postretirement benefit obligation was 9.5% and
9.0% for 1996 and 1997, respectively, 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 11.6% and the net
postretirement benefit cost by approximately 13.2% as of September 27, 1997.
13. STOCK COMPENSATION PLANS
The Hanson PLC Long Term Incentive Plan, which became effective January 1,
1997 allocates Hanson PLC stock to eligible management employees based on
continued employment and achievement of certain performance objectives. The
Company has recorded a provision of $1,378 as an estimate of the value of the
shares earned for the nine months ended September 27, 1997.
In 1993, the Board of Directors of Hanson PLC approved a Stock Option Plan
("the Plan") which authorizes up to 65,530,000 shares of Hanson PLC stock for
participants in the Plan, including certain employees of the Company, as well as
including employees of other Hanson PLC divisions and subsidiaries. The Plan
provides for the granting of options to officers and other key employees at an
exercise price not lower than the fair market value of the stock on the date of
grant. Under the terms of the plan, the maximum term for the options granted is
ten years with the options vesting ratably over a period of three
F-21
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
13. STOCK COMPENSATION PLANS (CONTINUED)
years. The Plan only permits the issuance of non-qualified options. The
following table summarizes the activity related to the Company's participation
in the Plan:
<TABLE>
<CAPTION>
STOCK WEIGHTED
OPTIONS AVERAGE
OUTSTANDING EXERCISE PRICE
----------- ---------------
<S> <C> <C>
October 1, 1994...................................................................... 1,064,090 $ 6.07
Granted.............................................................................. 244,447 6.53
Exercised............................................................................ (70,009) 5.55
----------- -----
September 30, 1995................................................................... 1,238,528 6.20
Granted.............................................................................. 162,651 5.49
Exercised............................................................................ (42,882) 4.13
Forfeited............................................................................ (32,498) 6.31
----------- -----
September 28, 1996................................................................... 1,325,799 6.11
Exercised............................................................................ (24,945) 4.79
Forfeited............................................................................ (83,843) 6.76
----------- -----
September 27, 1997................................................................... 1,217,011 $ 6.29
----------- -----
----------- -----
Options exercisable at September 30, 1995............................................ 566,159 $ 5.25
Options exercisable at September 28, 1996............................................ 682,361 5.61
Options exercisable at September 27, 1997............................................ 847,545 6.29
</TABLE>
Exercise prices for options outstanding as of September 27, 1997, ranged
from $3.79 to $7.76. The following table sets forth certain information with
respect to those stock options outstanding at September 27, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED REMAINING
STOCK OPTIONS AVERAGE EXERCISE CONTRACTUAL
RANGE OF EXERCISE PRICES OUTSTANDING PRICE LIFE
- ---------------------------------------------------------------- ------------- ----------------- ---------------
<S> <C> <C> <C>
Under $4.82..................................................... 121,402 $ 4.22 0.94 years
$4.82 to $6.42.................................................. 493,080 5.81 4.77 years
Over $6.42...................................................... 602,529 7.10 6.36 years
------------- ----- ---------------
1,217,011 $ 6.29 5.17 years
------------- ----- ---------------
------------- ----- ---------------
</TABLE>
The following table sets forth certain information with respect to those
stock options exercisable at September 27, 1997:
<TABLE>
<CAPTION>
WEIGHTED
STOCK OPTIONS AVERAGE EXERCISE
RANGE OF EXERCISE PRICES EXERCISABLE PRICE
- --------------------------------------------------------------------------------- ------------- -----------------
<S> <C> <C>
Under $4.82...................................................................... 121,402 $ 4.22
$4.82 to $6.42................................................................... 344,781 5.86
Over $6.42....................................................................... 381,362 7.37
------------- -----
847,545 $ 6.29
------------- -----
------------- -----
</TABLE>
F-22
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
14. TRANSACTIONS WITH RELATED PARTIES
The common stock reflected in the combined statements of changes in invested
capital represent the legal capital of Grove Europe Ltd. The total number of
authorized shares is 10,000, of which 5,307 are issued and outstanding for all
periods presented. The total amount of invested capital relating to the common
stock of Grove Europe Ltd. was $8,976 for all periods presented.
The Company receives certain services provided by Hanson PLC and its
affiliates that include cash management, tax reporting, and risk management and
is charged a management fee for such services. The allocation of these
management fees was based on percentage of total group sales in 1995 and 1996
and on total group operating profits in 1997. In the opinion of management,
these methods of allocation are reasonable.
The amount of invested 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 are no terms of settlement associated
with the account balance. Generally, there are 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 the parent's central
cash management program, wherein all the Company's cash receipts are remitted to
the parent and all cash disbursements are funded by the parent. Other
transactions included in invested capital are management fees, taxes, insurance,
employee benefits, and miscellaneous other administrative expenses incurred by
the parent on behalf of the Company.
Intercompany interest expense for the fiscal years ended September 30, 1995,
September 28, 1996 and September 27, 1997 was $2,553, $2,610, and $1,404,
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 $25,052, $24,540
and 19,000 for the fiscal year ended September 30, 1995, September 28, 1995 and
September 27, 1997, respectively.
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.
15. 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 30, 1995, September 28, 1996 and September 27, 1997.
F-23
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
15. BUSINESS SEGMENT AND GEOGRAPHIC AREAS (CONTINUED)
Information relating to operations by geographic area is as follows as of
and for the fiscal years ended September 30, 1995, September 28, 1996 and
September 27, 1997:
<TABLE>
<CAPTION>
CORPORATE
UNITED OTHER AND
STATES EUROPE COUNTRIES ELIMINATIONS COMBINED
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1995
Sales to unaffiliated customers................ $ 397,095 $ 106,720 $ -- $ -- $ 503,815
Transfers between geographic areas............. 28,025 10,726 -- (38,751) --
----------- ----------- ----------- ------------ -----------
Net sales...................................... $ 425,120 $ 117,446 $ -- $ (38,751) $ 503,815
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Operating profit............................... $ 47,267 $ (4,457) $ -- $ (4,437) $ 38,373
Identifiable assets............................ $ 528,998 $ 177,971 $ -- $ (60,706) $ 646,263
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
Identifiable assets............................ $ 530,605 $ 230,849 $ -- $ (31,296) $ 730,158
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
</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 5.0% of the
combined net sales of the Company during each of the years in the three year
period ended September 27, 1997.
Net sales by the Company's U.S. operations to foreign customers were less
than 10.0% of the combined net sales of the Company during each of the years in
the three year period ended September 27, 1997.
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.
F-24
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
16. LEASES (CONTINUED)
The following is a schedule of future minimum lease payments required under
third party operating leases that have initial or remaining noncancelable lease
terms in excess of one year:
<TABLE>
<CAPTION>
YEAR
- -----------------------------------------------------------------------------------
<S> <C>
1998............................................................................... $ 4,570
1999............................................................................... 2,701
2000............................................................................... 1,870
2001............................................................................... 640
2002............................................................................... 327
Thereafter......................................................................... 9,768
---------
Total............................................................................ $ 19,876
---------
---------
</TABLE>
The major component of the future minimum lease payments due after the year
2002 relates to leases of the Company's manufacturing facility and land in
Germany that expires in 2043.
