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INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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GRADALL INDUSTRIES, INC.
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GRADALL INDUSTRIES, INC.
406 Mill Avenue, S.W. - New Philadelphia, Ohio 44663
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Gradall Industries, Inc. will be held at
Sheraton Airport Hotel, 5300 Riverside Drive, Cleveland, Ohio 44135, on May 20,
1998 at 10:00 a.m. Eastern Daylight Time for the following purposes:
1. To elect directors for the ensuing year; and
2. To consider and vote upon a proposal to approve the Gradall Industries,
Inc. 1998 Stock Option Plan.
3. To consider and vote upon a proposal to approve the Gradall Industries,
Inc. Employee Stock Purchase Plan.
4. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on April 3, 1998 as the
record date for determining the stockholders entitled to notice of and to vote
at the meeting. Only stockholders of record at the close of business on April 3,
1998 are entitled to vote at the meeting.
Whether or not you plan to attend the meeting, please complete, sign, date and
return the enclosed proxy card in the enclosed return envelope to assure that
your shares will be represented. Sending in your proxy will not prevent you
from voting in person if you attend the meeting.
By order of the Board of Directors
Joseph H. Keller
Secretary
April 6, 1998
GRADALL INDUSTRIES, INC.
406 Mill Avenue, S.W. - New Philadelphia, Ohio 44663
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Gradall Industries, Inc. (the "Company") of proxies to
be voted at the Annual Meeting of Shareholders to be held at 10:00 a.m., local
time, on May 20, 1998, and any adjournment thereof.
If a proxy card is duly signed and returned, the shares represented thereby
will be voted as specified therein, and if no specification is made, the shares
will be voted in accordance with the recommendations of the Board of Directors.
Any stockholder returning a proxy may revoke it by executing a later dated
proxy, by giving notice of revocation to the Company in writing or by casting a
ballot at the meeting.
At April 3, 1998, the record date, there were 8,941,117 shares of Common
Stock outstanding and entitled to vote, and each share is entitled to one vote
on each matter to be considered. There are no cumulative voting rights in the
election of directors.
This Proxy Statement and the enclosed proxy card are first being mailed to
stockholders on or about April 20, 1998.
ELECTION OF DIRECTORS
Eight directors are to be elected at the Annual Meeting, to hold office
until the next Annual Meeting of Stockholders or until their successors are
elected. The following nominees have been proposed by the Board of Directors and
are currently serving as directors:
Sangwoo Ahn*
Ernest Green
Perry J. Lewis
John A. Morgan
Barry L. Phillips
Jack D. Rutherford
William C. Ughetta, Jr.
and
David S. Williams
*Sangwoo Ahn was a Co-Chairman of the Board from October 1995 to March 1996 and
has been Chairman of the Board since March 1996.
2
Mr. Ahn is a founding partner of Morgan Lewis Githens & Ahn ("MLGA"), a
privately-owned international investment banking and leveraged buyout firm which
was founded in 1982. Mr. Ahn has served as a general partner of MLGAL Partners
L.P. ("MLGAL"), a Connecticut limited partnership and the general partner of
MLGA Fund II, L.P. ("Fund II"), since its formation in 1987. Mr. Ahn also serves
on the Board of Directors of Kaneb Pipeline Partners, L.P., Kaneb Services,
Inc., PAR Technology Corporation, Quaker Fabric Corporation, Stuart
Entertainment, Inc. and ITI Technologies, Inc. Mr. Ahn is 59 years old.
Ernest Green has been a director of the Company since July 1996. Mr. Green
is the founder of, and since its formation in 1981, has served as President and
Chief Executive Officer of EGI, Inc., a manufacturer of automotive components.
He is also President of Florida Production Engineering, Inc., a subsidiary of
EGI, Inc. Mr. Green also serves on the Board of Directors of DPL Inc., Eaton
Corporation, Fluor Daniel GTI, Inc. and Pitney Bowes, Inc. Mr. Green is 59 years
old.
Perry J. Lewis has been a director of the Company since 1995. Mr. Lewis is
a founding partner of MLGA and has served as a general partner of MLGAL since
its formation. Mr. Lewis also serves on the Board of Directors of Aon
Corporation, Stuart Entertainment, Inc. ITI Technologies, Inc. and Chancellor
Media Corporation. Mr. Lewis is 60 years old.
John A. Morgan has been a director of the Company since 1995. Mr. Morgan is
a founding partner of MLGA and has served as a general partner of MLGAL since
its formation. Mr. Morgan also serves on the Board of Directors of Masco Tech,
Inc., Masco Corp. and Allied Digital Technologies, Inc. Mr. Morgan is 67 years
old.
Barry L. Phillips has served as President - Chief Executive Officer and has
been a director of the Company since 1995 and has served as President of The
Gradall Company, its wholly-owned subsidiary, since 1985. Prior to joining the
Company, Mr. Phillips spent 26 years with International Harvester and was the
plant manager of its Farmall Plant in Rock Island, Illinois. Mr. Phillips is 56
years old.
Jack D. Rutherford has been a director of the Company since its formation
in 1985. Mr. Rutherford has served as Chairman of the Board and Chief Executive
Officer of the Company from 1985 to October 1995 and as Co-Chairman of the Board
from October 1995 until March 1996. He served as President and Vice Chairman of
ICM Krebsoge, Inc., a manufacturer of component parts for the automotive
industry, from January 1993 until December 1996. Mr. Rutherford also served as
Vice Chairman of Magna LLC, and its predecessors, a holding company whose
operating subsidiary manufactures hydraulic cylinders, pumps and valves, from
1986 through September 1996. Mr. Rutherford also serves on the Board of
Directors of Code Alarm, Inc. Mr. Rutherford is 64 years old.
3
William C. Ughetta, Jr. has been a director of the Company since 1995. In
December 1997, Mr. Ughetta became a Managing Director of Long Point Capital,
Inc., a private equity investment firm. From January 1994 through December 1996,
Mr. Ughetta was a general partner of MLGA and MLGAL. Prior to that, Mr. Ughetta
served as a Vice President of MLGA and MLGAL from 1990 to 1994. Currently, Mr.
Ughetta is a managing director of MLGA and MLGAL and also serves on the Board of
Directors of ITI Technologies, Inc. Mr. Ughetta is 37 years old.