Rental expense associated with third party operating leases was
approximately $1,608, $2,809, and $3,489 for the fiscal years ended September
30, 1995, September 28, 1996, and September 27, 1997, 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. COMMITMENTS AND CONTINGENCIES
The Company is involved in various lawsuits arising in the ordinary course
of business. These lawsuits primarily involve claims for damages arising out of
the use of the Company's products. The Company is also involved in litigation
and administrative proceedings relating to 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
policy is to accrue the probable legal costs to be incurred in defending the
Company against the claims. The Company has followed this policy during each of
the years in the three year period ended September 27, 1997 with respect to all
investigations, claims and litigation.
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. The Company's
estimate of the costs associated with legal, product liability, and
environmental
F-25
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
17. COMMITMENTS AND CONTINGENCIES (CONTINUED)
exposures is accrued if, in management's judgment, the likelihood of a loss is
probable. These accrued liabilities are not discounted.
Insurance recoveries for environmental and certain general liability claims
are not recognized until realized. 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 September 27, 1997, the Company had no known probable but inestimable
exposures that could have a material effect on the Company.
The Company provides conditional loss guarantees to certain financing
companies on behalf of their customers. As of September 28, 1996 and September
27, 1997, the Company had outstanding guarantees of $2,438 and $1,297
respectively. These guarantees mature at various dates ranging from October 1997
through August 2000. The Company has not and does not expect to incur losses as
a result of these guarantees.
As noted under the Company's revenue recognition policy, 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 years ended
September 30, 1995, September 28, 1996 and September 27, 1997.
As of September 27, 1997, the Company had approximately $595 in outstanding
letters of credit relating to the purchase of certain equipment.
As collateral for performance and for import duties, the Company is
contingently liable under bonds in the amount of $3,125 at September 27, 1997.
18. SUBSEQUENT EVENTS
DEALER FINANCING PROGRAM
In the first quarter of fiscal year 1998, the Company entered into an
agreement to finance certain of its notes receivable. The agreement enables the
transfer to a financial institution of up to 90% of these receivables (up to a
limit of $90,000), without recourse.
PRODUCT LIABILITY AND WORKERS' COMPENSATION INSURANCE
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. The Company is responsible for claims arising on
or after October 1, 1997. For product liability claims arising on or after such
date, 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.
F-26
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
19. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION
The Company's payment obligations under the Senior Subordinated Notes are
guaranteed by all of the Company's wholly-owned domestic subsidiaries other than
Grove Capital (the "Subsidiary Guarantors"). Such guarantees are full,
unconditional and joint and several. Separate financial statements of 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 Subsidiaries Guarantors is not significantly restricted under the terms of
the Company's debt obligations. The following supplemental financial information
sets forth, on a combined basis, balance sheets, statements of operations and
statements of cash flows information for the Subsidiary Guarantors, the
Company's non-guarantor subsidiaries and for the Company.
CONDENSED COMBINING BALANCE SHEETS AT SEPTEMBER 28, 1996
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 470 $ 7,714 $ -- $ 8,184
Trade receivables (net).................................. 65,200 55,844 -- 121,044
Inventories.............................................. 112,258 113,181 (2,897) 222,542
Other current assets..................................... 4,869 1,811 -- 6,680
----------- ----------- ------------ ----------
Total current assets..................................... 182,797 178,550 (2,897) 358,450
Property, plant, and equipment (net)......................... 56,852 44,324 -- 101,176
Goodwill..................................................... 257,060 7,784 -- 264,844
Due from Grove Companies..................................... 28,399 -- (28,399) --
Other non-current assets..................................... 5,497 191 -- 5,688
----------- ----------- ------------ ----------
Total assets............................................. $ 530,605 $ 230,849 $ (31,296) $ 730,158
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
LIABILITIES AND INVESTED CAPITAL
Current liabilities:
Trade accounts payable..................................... $ 41,194 $ 29,585 $ $ 70,779
Short-term borrowings...................................... 7,443 -- -- 7,443
Deferred tax liability..................................... 4,828 -- -- 4,828
Other payables and accrued liabilities....................... 42,331 47,875 -- 90,206
----------- ----------- ------------ ----------
Total current liabilities................................ 95,796 77,460 -- 173,256
Deferred tax liability..................................... 4,047 -- -- 4,047
Non-current liabilities:
Due to Grove Companies................................... -- 28,399 (28,399) --
Deferred revenue......................................... -- 21,154 -- 21,154
Other non-current liabilities................................ 18,556 10,591 -- 29,147
----------- ----------- ------------ ----------
Total liabilities........................................ 118,399 137,604 (28,399) 227,604
Total invested capital....................................... 412,206 93,245 (2,897) 502,554
----------- ----------- ------------ ----------
Total liabilities and invested capital................... $ 530,605 $ 230,849 $ (31,296) $ 730,158
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
F-27
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
19. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (CONTINUED)
CONDENSED COMBINING BALANCE SHEETS AT 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
Other current assets....................................... 3,923 3,710 -- 7,633
Deferred tax assets........................................ 14,936 -- -- 14,936
----------- ----------- ------------ ----------
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
Deferred tax assets.......................................... 11,415 -- -- 11,415
Due from Grove Companies..................................... 29,272 442 (29,714) --
Other non-current assets..................................... 7,126 100 -- 7,226
----------- ----------- ------------ ----------
Total assets............................................. $ 648,578 $ 265,316 $ (32,398) $ 881,496
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
LIABILITIES AND INVESTED CAPITAL
Current liabilities:
Trade accounts payable..................................... $ 45,072 $ 25,255 $ -- $ 70,327
Short-term borrowings...................................... -- 7,265 -- 7,265
Income taxes payable....................................... 4,622 -- -- 4,622
Other payables and accrued liabilities..................... 46,423 39,689 -- 86,112
----------- ----------- ------------ ----------
Total current liabilities................................ 96,117 72,209 -- 168,326
Non-current liabilities:
Due to Grove Companies..................................... 442 29,272 (29,714) --
Deferred revenue........................................... -- 46,509 -- 46,509
Other non-current liabilities................................ 27,781 10,388 -- 38,169
----------- ----------- ------------ ----------
Total liabilities.......................................... 124,340 158,378 (29,714) 253,004
Total invested capital....................................... 524,238 106,938 (2,684) 628,492
----------- ----------- ------------ ----------
Total liabilities and invested capital..................... $ 648,578 $ 265,316 $ (32,398) $ 881,496
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
F-28
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
19. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (CONTINUED)
CONDENSED COMBINING STATEMENTS OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30,
1995
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Net sales.................................................... $ 425,120 $ 117,446 $ (38,751) $ 503,815
Cost of goods sold........................................... 315,864 99,066 (37,704) 377,226
----------- ----------- ------------ ----------
Gross profit............................................. 109,256 18,380 (1,047) 126,589
Selling, engineering, general, and administrative expenses... 61,989 22,837 -- 84,826
Management fees.............................................. 3,390 -- -- 3,390
----------- ----------- ------------ ----------
Operating profit......................................... 43,877 (4,457) (1,047) 38,373
Net interest (expense)/income................................ (2,572) 260 -- (2,312)
Other expense, net........................................... (279) -- -- (279)
----------- ----------- ------------ ----------
Income before income taxes............................... 41,026 (4,197) (1,047) 35,782
Income taxes................................................. 19,162 (149) -- 19,013
----------- ----------- ------------ ----------
Net income............................................... $ 21,864 $ (4,048) $ (1,047) $ 16,769
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
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.............................................. 5,655 -- -- 5,655
----------- ----------- ------------ ----------
Operating profit............................................. 52,998 72 (2,450) 50,620
Net interest (expense)/income................................ (2,820) 29 -- (2,791)
Other expense, net........................................... (193) -- -- (193)
----------- ----------- ------------ ----------
Income before income taxes............................... 49,985 101 (2,450) 47,636
Income taxes................................................. 21,749 439 -- 22,188
----------- ----------- ------------ ----------
Net income............................................... $ 28,236 $ (338) $ (2,450) $ 25,448
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
F-29
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
19. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (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.............................................. 2,176 -- -- 2,176
Restructuring charges........................................ -- 1,960 -- 1,960
----------- ----------- ------------ ----------
Operating profit......................................... 67,108 570 213 67,891
Net interest (expense)/income................................ 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 CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30,
1995
<TABLE>
<CAPTION>
GUARANTOR OTHER
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS
----------- ----------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities................................ $ 5,025 $ 1,928 $ 6,953
----------- ----------- ------------
INVESTING ACTIVITIES
Capital expenditures..................................................... (7,701) 316 (7,385)
Investment in equipment held for rent.................................... -- (552) (552)
Proceeds from sales of property, plant, and equipment.................... 1,733 -- 1,733
Acquisition of businesses................................................ -- (40,370) (40,370)
----------- ----------- ------------
Net cash used in investing activities.................................... (5,968) (40,606) (46,574)
----------- ----------- ------------
FINANCING ACTIVITIES
Net proceeds from short-term borrowings.................................. (127) -- (127)
Net amounts received from parent......................................... 12,017 49,808 61,825
Cash dividends paid to parent............................................ (11,097) -- (11,097)
----------- ----------- ------------
Net cash provided by financing activities................................ 793 49,808 50,601
----------- ----------- ------------
Effect of exchange rate changes on cash.................................. -- 570 570
----------- ----------- ------------
Net (decrease) increase in cash and cash equivalents..................... (150) 11,700 11,550
Cash and cash equivalents at beginning of year........................... 663 6,472 7,135
----------- ----------- ------------
Cash and cash equivalents and end of year................................ $ 513 $ 18,172 $ 18,685
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
F-30
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
19. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (CONTINUED)
CONDENSED COMBINING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 28,
1996
<TABLE>
<CAPTION>
GUARANTOR OTHER
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS
----------- ----------- ------------
<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)
Proceeds from sales of property, plant, and equipment.................... 432 -- 432
Acquisition of businesses................................................ -- (3,703) (3,703)
----------- ----------- ------------
Net cash used in investing activities.................................... (16,090) (29,151) (45,241)
----------- ----------- ------------
FINANCING ACTIVITIES
Net proceeds from short-term borrowings.................................. 7,443 -- 7,443
Net amounts received from parent......................................... 3,385 44,981 48,366
Cash dividends paid to parent............................................ (30,057) -- (30,057)
----------- ----------- ------------
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 and end of year................................ $ 470 $ 7,714 $ 8,184
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
CONDENSED COMBINING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 27,
1997
<TABLE>
<CAPTION>
GUARANTOR OTHER
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS
----------- ----------- ------------
<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)
Proceeds from sales of property, plant, and equipment.................... 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 and end of year................................ $ (492) $ 5,516 $ 5,024
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
F-31
<PAGE>
GROVE HOLDINGS LLC
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 11,424
Trade receivables (net)..................................................... 134,540
Notes receivable............................................................ 21,471
Inventories................................................................. 240,292
Due from Hanson PLC......................................................... 16,700
Other current assets........................................................ 22,687
-----------
Total current assets.................................................... 447,114
Property, plant, and equipment (net).......................................... 195,921
Goodwill...................................................................... 285,016
Other non-current assets...................................................... 23,365
-----------
Total assets............................................................ $ 951,416
-----------
-----------
LIABILITIES AND HOLDER'S EQUITY
Current Liabilities:
Trade accounts payable...................................................... $ 86,999
Current maturities of long-term debt........................................ 27,200
Short-term borrowings....................................................... 13,600
Other payables and accrued liabilities...................................... 124,885
-----------
Total current liabilities............................................... 252,684
Non-current liabilities:
Long-term debt, less curent maturities...................................... 473,953
Deferred revenue............................................................ 61,545
Other non-current liabilities............................................... 55,705
-----------
Total liabilities....................................................... 843,887
-----------
Holder's equity:
Holder's equity............................................................. 119,992
Accumulated deficit......................................................... (10,420)
Cumualtive translation adjustment........................................... (2,043)
-----------
Total holder's equity................................................... 107,529
-----------
$ 951,416
-----------
-----------
</TABLE>
See notes to unaudited condensed financial statements.
F-32
<PAGE>
GROVE HOLDINGS LLC
CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 28, 1997 AND SEVEN MONTHS ENDED APRIL 28, 1998
AND CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE TWO MONTHS ENDED JUNE 27, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------ -----------
NINE SEVEN TWO
MONTHS MONTHS MONTHS
ENDED ENDED ENDED
JUNE 28, APRIL 28, JUNE 27,
1997 1998 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.............................................. $ 633,845 $ 476,199 $ 154,780
Cost of goods sold..................................... 487,759 375,732 121,144
Write-off of amount assigned to inventory in excess of
historical costs resulting from purchase accounting
adjustments.......................................... -- -- 10,000
----------- ----------- -----------
Gross profit......................................... 146,086 100,467 23,636
Selling, engineering, general, and administrative
expenses............................................. 93,774 73,197 23,162
Amortization of goodwill............................... 6,801 5,215 1,164
----------- ----------- -----------
Operating profit (loss).............................. 45,511 22,055 (690)
Net interest (expense)/income.......................... (938) 1,047 (7,985)
Other (expense) income, net............................ 495 (6,993) 6
----------- ----------- -----------
Income (loss) before income taxes.................... 45,068 16,109 (8,669)
Income taxes........................................... 17,748 11,673 1,751
----------- ----------- -----------
Net income (loss).................................... $ 27,320 $ 4,436 $ (10,420)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to unaudited condensed financial statements.