David S. Williams has served as Vice President, Marketing and Sales and has
been a director of the Company since 1995 and has served as Vice President,
Marketing and Sales of The Gradall Company since 1986. Prior to that, Mr.
Williams served as President of Claas of America and held various management
positions at International Harvester, including General Sales Manager. Mr.
Williams is 57 years old.
Directors who are not officers or employees of the Company are entitled to
receive $1,000 per attended meeting and $20,000 per annum for serving as
directors of the Company. In addition, Mr. Green was granted an option to
purchase 10,000 shares of Common Stock of the Company, at an exercise price of
$2.71 per share, which may be exercised at any time and from time to time prior
to August 14, 2006.
INFORMATION ABOUT THE BOARD OF DIRECTORS
The Board of Directors held four meetings during 1997. Each director
attended at least 75% of the total number of meetings of the Board and
Committees on which he served, except Messrs. Morgan and Lewis.
The Board of Directors has an Audit Committee and a Compensation Committee.
It does not have a Nominating Committee. The Board functions as a committee of
the whole to nominate candidates for election as directors.
The Compensation Committee consists of Messrs. Ahn, Rutherford and
Phillips. The functions of the Compensation Committee are to review and approve
senior executive base and incentive compensation. The Compensation Committee met
twice in 1997.
The Audit Committee, which in 1997 consisted of Messrs. Ughetta, Rutherford
and Green, held one meeting in 1997. The Audit Committee's functions are to
review the plan and results of the annual audit by the Company's independent
accountants, to review the adequacy of the Company's system of internal
controls, to monitor related party transactions and to recommend to the
directors the firm of accountants to serve as the Company's auditors.
4
EXECUTIVE COMPENSATION
The following table provides information relating to compensation for
the years ended December 31, 1997, 1996 and 1995 of the Company's Chief
Executive Officer and its other four most highly compensated executive officers
(collectively, the "Named Executive Officers").
Summary Compensation Table
Long-Term
Annual Compensation Awards
Name and Compensation Securities All Other
Principal Position Year Salary Bonus Underlying Options Compensation
- ------------------------- ---- ------------- -------- ------------------- --------------
Barry L. Phillips . . . . 1997 $ 210,249 $250,000 65,000 $ 18,290(1)
President and . . . . . . 1996 166,000 107,000 24,930 18,290(1)
Chief Executive Officer . 1995 165,666 99,000 28,373 18,290(1)
David S. Williams . . . . 1997 147,000 98,000 25,895 12,534(2)
Vice President, . . . . . 1996 143,096 77,000 23,545 12,534(2)
Marketing and Sales . . . 1995 139,524 75,000 25,220 12,534(2)
Joseph H. Keller, Jr. . . 1997 97,200 60,000 17,000 5,139(3)
Vice President, . . . . . 1996 91,711 46,000 6,925 5,139(3)
Engineering and Secretary 1995 88,806 50,000 6,305 5,139(3)
James C. Cahill . . . . . 1997 97,704 71,000 25,000 5,064(3)
Vice President, . . . . . 1996 88,906 56,000 13,850 5,064(3)
Manufacturing . . . . . . 1995 80,681 55,500 12,610 5,064(3)
Bruce A. Jonker . . . . . 1997 99,384 91,000 25,000 5,064(3)
Vice President and. . . . 1996 87,982 64,500 13,850 5,064(3)
Chief Financial Officer . 1995 78,792 55,500 12,610 5,064(3)
<FN>
(1) Includes $2,534 the Company contributed on behalf of Mr. Phillips to its Supplemental
Executive Retirement Plan, $10,226 in life insurance premiums the Company paid pursuant to a
split-dollar life insurance agreement with Mr. Phillips and $5,530 in life insurance premiums
the Company paid pursuant to a deferred compensation agreement with Mr. Phillips.
(2) Includes $2,534 the Company contributed on behalf of Mr. Williams to its Supplemental
Executive Retirement Plan and $10,000 in life insurance premiums the Company paid pursuant to
a deferred compensation agreement with Mr. Williams.
(3) Represents the amount the Company contributed on behalf of the Named Executive
Officer to its Supplemental Executive Retirement Plan.
5
The following tables provide information relating to stock options granted
to and exercised by the Named Executive Officers during the year ended December
31, 1997.
Option Grants in Last Fiscal Year
Individual Grants
Potential Realizable
Number % of Total Value at Assumed
of Securities Options Annual Rates of Stock
Underlying Granted to Exercise or Price Appreciation for
Options Employees in Base Price Expiration Option Term
Name Granted Fiscal Year ($/sh) Date 5%($) 10%($)
- --------------------- -------------- ------------- ------------- ---------- ----------------------
Barry L. Phillips . . 25,000(1) 11% $ 12.00 4/17/07 $ 188,750 $ 478,123
40,000(2) 17% $ 13.75 6/17/07 345,892 876,558
David S. Williams . . 3,395(1) 1% $ 12.00 4/17/07 25,632 64,929
22,500(2) 9% $ 13.75 6/17/07 194,564 493,064
James C. Cahill . . . 2,500(1) 1% $ 12.00 4/17/07 18,875 47,812
22,500(2) 9% $ 13.75 6/17/07 194,564 493,064
Bruce A. Jonker . . . 2,500(1) 1% $ 12.00 4/17/07 18,875 47,812
22,500(2) 9% $ 13.75 6/17/07 194,564 493,064
Joseph H. Keller, Jr. 2,000(1) 1% $ 12.00 4/17/07 15,100 38,250
15,000(2) 6% $ 13.75 6/17/07 129,710 328,709
<FN>
(1) Exercisable in three equal annual installments commencing on April 28, 1998.
(2) Exercisable in three equal annual installments commencing on June 18, 1998.
Stock Options Exercised in Last Fiscal Year and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Options at Fiscal Year End at Fiscal Year End(1)
Name on Exercise Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ----------- ----------- ------------- ------------ --------------
Barry L. Phillips. . -0- 18,915 99,388 $ 260,838 $ 606,713
David S. Williams. . -0- 16,813 57,847 231,851 432,773
James C. Cahill. . . -0- 8,406 43,054 115,919 272,091
Bruce A. Jonker. . . -0- 8,406 43,054 115,919 272,091
Joseph H. Keller, Jr -0- 4,203 26,027 57,959 149,733
<FN>
(1) Values are calculated as the difference between the exercise price of the options
and the market value of the Company's Common Stock as of December 31, 1997.