F-33
<PAGE>
GROVE HOLDINGS LLC
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 28, 1997 AND THE SEVEN MONTHS ENDED APRIL 28,
1998
AND CONDENSED CONSOLIDATED CASH FLOWS FOR
THE TWO MONTHS ENDED JUNE 27, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------ -------------
NINE SEVEN TWO
MONTHS ENDED MONTHS ENDED MONTHS ENDED
JUNE 28, 1997 APRIL 28, 1998 JUNE 27, 1998
------------- -------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 27,320 $ 4,436 $ (10,420)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 13,560 10,934 2,749
Depreciation of equipment held for rent................. 4,384 5,501 2,529
Accretion of subordinated discount debentures........... -- -- 968
Amortization of deferred financing costs................ -- -- 332
Write-off of amount assigned to inventory in excess of
historical costs resulting from purchase accounting
adjustments........................................... -- -- 10,000
Loss (gain) on sale of fixed assets..................... (42) 4,714 --
Deferred tax expense.................................... 1,268 2,358 11
Changes in operating assets and liabilities:
Trade receivables (net)............................... (11,935) 32,096 (15,992)
Notes receivable...................................... (46,889) 28,409 (21,471)
Inventories........................................... (10,126) (10,157) 1,183
Trade accounts payable................................ 7,960 7,542 8,500
Other assets and liabilities, net..................... (7,503) 10,361 1,096
------------- -------------- -------------
Net cash provided by (used in) operating activities......... (22,003) 96,464 (20,515)
------------- -------------- -------------
INVESTING ACTIVITIES
Capital expenditures...................................... (26,282) (20,254) (3,047)
Investment in equipment held for rent..................... (12,907) (16,380) (8,335)
Acquisition of business from Hanson PLC, including
transaction costs of $6,485, net of cash acquired of
$9,242 and post-closing adjustment of $16,700........... -- -- (563,543)
Other investing activities................................ 350 3,630 --
------------- -------------- -------------
Net cash used in investing activities..................... (38,839) (33,004) (574,925)
------------- -------------- -------------
FINANCING ACTIVITIES
Net proceeds from short-term borrowings................... (363) 2,628 4
Proceeds from issuance of long-term debt.................. -- -- 500,185
Equity investment from Grove Investors LLC................ -- -- 119,992
Deferred financing costs.................................. -- -- (14,442)
Other financing activities................................ 59,214 (62,087) 1,213
------------- -------------- -------------
Net cash provided by (used in) financing activities....... 58,851 (59,459) 606,952
------------- -------------- -------------
Effect of exchange rate changes on cash................... (464) 217 (88)
------------- -------------- -------------
Net increase (decrease) in cash and cash equivalents...... (2,455) 4,218 11,424
Cash and cash equivalents at beginning of period........ 8,184 5,024 --
------------- -------------- -------------
Cash and cash equivalents at end of period.................. $ 5,729 $ 9,242 $ 11,424
------------- -------------- -------------
------------- -------------- -------------
</TABLE>
See notes to unaudited condensed financial statements.
F-34
<PAGE>
GROVE HOLDINGS LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
1. THE ACQUISITION
On April 29, 1998, Grove Holdings LLC ("Holdings"), through its wholly owned
subsidiary Grove Worldwide LLC ("Grove" and, together with Holdings, 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 $16.7
million from Hanson in July 1998. The Company is a wholly owned subsidiary of
Grove Investors LLC ("Investors"). Funds required by the Company to consummate
the Acquisition, including the payment of related fees and expenses were as
follows:
<TABLE>
<S> <C>
Sources:
Issuance of the Senior Subordinated Notes....................................... $ 225,000
Borrowings under Revolving Credit Facility...................................... 9,500
Borrowings under Term Loan Facility............................................. 200,000
Issuance of Senior Discount Debentures.......................................... 49,985
Equity investment by Holdings................................................... 120,000
---------
$ 604,485
---------
---------
Uses:
Acquisition price............................................................... $ 583,000
Transaction costs............................................................... 6,485
---------
Aggregate purchase price...................................................... 589,485
Debt financing costs............................................................ 15,000
---------
$ 604,485
---------
---------
</TABLE>
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 $6.5 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. Such allocation is based on studies which
have not yet been completed. Accordingly, the allocation reflected in the
unaudited consolidated financial statements is preliminary and subject to
revision. 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
F-35
<PAGE>
GROVE HOLDINGS LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
1. THE ACQUISITION (CONTINUED)
operates. The estimated fair values of the assets acquired and liabilities
assumed in the Acquisition are summarized as follows:
<TABLE>
<CAPTION>
Cash and cash equivalents........................................................ $ 9,241
<S> <C>
Due from Hanson for post-closing adjustment...................................... 16,700
Trade receivables................................................................ 122,616
Notes receivable................................................................. 2,280
Inventories...................................................................... 251,316
Other current assets............................................................. 10,602
Property, plant and equipment.................................................... 185,855
Goodwill......................................................................... 286,180
Other non-current assets......................................................... 720
Short-term borrowings............................................................ (14,086)
Trade accounts payable........................................................... (79,493)
Accrued expenses and other current liabilities................................... (77,187)
Accrual for closure of Sunderland U.K. manufacturing facility.................... (17,000)
Other non-current liabilities.................................................... (108,259)
---------
Aggregate purchase price..................................................... $ 589,485
---------
---------
</TABLE>
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, these financial statements do not include
all the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, the
unaudited consolidated financial statements include all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
the financial position and results of operations.
Information prior to April 29, 1998 relates to the Company prior to the
Acquisition (the "Predecessor"). Information subsequent to April 29, 1998
relates to the Company following the Acquisition. Following the Acquisition, the
Company has a new basis of accounting and a different capital structure, and,
accordingly, the results for the Predecessor and for the Company are not
directly comparable.
Interim results for the two month period ended June 27, 1998 are not
necessarily indicative of the results that may be expected for a full fiscal
year. For further information, refer to the combined financial statements and
notes for the year ended September 27, 1997.
3. ADOPTION OF NEW ACCOUNTING STANDARDS
In 1998, the Financial Accounting Standards Board issued Statement 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
F-36
<PAGE>
GROVE HOLDINGS LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
3. ADOPTION OF NEW ACCOUNTING STANDARDS (CONTINUED)
impact on the Company's operations. Adoption of this statement will be required
for the fiscal year beginning October 1999.
4. SALE OF NOTES RECEIVABLE
Prior to the Acquisition, the predecessor of the Company entered into an
agreement to sell certain notes receivable to a third-party financial
institution 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 financial institution 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
credit risk. The cost of providing administrative support is immaterial.
Following the Acquisition, the Company entered into an agreement with a
third-party financial institution 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 360 days on a revolving basis. 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 financial institution to insure the 90% risk assumed by the
third-party. The Company retains 10% of the credit risk.
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 financial institution. The third-party financial institution has the
power to sell or pledge the notes receivable purchased at any time and the
Company has no rights to repurchase the notes receivable
Notes receivable sold by the Company under this arrangement meet the
criteria for sale under SFAS No. 125 and, accordingly, will be removed from the
Company's balance sheet upon sale.
5. INVENTORY
The components of inventory at June 27, 1998 consisted of the following:
<TABLE>
<S> <C>
Raw materials and supplies............................................................................ $ 61,544
Work in process....................................................................................... 81,291
Finished goods (including a purchase accounting adjustment of $15,000 in 1998)........................ 97,457
----------
$ 240,292
----------
----------
</TABLE>
Inventories are valued at the lower of cost or market, as determined
primarily under the first-in, first-out method.
In connection with the Acquisition, the Company has allocated $25,000 of the
purchase price to the inventories acquired in excess of their historical costs.
Such amount is being charged to operations as inventory turns over the five
months following the Acquisition. As of June 27, 1998, $10,000 has been charged
to operations and the balance has been included in determination of inventory
carrying value.
F-37
<PAGE>
GROVE HOLDINGS LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
6. INCOME TAXES
Following the Acquisition, a significant portion of the Company's business
is operated as a United States limited liability company, whereby the limited
liability company is not itself subject to income tax. The taxable income of the
limited liability company in the United States will be allocated to the equity
holders of Investors and such equity holders will be responsible for income
taxes on such taxable income. The Company expects to make distributions in the
form of dividends to equity holders of Investors to enable them to meet their
tax obligations with respect to income allocated to them by the Company. Foreign
and domestic taxes payable on taxable income generated by the Company's foreign
subsidiaries and its truck-mounted crane business will continue to be the
responsibility of the Company.