6
Pension Plan
Under The Gradall Company Employees' Retirement Plan (the "Retirement
Plan"), benefits are payable to all eligible employees of the Company, other
than employees who participate in a separate retirement plan for bargaining unit
employees. The pension plan table below sets forth the estimated annual benefit,
computed as a straight-life annuity, payable under the Retirement Plan at the
normal retirement age of 65:
Years of Service
Remuneration 15 20 25 30 35
80,000 . . . $12,000 $16,000 $20,000 $24,000 $28,000
100,000 . . . 15,000 20,000 25,000 30,000 35,000
120,000 . . . 18,000 24,000 30,000 36,000 42,000
140,000 . . . 21,000 28,000 35,000 42,000 49,000
160,000 . . . 24,000 32,000 40,000 48,000 56,000
180,000 . . . 24,000 32,000 40,000 48,000 56,000
The Retirement Plan provides a benefit, based upon years of service with
the Company since October 1983, and upon final average base compensation (i.e.,
salary only) for the five highest consecutive calendar years of the ten years
preceding retirement. The benefits under the Retirement Plan are not subject to
any deduction for Social Security or other amounts. The credited years of
service at December 31, 1997 for the Named Executive Officers were as follows:
Mr. Phillips, 12; Mr. Williams, 12; Mr. Cahill, 14; Mr. Jonker, 14; and Mr.
Keller, 14. The Company has also adopted a non-qualified supplemental retirement
plan for certain officers and key employees, including Messrs. Cahill, Jonker
and Keller (the "Restoration Plan"). The Retirement Plan provides an additional
benefit to participants retiring before age 65, and is intended to minimize the
effect of revised actuarial reduction factors utilized in calculating normal
benefits under certain provisions of the Code and the Employee Retirement Income
Security Act of 1974.
Employment Agreements
In January 1998, the Company entered into amended and restated employment
agreements with Mr. Phillips, Mr. Williams and Mr. Jonker. Mr. Phillips'
agreement provides for the continuation of his employment as President and Chief
Executive Officer at an annual salary of $225,000. Mr. Williams' agreement
provides for the continuation of his employment as Vice President, Marketing and
Sales at an annual salary of $147,000. Mr. Jonker's agreement provides for the
continuation of his employment as Vice President and Chief Financial Officer at
7
an annual salary of $103,000. The salaries of Mr. Phillips, Mr. Williams and Mr.
Jonker may be increased from time to time at the discretion of the Company. The
term of each agreement is for a period of one year expiring in January 1999
subject to automatic renewal for successive one-year periods unless terminated
upon the notice required by the agreement. In the event that the Company
experiences a change of control (as defined in the employment agreements) the
term of each employment agreement is extended for a period of three years from
the date on which such change of control occurs (the "Continuation Term"). If
the Company terminates any of these agreements prior to the occurrence of a
change of control, for any reason other than "for cause," death or disability,
the Company is required to continue to make all payments due thereunder for a
period of 12 months. If the employment of any of these officers is terminated
within three years of the occurrence of a change in control, for any reason
other than for cause, death or disability, including the officer's resignation
for good cause (as defined in the employment agreement) the Company is required
to continue to make all payments due thereunder for the balance of the
Continuation Term. In addition, upon the termination of employment of any of
these officers within three years of a change of control, the officer may
receive credit for additional years of service for the purpose of computing
benefits due and payable under the Company's retirement plan and benefit
restoration plan. If amounts to be received by the officer in connection with a
termination of the officer's employment following a change of control ("Total
Payments") will be subject to the excise tax provided by Section 4999 of the
Internal Revenue Code (the "Excise Tax"), (i) the Total Payments will be reduced
to the maximum amount of payments which could be made without imposition of the
Excise Tax (the "Safe Harbor Amount"), if within 115% of the Safe Harbor Amount
or (ii) if the Total Payments equal or exceed 115% of the Safe Harbor Amount,
the Company is required to pay the officer an additional amount to offset any
Excise Tax on the Total Payments (the "Gross-Up Payment") and any federal, state
and local income and employment taxes and Excise Tax upon the Gross-Up Payment.
The Company has also entered into employment agreements with Messrs. Keller
and Cahill which provide for the continuation of their employment at current
salaries and benefit levels, subject to annual increases at the discretion of
the Company. The term of each agreement is for a period of one year, which
automatically renews for successive one-year terms unless terminated by the
Company upon written notice. If the Company terminates the employment of Messrs.
Keller or Cahill for any reason other than "for cause," the Company is required
to continue to make all payments due under the employment agreement for a period
of 14 months, subject to offset for amounts earned by the officer from other
employment.
8
Deferred Compensation
The Company maintains a Supplemental Executive Retirement Plan for the
benefit of certain key employees of the Company as selected by the Board of
Directors including each of the Named Executive Officers (the "SERP"). Pursuant
to the terms of the SERP, participants may elect to defer all or any portion of
their compensation and contribute such deferral to the SERP. All participant
deferrals are immediately and fully vested. The Company may make contributions
to the SERP at the discretion of the Board of Directors. Company contributions
are 50% vested after the participant reaches age 55 and are fully vested once
the participant reaches age 60. In addition, Company contributions fully vest
upon the death or disability of the participant or in the event of a change of
control of the Company. If a participant's employment is terminated "for cause,"
all Company contributions allocated to such participant's account are forfeited.
All amounts contributed to the SERP, whether as a result of Company
contributions or participant deferrals have been used to purchase whole life
insurance policies on the life of the participant. As of December 31, 1997, life
insurance policies purchased under the SERP included policies on the lives of
Mr. Phillips in the aggregate face amount of $174,133; Mr. Williams in the
aggregate face amount of $103,573; Mr. Keller in the aggregate face amount of
$199,234; Mr. Cahill in the aggregate face amount of $253,446; and Mr. Jonker in
the aggregate face amount of $138,030. Upon the death of the insured, the entire
proceeds of the policy will be paid to insured's designated beneficiary. The
insured is entitled to receive the policy upon the termination of his employment
as a result of disability or retirement after age 60. The Company's contribution
to the SERP during 1997, 1996 and 1995 is included in "All Other Compensation"
column of the "Summary Compensation Table" on page 5.
Effective July 1989, the Company entered into a Deferred Compensation
Agreement with Mr. Phillips. Pursuant to this Agreement, upon the termination of
Mr. Phillips' employment with the Company at any time after age 65, the Company
will pay to Mr. Phillips or his designated beneficiary in the event of his
death, the sum of $78,687 per year for fifteen years. Upon the death of Mr.
Phillips while employed by the Company, Mr. Phillips' designated beneficiary is
entitled to receive the death benefit payable under a life insurance policy in
the face amount of $125,000. Upon termination of employment as a result of
disability, Mr. Phillips has the option of receiving the net cash surrender
value of this policy or an assignment of the policy. The Company pays all
premiums due under this policy. Premiums paid by the Company for this life
insurance policy during fiscal 1997, 1996 and 1995, are included in "All Other
Compensation" column of the "Summary Compensation Table" on page 5.
The Company has entered into a Split-Dollar Life Insurance Agreement with
Mr. Phillips with respect to an insurance policy on the life of Mr. Phillips
with a death benefit of $500,000. Pursuant to the terms of the agreement, Mr.
Phillips pays the portion of the premium attributable to the PS-58 cost of the
9
policy, funded by an off-setting bonus from the Company, and the Company pays
the balance of the premium. Upon the death of Mr. Phillips or the cancellation
of the policy, the Company is entitled to receive the premiums it has paid under
the policy and a portion of the cash value of the policy. The balance of the
policy proceeds will be paid to Mr. Phillips or his designated beneficiary.
Premiums paid by the Company for this life insurance policy during fiscal 1997,
1996 and 1995 are included in "All Other Compensation" column of the "Summary
Compensation Table" on page 5.
Effective July 1989, the Company entered into a Deferred Compensation
Agreement with Mr. Williams. Pursuant to this agreement, upon the termination of
Mr. Williams' employment with the Company at any time after age 60 or as a
result of his disability or death, the Company will pay to Mr. Williams, or his
designated beneficiary in the event of his death, the sum of $30,000 per year
for 15 years. This deferred compensation payment is funded in part through an
insurance policy on the life of Mr. Williams. Mr. Williams contributes $2,469
per year towards the payment of the premium due under this policy, as a deferral
of his compensation. The Company contributes the balance of the premiums due
under the policy which is $10,000 per year. Premiums paid by the Company for
this life Insurance policy during fiscal 1997, 1996 and 1995 are included in
"All Other Compensation" column of the "Summary Compensation Table" on page 5.
Certain Transactions
In September 1997 the Company entered into an agreement with MLGA, pursuant
to which MLGA agreed to act as a financial advisor to the Company in connection
with the Company's consideration of possible strategic business alternatives
including (i) acquisitions; (ii) divestitures; (iii) recapitalizations; and (iv)
business combinations. The terms of the agreement provide that in the event a
business combination is consummated within the term of the agreement or within
one year thereafter, the Company will pay MLGA a fee for its services in an
amount equal to 0.42% of the purchase price paid in such business combination up
to $192.1 million and an amount equal to 1.6667% of the purchase price in excess
of $192.1 million, plus reasonable out-of-pocket expenses. No amounts were paid
to MLGA under this agreement during the fiscal year ended December 31, 1997. The
Company is not currently considering any transaction that would cause the
Company to owe a fee under the agreement to MLGA. Messrs. Ahn, Lewis and Morgan,
three of the Company's directors, are founding partners of MLGA. MLGA is an
affiliate of MLGA Fund II, L.P., the largest shareholder of the Company.
10
Compensation Committee Interlocks and Insider Participation
During 1997, the Compensation Committee of the Board of Directors consisted
of Sangwoo Ahn and Jack D. Rutherford, both of whom are non-employee directors,
and Barry L. Phillips, who is an executive officer of the Company. Mr. Phillips
does not participate in the deliberations of the Compensation Committee
concerning his compensation.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
oversees the Gradall executive compensation programs. The Committee met two
times in 1997 to review and approve executive compensation matters.
The Gradall executive compensation philosophy is designed to meet four
primary goals:
(1) Ensure a strong linkage between individual performance and total
compensation.
(2) Integrate compensation programs with Gradall's annual and long-term
strategic goals.
(3) Encourage long-term strategic management and enhancement of shareholder
value through equity awards.
(4) Attract and retain key executives critical to the long-term success of
Gradall by providing a fully competitive reward package that is appropriately
sensitive to performance.
These principles are reflected in the key components of the executive
compensation programs which consist of base salary, annual incentive awards, and
long-term incentive awards. Increases in the base salaries and the specific
level of participation in the incentive compensation plans for the executive
officers is determined by the Committee based on the factors described below.
Base Salary
An executive's base salary and subsequent adjustments are determined
relative to the following factors: individual and Company performance, scope of
responsibility and accountability, and comparison with industry pay practices.
The Committee feels that all of these factors are significant and the relevance
of each varies from executive to executive. Therefore, no specific weight has
been assigned to these factors in the evaluation of an executive's base salary.
11
The specific measures of the Company's performance vary depending upon the
executive's performance area and the goals periodically set for the performance
area by the Company. Industry comparisons of manufacturing organizations of
comparable asset size and net sales are drawn from survey data relating to
various executive levels published by independent sources. Although the
Committee reviews data representing base pay and annual cash incentive awards
practices of the 25th to 75th percentiles of the competitive market, in terms of
compensation, the Committee does have a policy to target base compensation at
the 25th percentile of the competitive market, and the combination of base pay
and annual cash compensation at the 50th percentile.
Annual Cash Incentive Awards
Under the Gradall Incentive Compensation Plan in effect for 1997, executive
officers earned annual cash incentive awards determined as a percentage of base
salary. The percentage of base salary for an executive was determined by (i) the
category to which the executive was assigned for 1997 based upon his level of
responsibility and (ii) Gradall's performance as measured by growth in earnings
per share. Awards were assigned weights of 75% for Company performance and 25%
for individual performance.
Long-Term Incentive Awards
Long-term incentive awards are in the form of stock options granted under
the Company's Stock Option Plan.
Stock option awards are considered annually, by the Committee and the
number of shares granted to an executive officer is based on the individual's
scope of responsibility, a subjective evaluation of the performance of the
individual and the Company's performance since the last grant, and industry
comparisons. No specific weight is attached to these factors.
Data from three surveys published by nationally known compensation and
human resources consulting firms was reviewed by the Committee to determine
competitive benchmarks for awarding 1997 base salary, annual cash incentive and
long-term incentive award. Competitive awards were considered by using sources
presenting data as a percentage of base salary and as a dollar value. The
Committee does not have a policy to target long-term incentive awards at any
specific level of data as provided from these sources.