The difference between the Company's reported tax provision for the two
months ended June 27, 1998 and the tax provision computed based on U.S.
statutory rates is primarily attributed to the Company's structure as a limited
liability company and losses generated in foreign operations for which a tax
benefit will not be recognized until realization is deemed to be more likely
than not.
7. LONG-TERM DEBT
BANK CREDIT FACILITY. The Bank Credit Facility, which was entered into on
April 29, 1998, 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 will enable 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 will 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 Agent, 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 Company will also pay certain fees with respect to the unused portion of the
Bank 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. At June 27, 1998, the Company had
outstanding borrowings of $25,200 and available borrowing of $99,788 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
F-38
<PAGE>
GROVE HOLDINGS LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
7. LONG-TERM DEBT (CONTINUED)
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, all
of the capital stock of the Company's domestic subsidiaries, and 65% of the
capital stock of the Company's first-tier foreign subsidiaries.
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, other than Grove
Capital, Inc. 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.
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.
SENIOR DISCOUNT DEBENTURES. The Senior Discount Debentures were issued
pursuant to an Indenture dated April 29, 1998 (the "Holdings Indenture") at a
discount from their principal amount. The Senior Discount Debentures are general
unsecured obligations of Holdings and its co-issuer, Grove Holdings Capital,
Inc. The Senior Discount Debentures accrete interest at a rate of 11 5/8% per
annum, compounded semi-annually, to an aggregate principal amount of $88,000 at
May 1, 2003. Thereafter, the Senior Discount Debentures will accrue cash
interest at a rate of 11 5/8% per annum, payable semi-annually on May 1 and
November 1 of each year, commencing on November 1, 2003. The Senior Discount
Debentures will be redeemable at the option of Holdings, in whole or in part, at
any time after May 1, 2003, at a declining redemption price.
In addition, at any time prior to May 1, 2001, Holdings may redeem up to 35%
of the originally issued aggregate principal amount of the Senior Discount
Debentures at 111.625% of the accreted value (as
F-39
<PAGE>
GROVE HOLDINGS LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
7. LONG-TERM DEBT (CONTINUED)
defined by the Holdings Indenture) thereof plus liquidated damages (as defined
by the Holdings Indenture) thereon, if any, with the net proceeds of one or more
public offerings of the Company's or Investors' equity, provided that at least
65% of the originally issued aggregate principal amount of the Senior Discount
Debentures remain outstanding thereafter.
Upon the occurrence of a Change of Control (as defined by the Holdings
Indenture), each holder of the Senior Discount Debentures will have the right to
require Holdings to repurchase such holders' 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 Holdings Indenture contains certain covenants the limit, among other
things, the ability of the Holdings 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. At June 27, 1998, the Company had $50,953 outstanding in
Senior Discount Debentures.
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 acquisitions 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.
8. RELATED PARTY TRANSACTIONS
On February 27, 1998, the Company sold the land and building of its U.K.
subsidiary to Hanson for $2,524 and recognized a loss of $4,769. The purchase
price was determined by an independent third party appraisal. Immediately after
the sale, Hanson leased the property back to the Company.
9. CLOSURE OF SUNDERLAND MANUFACTURING FACILITY
The Company plans to close its Sunderland, U.K. 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 $17,000, consisting of
approximately $10,000 of employee severance and $7,000 of plant shut-down costs,
all of which are expected to be expended in the next twelve months. Such amount
has been accrued in purchase accounting.
F-40
<PAGE>
GROVE WORLDWIDE LLC
SCHEDULE OF
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT --------------------------------
BEGINNING CHARGED TO CHARGED TO
OF COSTS AND OTHER DEDUCTIONS- BALANCE AT
YEAR EXPENSES ACCOUNTS (A) DESCRIBE (B) END OF YEAR
ALLOWANCE FOR DOUBTFUL ACCOUNTS: ----------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1995................... $ 2,590 86 5 790 $ 1,891
----------- --- --- --- -----------
----------- --- --- --- -----------
Year ended September 28, 1996................... $ 1,891 688 (14) 12 $ 2,553
----------- --- --- --- -----------
----------- --- --- --- -----------
Year ended September 27, 1997................... $ 2,553 538 (114) 260 $ 2,717
----------- --- --- --- -----------
----------- --- --- --- -----------
</TABLE>
- ------------------------
(a) Impact of exchange rates
(b) Write-offs
S-1
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY HOLDINGS OR GROVE HOLDINGS CAPITAL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF HOLDINGS OR GROVE HOLDINGS CAPITAL SINCE THE DATE HEREOF. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information............................ 3
Special Note Regarding Forward Looking
Statements..................................... 4
Prospectus Summary............................... 5
Risk Factors..................................... 20
The Transactions................................. 26
Use of Proceeds.................................. 28
Capitalization................................... 29
Selected Historical Financial Data............... 30
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 31
The Exchange Offer............................... 41
Business......................................... 52
Management....................................... 65
Security Ownership of Certain Beneficial Owners
and Management................................. 69
Certain Relationships and Related Transactions... 70
Description of Certain Indebtedness.............. 71
Description of Debentures........................ 73
Certain Federal Income Tax Considerations........ 109
ERISA Considerations............................. 112
Plan of Distribution............................. 113
Legal Matters.................................... 114
Experts.......................................... 114
Change in Accountants............................ 114
Index to Unaudited Pro Forma Combined Financial
Statements..................................... P-1
Index to Combined and Consolidated Financial
Statements..................................... F-1
</TABLE>
------------------------
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENT.
$88,000,000
GROVE HOLDINGS LLC
GROVE HOLDINGS CAPITAL, INC.
OFFER TO EXCHANGE THEIR
11 5/8% SENIOR DISCOUNT DEBENTURES DUE 2009
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF THEIR OUTSTANDING
11 5/8% SENIOR DISCOUNT DEBENTURES DUE 2009
---------------------
PROSPECTUS
---------------------
OCTOBER , 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 18-108 of the Delaware Limited Liability Company Act, as amended
(the "Act"), grants a Delaware limited liability company the power, subject to
such standards and restrictions, if any, as are set forth in its limited
liability company agreement to indemnify and hold harmless any member or manager
or other person from and against any and all claims and demands whatsoever.
Section 6.1 of the Grove Holdings LLC ("Holdings") Amended and Restated
Limited Liability Company Agreement (the "Operating Agreement") provides that a
member shall not be personally liable for any debt, obligation or other
liability of Holdings, 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 regarding distributions to the members,
and as otherwise provided in the Operating Agreement, the Act and any other
applicable law. Section 6.2 of the Operating Agreement provides that any
affiliate of a 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 Holdings or its affiliates is a
"Covered Person." No Covered Person shall be liable to Holdings 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
Holdings and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by the Operating 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. A
Covered Person shall be fully protected in relying in good faith upon the
records of Holdings and upon such information, opinions, reports or statements
presented to Holdings 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 Holdings,
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 s might
properly be paid.
Section 145 of the Delaware General Corporation Law (the "DGCL") grants a
Delaware corporation the power to indemnify any director, officer, employee or
agent against reasonable expenses (including attorneys' fees) incurred by him in
connection with any proceeding brought by or on behalf of the corporation and
against judgments, fines, settlements and reasonable expenses (including
attorneys' fees) incurred by him in connection with any other proceeding, if (a)
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and (b) in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Except as ordered by a court, however, no indemnification is to be
made in connection with any proceeding brought by or in the right of the
corporation where the person involved is adjudged to be liable to the
corporation.