Information as to the options awarded to each executive during recent years
was reviewed by the Committee. However, the Committee did not consider the total
amount of options held by an executive officer in determining the size of an
option awarded for 1997.
12
Each stock option has an exercise price equal to the fair market value of
the underlying Common Stock of the Corporation on the date of grant. Stock
options granted in 1997 become exercisable in three equal annual increments
beginning on the first anniversary of the grant and remain exercisable for a
period of ten years from the date of grant (subject to plan forfeiture
restrictions). Since the stock options are granted at market price, the value of
the stock options is entirely dependent upon the growth in the Company's stock
price.
Barry L. Phillips, President and Chief Executive Officer, has an employment
contract that provides for an annual salary of $225,000, subject to increases at
the Company's discretion. In determining to increase Mr. Phillips' base salary
to $225,000, the Committee applied the policies described above with respect to
base salaries for other executive officers.
Incentive compensation and stock option awards to Mr. Phillips were made on
the same basis described above for other executive officers. In the 1997 bonus
for Mr. Phillips, the Company considered, in addition to the Company's record
performance during 1997 with respect to growth in earnings per share, the
successful introduction of the XL 2200 and XL 2210 excavators and the new family
of D Series material handlers.
COMPENSATION COMMITTEE
Sangwoo Ahn
Jack D. Rutherford
Barry L. Phillips
13
PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the SIC Code Index and the NASDAQ Composite Index for
the period August 28, 1996 through December 31, 1997. Trading in the Company's
Common Stock commenced on August 28, 1996
COMPARE CUMULATIVE TOTAL RETURN AMONG GRADALL
INDUSTRIES, INC., NASDAQ MARKET INDEX AND SIC CODE INDEX
-------------------------- FISCAL YEAR ENDING ---------------------------
COMPANY 8/28/1996 9/30/1996 12/31/1996 3/31/1997 6/30/1997 9/30/1997 12/31/1997
GRADALL INDUSTRIES INC 100.00 112.50 123.80 123.80 160.00 148.80 165.00
INDUSTRY INDEX . . . . 100.00 108.96 109.69 117.98 154.15 155.21 141.12
BROAD MARKET . . . . . 100.00 106.98 112.02 106.32 125.78 146.65 137.41
<FN>
Assumes $100.00 invested on August 28, 1996.
Assumes dividend reinvested.
Fiscal year ending December 31, 1997.
PROPOSAL TO APPROVE THE COMPANY'S 1998 STOCK OPTION PLAN
On March 25, 1998, the Board of Directors adopted the Company's 1998 Stock
Option Plan (the "1998 Plan"), subject to stockholder approval, which provides
for the grant of options to purchase up to a maximum of 300,000 shares of Common
Stock. The 1998 Plan is in addition to the Company's 1995 Stock Option Plan (the
"1995 Plan"). As of February 28, 1998, stock options had been granted under the
1995 Plan with respect to 515,226 shares, leaving no shares available for future
grants under the 1995 Plan. The following is a brief description of the material
features of the 1998 Plan. This description is qualified in its entirety by
reference to the complete terms of the 1998 Plan which is attached hereto as
Exhibit "A".
14
The Board of Directors believes that stock options are an important means
of attracting, retaining and motivating the Company's officers and key
employees. Accordingly, the Board of Directors believes that it would be in the
best interests of the Company and the stockholders to approve the 1998 Plan so
as to permit the Company to continue to offer these incentives in the future.
The 300,000 shares of Common Stock which will be authorized for issuance under
the 1998 Plan, together with the 515,226 shares of Common Stock authorized to be
issued under the 1995 Plan, of which 1,823 shares have already been issued,
represent approximately 9.1% of the Company's outstanding shares of Common Stock
as of February 28, 1998.
The 1998 Plan will be administered by the Board of Directors of the Company
(the "Board"). The Plan authorizes the granting of options which qualify as
incentive stock options ("ISO's") under Section 422 of the Internal Revenue Code
or non-qualified options to full-time salaried employees (including officers and
directors if they are employees) of the Company or a subsidiary. Subject to
limitations contained in the Plan, the Board is given full authority to
determine the employees to whom options are to be granted, the number of shares
for which options are granted, to interpret the Plan and prescribe, amend and
rescind rules and regulations relating to the Plan and the options and to make
other determinations necessary or advisable for the administration of the Plan.
The identity or number of eligible employees to whom options may be granted
in the future and the number of shares covered thereby are not determinable at
this time.
The 1998 Plan provides that the option price of any incentive stock option
granted thereunder may not be less than 100% of the fair market value of the
underlying shares of Common Stock on the date of grant. The option price of any
non-qualified options granted under the 1998 Plan may be less than 100% of the
fair market value of the underlying Common Stock on the date of the grant, in
the discretion of the Board. Payment of the option price in cash must be made in
full at the time of exercise unless the Board approves another form of payment
permitted by Section 422 of the Internal Revenue Code.
The term of each option will be determined by the Board, but may not exceed
ten years from the date of grant. Options become exercisable at such times and
in such installments as determined by the Board.
Options are not transferable or assignable during the recipient's lifetime,
but upon the recipient's death may be exercised by the person to whom such
option rights pass by will or by the laws of descent and distribution.
Each option granted under the 1998 Plan will terminate upon the cessation
of the recipient's employment, except that for a period of three (3) months
15
following such cessation of employment (or twelve (12) months in the case of
death or disability), the option may be exercised to the extent it was
exercisable on the date the recipient's employment ceased. If the recipient's
employment is terminated by the Company or a subsidiary for cause, his options
immediately terminate and become void.
Under the 1998 Plan, if there is any change in the outstanding shares of
Common Stock by reason of any stock split, stock dividend, recapitalization,
merger or other similar capital or corporate structure change, the Board of
Directors may make appropriate changes in the number or kind of securities that
may be issued under the 1998 Plan, as well as the number or kind of securities
issuable under, and the option price of, each outstanding option.
The 1998 Plan will expire, if not sooner terminated, on March 24, 2008. The
Board of Directors may terminate or amend the 1998 Plan at any time, except that
no amendment may become effective without shareholder approval which would
increase the number of shares issuable under the 1998 Plan, alter the
eligibility requirements or materially increase the benefits accruing to
participants under the 1998 Plan.
Federal Income Tax Consequences
Non-Qualified Stock Options. The issuance of a non-qualified stock option
under the 1998 Plan will not generally result in any taxable income to the
employee or a tax deduction to the Company at the time of grant. Generally, the
employee to whom a non-qualified stock option has been granted will recognize
ordinary income at the time the employee exercises the option in an amount equal
to the excess of the fair market value of such shares on the date of exercise
over the option price.
Notwithstanding the foregoing, upon the exercise of a non-qualified stock
option by a person subject to Section 16 of the Exchange Act ("Section 16"), the
acquisition date of the shares of Common Stock for federal income tax purposes
and the time of recognition of income will be postponed as long as the sale of
the shares of Common Stock could subject the person to suit under the "short
swing profit" provisions of Section 16, unless such person elects to be taxed on
the date of exercise. Furthermore, the amount of income recognized by the
recipient will be the excess of the fair market value of such shares of Common
Stock at the end of the postponement period (rather than at the date of
exercise) over the option price.
The Company is generally entitled to a tax deduction corresponding to the
amount of income recognized by the employee as a result of the exercise of a
non-qualified stock option for the year in which the employee recognizes such
income for federal income tax purposes.
16
Incentive Stock Options. Neither the receipt nor exercise of an incentive
stock option is a taxable event to the employee and if the employee does not
dispose of the shares of Common Stock acquired under an incentive stock option
prior to the expiration of the requisite holding periods described below, any
gain resulting from the sale of such shares will be long-term capital gain. In
such case, the Company would not be entitled to any tax deduction with respect
to the grant or exercise of the option. The difference between the fair market
value of the shares of the Common Stock on the date of exercise an the option
price is a tax preference item which may cause the employee to incur an
alternative minimum tax in the year of exercise.
The minimum statutory holding periods are two years from the date the
option is granted and one year from the date of the exercise of the incentive
stock option. The statutory holding period for incentive stock options is waived
in the event of the employee's death. If the shares of Common Stock are disposed
of before the end of either of such statutory holding periods (a "disqualifying
disposition"), the lesser of (i) the difference between the option price and the
fair market value of such shares on the date of exercise, or (ii) the total
amount of gain realized on the sale must be reported by the employee as ordinary
income and the Company would generally be entitled to a tax deduction in that
amount. The remaining gain, if any, would be taxed to the employee as capital
gain.
Notwithstanding the foregoing, if the employee is subject to Section 16 at
the time of a disqualifying disposition, the acquisition date of the shares and
the time of recognition of income will be postponed as long as the sale of
shares could subject the employee to suit for "short swing profit," unless he
elects to be taxed immediately. In addition, the amount of income recognized
will be the lesser of (i) the difference between the option price and the fair
market value of such shares at the end of the postponement period (rather than
at the date of exercise), or (ii) the total amount of gain realized on the sale.
Vote Required for Approval
The affirmative vote of a majority of the votes cast at the meeting is
required to approve the amendment to the Plan. For this purpose, abstentions and
broker non-votes shall not be counted. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE PROPOSAL TO APPROVE THE 1998 STOCK OPTION PLAN.
PROPOSAL TO APPROVE THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan of the Company was approved by the Board
of Directors on March 25, 1998, subject to stockholder approval (the "Stock
Purchase Plan"). An aggregate of 300,000 shares of Common Stock may be sold to
eligible employees under the Stock Purchase Plan, subject to adjustment upon the
17
occurrence of certain specific capitalization events. The following is a brief
description of the material features of the Stock Purchase Plan; such
description is qualified in its entirety by reference to the full text of the
Stock Purchase Plan which is attached hereto as Exhibit B.
The Stock Purchase Plan is intended to encourage eligible employees of the
Company and its current and future subsidiaries, designated for participation by
the Board of Directors, to acquire or increase their ownership of Common Stock
on reasonable terms, and to foster a strong incentive to put forth maximum
effort for the continued success and growth of the Company, as well as to aid in
retaining individuals who put forth such efforts, and to assist in attracting
the best available individuals to the Company. The Stock Purchase Plan is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Code and is not subject to any provisions of ERISA.
The Stock Purchase Plan is administered by a committee of the Board of
Directors, which includes at least two members who are considered "non-employee
directors" as required by Rule 16b-3 of the Exchange Act (the "Committee"). The
Committee has full discretion to determine when offerings will be made, the
number of shares of Common Stock to be made available in any offering, the
length of the period during which employees may elect to participate in any
offering and the period during which contributions of the option price must be
paid (the "Offering Period"), and such other terms and conditions as may be
necessary or appropriate, to interpret the Stock Purchase Plan, and to
prescribe, amend and rescind rules and regulations relating to the Stock
Purchase Plan.
The Stock Purchase Plan enables current and future employees of the Company
and its subsidiaries to purchase shares of Common Stock. Employees eligible to
participate in the Stock Purchase Plan are individuals employed by the Company,
or any of its current or future subsidiaries, designated by the Board of
Directors to participate in the Stock Purchase Plan, on the first day of the
Offering Period of any offering of shares made under the Stock Purchase Plan,
provided that such individual is normally employed by the Company or any of its
subsidiaries for more than 20 hours per week and more than five months in a
calendar year, and has been employed by the Company or any of its subsidiaries
for a least three months as of the first day of the Offering Period of any
offering. Approximately 98% of the Company's 686 employees will be eligible to
participate in the Stock Purchase Plan. Since such participation and the extent
of contributions are voluntary on the part of the employees, the Company is
unable to determine at this time the identity or level of participation of
eligible employees.
Each eligible employee who elects to participate in the Stock Purchase Plan
will be permitted to purchase no more than 250 shares of Common Stock during any
Offering Period. The actual number of shares of Common Stock purchased will be
determined by dividing the aggregate amount the employee has elected to
18
contribute, by the purchase price for such shares of Common Stock. Contributions
may be made by payroll deduction, from both regular and bonus pay. Such
contributions shall be subject to the claims of the Company's general creditors
until used to purchase shares on the last day of the Offering Period as
described below. No employee may elect to purchase shares during any offering
for an aggregate purchase price in excess of 10% of his compensation.