Section 8 of the Grove Holdings Capital, Inc. ("Grove Holdings Capital")
certificate of incorporation and Article 8 of Grove Holdings Capital's by-laws
provide that Grove Holdings Capital shall to the extent not prohibited by law,
indemnify any person who is or was made, or threatened to be made, a party to
any threatened, pending or completed action, suit or proceeding (a
"Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of Grove Holdings
Capital to procure a judgment in its favor, by reason of the fact that such
person, or a person of whom such person is the legal representative, is or was a
director or officer of Grove Holdings Capital, or, at the request of Grove
Holdings Capital, is or was serving as a director or officer of any other
corporation or in a capacity with comparable authority or responsibilities for
any partnership, joint venture, trust, employee benefit plan or other enterprise
(an "Other Entity"), against judgments, fines, penalties, excise taxes,
II-1
<PAGE>
amounts paid in settlement and costs, charges and expenses (including attorneys'
fees, disbursements and other charges). Persons who are not directors or
officers of Grove Holdings Capital (or otherwise entitled to indemnification
pursuant to the preceding sentence) may be similarly indemnified in respect of
service to Grove Holdings Capital or to an Other Entity at the request of Grove
Holdings Capital to the extent the board of directors of Grove Holdings Capital
at any time specifies that such persons are entitled to the benefits of this
Article 8.
Section 102(b)(7) of the DGCL permits the elimination or limitation of
directors' personal liability to the corporation or its stockholders for
monetary damages for breach of fiduciary duties as a director except for (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law, (iii) breaches under section 174 of the DGCL,
which relate to unlawful payments of dividends or unlawful stock repurchase or
redemptions, and (iv) any transaction from which the director derived an
improper personal benefit.
Section 7 of Grove Holdings Capital's certificate of incorporation limits
the personal liability of directors of the company to the fullest extent
permitted by paragraph (7) of subsection (b) of section 102 of the DGCL.
The Directors' and Officers' Liability and Reimbursement Insurance Policy
covering Holdings and Grove Holdings Capital is designed to reimburse Holdings
and Grove Holdings Capital for any payments made by them pursuant to the
foregoing indemnification. Such policy has aggregate coverage of $10.0 million.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Holdings and
Grove Holdings Capital pursuant to the foregoing provisions, Holdings and Grove
Holdings Capital have been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Pursuant to Section 8 of the Registration Rights Agreement dated April 29,
1998 between the Holding, Grove Holdings Capital and Donaldson, Lufkin &
Jenrette Securities Corporation and Chase Securities Inc. (the "Initial
Purchasers") (the "Registration Rights Agreement"), the holders of the
Debentures have agreed to indemnify Holdings and Grove Holdings Capital and
their directors and controlling persons against any losses, claims, damages,
liabilities or expenses that may arise out of an untrue statement or alleged
untrue statement of or omission to state a material fact, contained in the
registration statement or prospectus, but only with reference to information
relating to such holder furnished in writing to Holdings and Grove Holdings
Capital.
The Purchase Agreement dated as of April 29, 1998, by and among Holdings,
Grove Holdings Capital and Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") and Chase Securities Inc. ("Chase Securities," together with DLJ, the
"Initial Purchasers"), contains provisions by which the Initial Purchasers agree
to indemnify Holdings and Grove Holdings Capital and their respective directors,
officers and controlling persons against any losses, claims, damages,
liabilities or expenses that may arise out of an untrue statement or alleged
untrue statement of or omission to state a material fact, contained in the
registration statement or prospectus, but only with reference to information
relating to such holder furnished in writing to Holdings and Grove Holdings
Capital.
Section 10.07 of the Indenture dated as of April 29, 1998, by and among
Holdings, Grove Holdings Capital and the United States Trust Company of New York
provides that the holders of the Debentures have agreed to waive all liability
for any obligations incurred by Holdings and Grove Holdings Capital under the
Debentures or the Indenture or for any claim based on, in respect of, or by
reason of such obligations or their creation, against any incorporator, member,
director, officer, employee or stockholder, as such, of Holdings and Grove
Holdings Capital, and have agreed to the release of such persons from any such
liability.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1 Purchase Agreement dated as of April 29, 1998, by and among Holdings and Grove Holdings Capital and
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and Chase Securities Inc. ("Chase
Securities," together with DLJ, the "Initial Purchasers").
3.1 Amended and Restated Limited Liability Company Agreement of Holdings.
3.2 Articles of Incorporation of Grove Holdings Capital.
3.3 By-laws of Grove Holdings Capital.
4.1 Indenture dated as of April 29, 1998, by and among Holdings and Grove Holdings Capital and the United
States Trust Company of New York (the "Indenture").
4.2 Form of 11 5/8% Senior Discount Debentures due 2009 (see Exhibit A of the Indenture).
4.3 Form of new 11 5/8% Senior Discount Debentures due 2009.
4.4 Registration Rights Agreement dated as of April 29, 1998, by and among Holdings and Grove Holdings
Capital and the Initial Purchasers.
4.5 Credit Agreement dated April 29, 1998, by and among Grove Worldwide LLC, Grove Capital, Inc. 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.
5.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to validity of the Debentures.
8.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to certain federal income tax matters.
10.1 Stock and Asset Purchase Agreement, dated March 10, 1998 (the "Acquisition Agreement"), by and among
Grove Worldwide LLC 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 Grove Worldwide LLC and
the Sellers.
10.3 George Group Consulting Agreement dated as of April 29, 1998 by and between Grove Worldwide LLC and
George Group Inc.
10.4 Employment Agreement dated as of March 5, 1998 by and between Grove Worldwide LLC and Salvatore J.
Bonanno.
10.5 Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide and James A. Kolinski.
10.6 Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide and Joseph A. Shull.
10.7 Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide and Robert J. Sliwa.
10.8 Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide and Keith R. Simmons.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.9 Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide and Theodore J.
Urbanek.
10.10 Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide LLC 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 Worldwide LLC, Grove Capital, Inc.
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., ans 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., ans amended by Addendum No. One, dated June 29, 1996.
10.16 Consent Letter, dated April 27, 1998 from Grove Worldwide LLC 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 Worldwide LLC and Salvatore J. Bonanno.
10.20* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and Salvatore J. Bonanno.
10.21* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and Jeffry D. Bust.
10.22* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and James A. Kolinski.
10.23* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and John Wheeler.
12.1 Statement of Computation of Ratios of Earnings to Fixed Charges.
16.1* Letter from Ernst & Young LLP.
21.1 Subsidiaries of Holdings.
23.1* Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Ernst & Young LLP.
23.3 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the opinions filed as Exhibits 5.1
and 8.1 of this Registration Statement).
24.1 Powers of Attorney (contained on signature pages).
25.1 Form T-1 Statement of Eligibility of the United States Trust Company of New York to act as trustee
under the Indenture.
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Guidelines for Certification of Taxpayer Identification Number of Substitute Form W-9
99.4 Form of Securities Dealers, Commercial Banks, Trust Companies and Other Nominees Letter
99.5 Form of Client Letter
</TABLE>
- ------------------------
* Filed herewith. All other exhibits were previously filed.