Compensation for this purpose includes gross bonuses paid during the Offering
Period plus the employee's gross base compensation paid during the Offering
Period. In addition, no employee may purchase shares under the Stock Purchase
Plan if the employee, immediately after such purchase would own five percent or
more of the voting power or value of all classes of stock of the Company. No
employee may purchase shares under the Stock Purchase Plan, or any other
employee stock purchase plans of the Company, its subsidiary, or parent, to the
extent that the aggregate fair market value of such purchases exceed $25,000 in
any one calendar year (determined as of the first day of the Offering Period).
Each person electing to participate in any offering made under the Stock
Purchase Plan must execute and deliver to the Company an election agreement
which indicates the amount to be deducted from each pay for each payroll period,
as well as any deductions to be made from any bonus payments. If the number of
shares available under the Stock Purchase Plan on a scheduled Share Purchase
Date is insufficient, then each employee who elected to participate will receive
a pro rata number of the available shares, based on the amount of subscriptions
received.
Subject to certain limitations set forth in the Stock Purchase Plan, an
employee is permitted, at any time prior to ten (10) days before the end of the
Offering Period, to terminate or reduce his payroll deductions or to withdraw
all or part of the amount in his account.
An employee whose employment is terminated for any reason or who is granted
a leave of absence of more than 90 days' duration will no longer be eligible to
participate in the Plan and his election to purchase shall be deemed to have
been canceled at that time, and his only right will be to receive in cash the
amount credited to his account.
Payroll deductions under the Stock Purchase Plan will automatically be
applied to the Purchase of Common Stock as of the last trading day of the
Offering Period (the "Share Purchase Date"). On the Share Purchase Date, the
aggregate amount of payroll and bonus deductions credited to the account of each
employee as of such date will be applied to the purchase price for the purchase
of that number of shares equal to the amount credited to the employee's account,
divided by the purchase price. The purchase price will be the lesser of (i) 85%
of the fair market value of the shares on the first day of the Offering Period,
or (ii) 85% of the fair market value of the shares on the Share Purchase Date. A
certificate representing the shares so purchased will be delivered to the
employee as soon as practicable following an employee's written request. Any
19
remainder not applied to purchase shares will be paid in cash to the employee.
An employee will become a stockholder of the Company with respect to shares for
which payment has been completed on the Share Purchase Date and will have no
rights as a stockholder with respect to such shares until such time.
An employee's rights under the Stock Purchase Plan are not transferable
other than by will or pursuant to the laws of descent and distribution, and will
be exercisable during the lifetime of the holder only by the holder or, in the
event of death, by the holder's successor. Shares of Common Stock purchased
under the Employee Stock Purchase Plan may not be sold or otherwise transferred
for a period of one year following the date on which such shares were purchased,
except in the case of the death, disability or retirement of the employee or
other circumstances approved by the Committee.
The Board may, in its sole discretion, elect to terminate the Plan at any
time. In the event of any such termination, all payroll deductions shall cease
and all amounts previously contributed by the participating employees shall be
applied to the purchase of Common Stock then available for sale and any
remaining amounts shall be refunded to participating employees.
The Stock Purchase Plan may be amended by the Board, provided that
stockholder approval will be necessary if required under Rule 16b-3 ("Rule
16b-3") of the General Rules and Regulations of the Exchange Act or Section 423
of the Code, and no amendment may impair any of the rights of any holder of an
option previously granted under the Stock Purchase Plan without the holder's
consent.
Federal Income Tax Consequences of The Stock Purchase Plan
An employee will not be required to recognize income at the time he elects
to participate in the Stock Purchase Plan, or at the time shares are purchased
under the Stock Purchase Plan. Provided the holding periods described below are
met, upon the disposition of the Common Stock by the employee (or in the event
of the death of the employee while owning such Common Stock whether or not the
holding period requirements are met), the employee will recognize compensation
income (taxed as ordinary income) in an amount equal to the lesser of (i) the
excess of the fair market value of the Common Stock at the time of such
disposition or death over the purchase price; or (ii) the excess of the fair
market value of the Common Stock on the first day of the Offering Period during
which such shares were purchased over the purchase price. Any additional gain or
any loss resulting from the disposition will be taxed as long-term capital gain
or loss. The Company will not be entitled to any deduction with respect to
shares purchased under the Stock Purchase Plan except in connection with a
disqualifying disposition as discussed below. The Stock Purchase Plan is not
considered to be tax-qualified under Section 401(a) of the Code.
20
In order for an employee to receive the favorable tax treatment described
above, the employee may not sell the Common Stock within two years from the
first day of the Offering Period during which such shares were purchased nor
within one year from the date the Common Stock was purchased. If an employee
sells the Common Stock acquired pursuant to the Stock Purchase Plan before the
expiration of these holding period requirements, the employee will recognize, at
the time of the sale, ordinary compensation income in an amount equal to the
excess of the fair market value of the Common Stock on the date shares were
acquired over the purchase price. The amount recognized as ordinary compensation
income will increase the employee's basis in such shares. The balance of gain or
loss resulting from the sale will be taxed as capital gain or loss. At the time
of the disqualifying sale, the Company would be allowed a deduction equal to the
amount included in the employee's income as ordinary compensation income.
Vote Required for Approval
The affirmative vote of a majority of the votes cast at the meeting is
required to approve the amendment to the Plan. For this purpose, abstentions and
broker non-votes shall not be counted. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE PROPOSAL TO APPROVE THE EMPLOYEE STOCK PURCHASE PLAN.
Name and Address Number of Shares Percent of Class
- ---------------------------------------------- ---------------- -----------------
MLGA Fund II, L.P.(1). . . . . . . . . . . . . 3,865,637 43.2%
Sangwoo Ahn(1)(2). . . . . . . . . . . . . . . 3,936,458 44.0
John A. Morgan(1)(2) . . . . . . . . . . . . . 3,921,458 43.9
Perry J. Lewis(1)(2) . . . . . . . . . . . . . 3,921,458 43.9
Becker Capital Management, Inc.(3) . . . . . . 677,500 7.6
The Prudential Insurance Company of America(4) 616,700 6.9
Templeton Investment Counsel, Inc.(5). . . . . 525,000 5.9
Franklin Resources, Inc.(5). . . . . . . . . . 525,000 5.9
Charles B. Johnson(5). . . . . . . . . . . . . 525,000 5.9
Rupert H. Johnson, Jr.(5). . . . . . . . . . . 525,000 5.9
Investment Counselors of Maryland(6) . . . . . 483,000 5.4
21
<FN>
(1) The business address of MLGA Fund II, L.P. and Messrs. Ahn, Lewis and
Morgan, is Two Greenwich Plaza, Greenwich, CT 06830.