II-4
<PAGE>
(B) FINANCIAL STATEMENTS SCHEDULE
S-1 VALUATION AND QUALIFYING ACCOUNTS
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officers or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof;
(3) To remove from registration by means of post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering;
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the Issuers undertake that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form;
(5) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 and is used in
II-5
<PAGE>
connection with an offering of securities subject to Rule 415, will be filed as
part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof;
(6) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of Form S-4, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of this
Registration Statement through the date of responding to the request; and
(7) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, GROVE HOLDINGS LLC HAS
DULY CAUSED THIS AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW
YORK, STATE OF NEW YORK, ON OCTOBER 6, 1998.
GROVE HOLDINGS LLC
By: /s/ SALVATORE J. BONANNO
-----------------------------------------
Salvatore J. Bonanno
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 3 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED, ON OCTOBER 6, 1998.
SIGNATURES TITLE
- ------------------------------ ---------------------------
Chairman and Chief
Executive Officer and
/s/ SALVATORE J. BONANNO Member (Principal
- ------------------------------ Executive Officer,
Salvatore J. Bonanno Principal Financial
Officer and and Principal
Accounting Officer)
* Member
- ------------------------------
J Taylor Crandall
* Member
- ------------------------------
Michael L. George
* Member
- ------------------------------
Gerard Grinstein
* Member
- ------------------------------
Steven B. Gruber
* Member
- ------------------------------
Robert B. Henske
* Member
- ------------------------------
Gerard E. Holthaus
* Member
- ------------------------------
Anthony P. Scotto
*By: /s/ SALVATORE J.
BONANNO
-------------------------
Salvatore J. Bonanno
Attorney-in-fact
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, GROVE HOLDINGS CAPITAL,
INC. HAS DULY CAUSED THIS AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY
OF NEW YORK, STATE OF NEW YORK, ON OCTOBER 6, 1998.
GROVE HOLDINGS CAPITAL, INC.
BY /S/ SALVATORE J. BONANNO
-----------------------------------------
Salvatore J. Bonanno
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 3 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED, ON OCTOBER 6, 1998.
SIGNATURES TITLE
- ------------------------------ ---------------------------
Chief Executive Officer and
Member (Principal
/s/ SALVATORE J. BONANNO Executive Officer,
- ------------------------------ Principal Financial
Salvatore J. Bonanno Officer and and Principal
Accounting Officer)
* Director
- ------------------------------
Robert B. Henske
/s/ SALVATORE J. BONANNO Director
- ------------------------------
Salvatore J. Bonanno
* Director
- ------------------------------
Anthony P. Scotto
*By: /s/ SALVATORE J.
BONANNO
-------------------------
Salvatore J. Bonanno
Attorney-in-fact
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ----------- ---------------------------------------------------------------------------------------------- -----
<C> <S> <C>
1.1 Purchase Agreement dated as of April 29, 1998, by and among Holdings and Grove Holdings
Capital and Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and Chase Securities
Inc. ("Chase Securities," together with DLJ, the "Initial Purchasers").
3.1 Amended and Restated Limited Liability Company Agreement of Holdings.
3.2 Articles of Incorporation of Grove Holdings Capital.
3.3 By-laws of Grove Holdings Capital.
4.1 Indenture dated as of April 29, 1998, by and among Holdings and Grove Holdings Capital and the
United States Trust Company of New York (the "Indenture").
4.2 Form of 11 5/8% Senior Discount Debentures due 2009 (see Exhibit A of the Indenture).
4.3 Form of new 11 5/8% Senior Discount Debentures due 2009.
4.4 Registration Rights Agreement dated as of April 29, 1998, by and among Holdings and Grove
Holdings Capital and the Initial Purchasers.
4.5 Credit Agreement dated April 29, 1998, by and among Grove Worldwide LLC, Grove Capital, Inc.
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.
5.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to validity of the Debentures.
8.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to certain federal income tax matters.
10.1 Stock and Asset Purchase Agreement, dated March 10, 1998 (the "Acquisition Agreement"), by and
among Grove Worldwide LLC 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 Grove Worldwide LLC
and the Sellers.
10.3 George Group Consulting Agreement dated as of April 29, 1998 by and between Grove Worldwide
LLC and George Group Inc.
10.4 Employment Agreement dated as of March 5, 1998 by and between Grove Worldwide LLC and
Salvatore J. Bonanno.
10.5 Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide and James A.
Kolinski.
10.6 Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide and Joseph A.
Shull.
10.7 Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide and Robert J.
Sliwa.
10.8 Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide and Keith R.
Simmons.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ----------- ---------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.9 Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide and Theodore J.
Urbanek.
10.10 Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide LLC 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 Worldwide LLC, Grove Capital,
Inc. 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., ans 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., ans amended by Addendum No. One, dated June 29,
1996.
10.16 Consent Letter, dated April 27, 1998 from Grove Worldwide LLC 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 Worldwide LLC and Salvatore J.
Bonanno.
10.20* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and Salvatore J.
Bonanno.
10.21* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and Jeffry D. Bust.
10.22* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and James A. Kolinski.
10.23* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and John Wheeler.
12.1 Statement of Computation of Ratios of Earnings to Fixed Charges.
16.1* Letter from Ernst & Young LLP.
21.1 Subsidiaries of Holdings.
23.1* Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Ernst & Young LLP.
23.3 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the opinions filed as
Exhibits 5.1 and 8.1 of this Registration Statement).
24.1 Powers of Attorney (contained on signature pages).
25.1 Form T-1 Statement of Eligibility of the United States Trust Company of New York to act as
trustee under the Indenture.
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Guidelines for Certification of Taxpayer Identification Number of Substitute Form W-9
99.4 Form of Securities Dealers, Commercial Banks, Trust Companies and Other Nominees Letter
99.5 Form of Client Letter
</TABLE>
- ------------------------
* Filed herewith. All other exhibits were previously filed.
<PAGE>
EX-10.18
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT ("FIRST AMENDMENT") entered
into as of June 23, 1998, between Salvatore J. Bonanno ("Executive") and Grove
Worldwide LLC ("Grove").
In recognition of the opportunity given to the Executive to invest
in Grove Investors LLC (the "Company"), the provisions of Section 4(b) of the
Employment Agreement dated March 5, 1998 are deleted and declared void.
IN WITNESS WHEREOF, Grove has caused this instrument to be executed
by its duly authorized officer and, except as modified by this letter, the
Employment Agreement remains in full force and effect.
GROVE WORLDWIDE LLC
Signed
---------------------------------
By:
/s/ Salvatore J. Bonanno
- -----------------------------
Salvatore J. Bonanno
<PAGE>
EX-10.19
MAKER: Salvatore J. Bonanno
PAYEE: Grove Worldwide LLC
PROMISSORY NOTE
$912,663 June 27, 1998
FOR VALUE RECEIVED, Salvatore J. Bonanno ("Maker"), promises to pay
to the order of Grove Worldwide LLC (collectively with all subsequent holders
of this Note, "Payee"), at 201 Main Street, Suite 2600, Fort Worth, Texas
76102, 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 Nine Hundred Twelve Thousand Six Hundred and Sixty Three
dollars ($912,663) (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 due and payable with accrued interest on the seventh
anniversary of the date hereof. The Note and all accrued interest will be
forgiven upon the occurrence of any of the following events prior to the
scheduled payment date: (A) the Maker dies while in service, (B) the Maker
becomes disabled, (C) the Maker is discharged involuntarily, (D) the Maker
quits with Good Reason as defined in the Employment Agreement, (E) the Maker
remains in employment continuously from the date hereof until the seventh
anniversary of this agreement, or (F) the occurrence of a Change of Control.
The amount due under this Note that shall be forgiven shall be increased or
decreased based on the positive difference, if any, between the fair market
value of shares of stock of Foamex International, Inc. ("Foamex") under option
to Maker which were not exercisable by Maker as of the announcement of Maker's
termination of employment from Foamex (the "Announcement") and the exercise
price for such stock under such options. As of the Announcement there were
44,754 such shares under option at an exercise price of $6 7/8 per share and
50,000 such shares under option at an exercise price of $11 1/2 per share. The
fair market value of a share of stock of Foamex shall be the average closing
price of a share of Foamex stock on the stock exchange on which such shares are
principally traded for the ten trading days prior to the Announcement or, if a
going-private transaction is announced, on or before July 28, 1998, the price
paid for a share of stock of Foamex in such transaction.
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
<PAGE>
3
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.
The forgiveness of this Note and the related interest that would
otherwise occur shall be conditioned on the Maker's providing the Payee with
sufficient funds to satisfy all applicable withholding requirements.
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.
(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
<PAGE>
4
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 are cumulative, not exclusive.
Upon Default under this Note, at Payee's option all amounts then
due and payable under this Note 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
immediately will then be deemed reformed and the amounts later collectible
hereunder reduced without the need to execute any new
<PAGE>
5
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.
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.
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/ Salvatore J. Bonanno
------------------------
SALVATORE J. BONANNO
"PAYEE"
/s/ Charles Zemene
------------------------
GROVE WORLDWIDE LLC
<PAGE>
6
By: /s/ CHARLES A. ZEMENE
--------------------------
Title: Treasurer
-----------------------
(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
Delware limited liability company.
By: /s/ Charles Zemene
------------------------
Title: Treasurer
---------------------
<PAGE>
EX-10.20
MAKER: Salvatore J. Bonanno
PAYEE: Grove Worldwide LLC
PROMISSORY NOTE
$1,000,000 June 27, 1998
FOR VALUE RECEIVED, Salvatore J. Bonanno ("Maker"), promises to pay
to the order of Grove Worldwide LLC (collectively with all subsequent holders
of this Note, "Payee"), at 201 Main Street, Suite 2600, Fort Worth, Texas
76102, 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 Million dollars ($1,000,000) (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 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
<PAGE>
5
or at law. All remedies under this Note and the Security Instruments are
cumulative, not exclusive.
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
<PAGE>
6
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.
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/ Salvatore J. Bonanno
----------------------------
SALVATORE J. BONANNO
"PAYEE"
/s/ Salvatore J. Bonanno
----------------------------
GROVE WORLDWIDE LLC
By: Salvatore J. Bonanno
-------------------------
Title: CEO
----------------------
(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
-------------------------
Title: CEO
----------------------
<PAGE>
EX-10.21
MAKER: Jeff Bust
PAYEE: Grove Worldwide LLC
PROMISSORY NOTE
$375,000 June 27, 1998
FOR VALUE RECEIVED, Jeff Bust ("Maker"), promises to pay to the
order of Grove Worldwide LLC (collectively with all subsequent holders of this
Note, "Payee"), at 201 Main Street, Suite 2600, Fort Worth, Texas 76102, 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
Three Hundred and Seventy-Five Thousand dollars ($375,000) (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 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 way 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
<PAGE>
5
or at law. All remedies under this Note and the Security Instruments are
cumulative, not exclusive.
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
<PAGE>
6
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.
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/ Jeff Bust
----------------------------------
JEFF BUST
"PAYEE"
/s/ Salvatore J. Bonanno
----------------------------------
GROVE WORLDWIDE LLC
By: /s/ Salvatore J. Bonanno
----------------------------------
Title: CEO
----------------------------------
(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
--------------------------
Title: CEO
-----------------------
<PAGE>
EX-10.22
MAKER: James Kolinski
PAYEE: Grove Worldwide LLC
PROMISSORY NOTE
$250,000 June 27, 1998
FOR VALUE RECEIVED, James Kolinski ("Maker"), promises to pay to
the order of Grove Worldwide LLC (collectively with all subsequent holders of
this Note, "Payee"), at 201 Main Street, Suite 2600, Fort Worth, Texas 76102,
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 and Fifty 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, 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 at 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
<PAGE>
5
or at law. All remedies under this Note and the Security Instruments are
cumulative, not exclusive.
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
<PAGE>
6
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.
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/ James Kolinski
----------------------------------
JAMES KOLINSKI
"PAYEE"
/s/ Salvatore J. Bonanno
----------------------------------
GROVE WORLDWIDE LLC
By: Salvatore J. Bonanno
-------------------------------
Title: CEO
----------------------------
(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
--------------------------
Title: CEO
-----------------------
<PAGE>
EX-10.23
MAKER: John Wheeler
PAYEE: Grove Worldwide LLC
PROMISSORY NOTE
$150,000 June 27, 1998
FOR VALUE RECEIVED, John Wheeler ("Maker"), promises to pay to the
order of Grove Worldwide LLC (collectively with all subsequent holders of this
Note, "Payee"), at 201 Main Street, Suite 2600, Fort Worth, Texas 76102, 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 and Fifty Thousand dollars ($150,000) (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 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
<PAGE>
5
or at law. All remedies under this Note and the Security Instruments are
cumulative, not exclusive.
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
<PAGE>
6
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.
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/ John Wheeler
----------------------------
JOHN WHEELER
"PAYEE"
/s/ Salvatore J. Bonanno
----------------------------
GROVE WORLDWIDE LLC
By: Salvatore J. Bonanno
-------------------------
Title: CEO
----------------------
(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
-------------------------
Title: CEO
----------------------
<PAGE>
EXHIBIT 16.1 TO FORM S-4
October 2, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Gentlemen:
We have read the section captioned "Change in Accountants" in Amendment 3 to
the Registration Statement (Form S-4 No. 333-57609) included in the
registration statement dated October 5, 1998, of Grove Holdings LLC and Grove
Holdings Capital, LLC and are in agreement with the statements contained in
paragraph 1 under the caption "Change in Accountants" on pages 114, therein.
We have no basis to agree or disagree with other statements of the registrant
contained therein.
Ernst & Young LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Grove Holdings LLC and Grove Holdings
Capital, Inc. of our report dated December 15, 1997 relating to the financial
statements of The Grove Companies which appear in such Prospectus. We also
consent to the references to us under the headings "Experts" and "Selected
Financial Data" in such Prospectus. However, it should be noted that
PricewaterhouseCoopers LLP has not prepared or certified such "Selected
Financial Data."
PricewaterhouseCoopers LLP
Florham Park, NJ
October 5, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
"Selected Historical Financial Data" and to the use of our report dated
December 15, 1997 (except for Note 19, as to which the date is April 29,
1998), in Amendment No. 2 to the Registration Statement (Form S-4 No.
333-57609) and related Prospectus of Grove Holdings LLC and Grove Holdings
Capital, Inc. for the registration of $88,000,000 11-5/8% Senior Discount
Debentures due 2009.
Ernst & Young LLP
Baltimore, Maryland
October 2, 1998