(2) Includes 3,865,637 shares held by MLGA Fund II, L.P. MLGAL Partners
L.P., the general partner of MLGA Fund II, L.P. has the power to vote or dispose
of the shares held by MLGA Fund II, L.P. Therefore, as general partners of MLGAL
Partners L.P., Messrs. Ahn, Lewis and Morgan, may be deemed to be the beneficial
owners of shares held by MLGA Fund II, L.P. Messrs. Ahn, Lewis and Morgan
disclaim beneficial ownership of the shares held by MLGA Fund II, L.P.
(3) The business address of Becker Capital Management, Inc. is 1211 S.W.
Fifth Avenue, Suite 2185, Portland, OR 97204.
(4) The business address of The Prudential Insurance Company of America is
751 Broad Street, Newark, NJ 07102-3777.
(5) Includes 525,000 shares owned by one or more open or closed-end
investment companies or other managed accounts, with respect to which Templeton
Investment Counsel, Inc. ("TIC"), as an investment advisor to such accounts, has
all voting and investment power. TIC is a subsidiary of Franklin Resources, Inc.
("FRI"). FRI and its principal shareholders, Charles B. Johnson and Rupert H.
Johnson, Jr. may be deemed to be the beneficial owner of shares held by persons
or entities advised by FRI or TIC. The business address of FRI and Messrs.
Johnson and Johnson is 777 Mariners Island Blvd., San Mateo, CA 94404. The
business address of TIC is 500 East Broward Blvd., Suite 2100, Fort Lauderdale,
FL 33394-3094.
(6) The business address of Investment Counselors of Maryland is 803
Cathedral Street, Baltimore, MD 21201.
22
The following table sets forth information as of March 31, 1998 with
respect to the shares of Common Stock of the Company beneficially owned by each
director, the chief executive officer and the four other most highly compensated
executive officers and all directors and executive officers as a group.
Name Number of Shares Percent of Class
- -------------------------------------------------- ----------------- -----------------
Sangwoo Ahn. . . . . . . . . . . . . . . . . . . . 3,936,458(1) 43.7%
James C. Cahill. . . . . . . . . . . . . . . . . . 36,106(2) *
Ernest Green . . . . . . . . . . . . . . . . . . . 10,000(2) *
Bruce A. Jonker. . . . . . . . . . . . . . . . . . 36,106(2) *
Joseph H. Keller . . . . . . . . . . . . . . . . . 15,533(2) *
Perry J. Lewis . . . . . . . . . . . . . . . . . . 3,921,458(1) 43.5
John A. Morgan . . . . . . . . . . . . . . . . . . 3,921,458(1) 43.5
Jack D. Rutherford . . . . . . . . . . . . . . . . 138,507 1.5
Barry L. Phillips. . . . . . . . . . . . . . . . . 295,915(2) 3.3
William C. Ughetta, Jr.. . . . . . . . . . . . . . 18,169 *
David S. Williams. . . . . . . . . . . . . . . . . 155,313(2) 1.7
All directors and officers as a group (11 persons) 4,753,749(1)(2) 52.8
<FN>
*Less than 1%
(1) Includes 3,865,637 shares held by MLGA Fund II, L.P., as to which
Messrs. Ahn, Lewis & Morgan disclaim beneficial ownership.
(2) Includes shares subject to options exercisable within 60 days by Mr.
Cahill as to 8,406 shares, Mr. Green as to 10,000 shares, Mr. Jonker as to 8,406
shares, Mr. Keller as to 4,203 shares, Mr. Phillips as to 18,915 shares and Mr.
Williams as to 16,813 shares.
23
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities to file reports
of beneficial ownership of such securities and changes in such beneficial
ownership with the Securities and Exchange Commission (the "SEC"). Such persons
are also required to furnish to the Company copies of all reports they file
pursuant to Section 16(a).
Joseph H. Keller, Vice President, Engineering & Secretary of the Company,
failed to file with the SEC on a timely basis a Form 5, Annual Statement of
Changes in Beneficial Ownership, with respect to the transfer by Mr. Keller, by
gift, of 2,520 shares of Common Stock to a non-profit organization. The Form 5
was filed with the SEC on or about March 18, 1998. Except as set forth above,
based solely on a review of the copies of the forms filed pursuant to Section
16(a) received by it, the Company believes that its directors, executive
officers and ten percent shareholders have complied with all such filing
requirements.
VOTE REQUIRED
The eight nominees for election as directors who receive the greatest
number of votes cast for the election of directors by the holders of the
Company's Common Stock present in person or by proxy at the Annual Meeting, a
quorum being present, shall become directors. The affirmative vote of a majority
of the votes cast by the holders of the Company's Common Stock, present in
person or by proxy at the meeting, a quorum being present, on the proposal to
approve the 1998 Stock Option Plan will be necessary to approve the proposal.
Abstentions and broker non-votes will not be counted either for or against
matters submitted for vote by the stockholders.
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P., independent public accountants, are the Company's
independent auditors. A representative of Coopers & Lybrand L.L.P. is expected
to be present at the Annual Meeting and will have the opportunity to make a
statement and be available to respond to appropriate questions.
24
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals by stockholders which are intended to be presented at the 1999
Annual Meeting of Stockholders of the Company must be received by the Company no
later than December 21, 1998.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
meeting. If any other matter should properly come before the meeting, however,
it is the intention of the persons named in the enclosed proxy card to vote in
accordance with their best judgment on such matters.
The solicitation of proxies is being made on behalf of the Board of
Directors and the cost will be borne by the Company. Brokerage firms and other
custodians, nominees and fiduciaries will be reimbursed by the Company for their
expenses in forwarding proxy materials to the beneficial owners of the voting
securities of the Company. Further solicitation of proxies may be made by
telephone or other communication by regular employees of the Company without
additional compensation.
By order of the Board of Directors
/S/ Joseph H. Keller
Joseph H. Keller
Secretary
April 6, 1998
A copy of the Company's Annual Report on Form 10-K for 1997 as filed with
the Securities and Exchange Commission, including the financial statements and
schedules thereto, but without exhibits, will be sent to any stockholder,
without charge, upon written request directed to Bruce A. Jonker, Vice President
and CFO, Gradall Industries, Inc., 406 Mill Avenue S.W., New Philadelphia, Ohio
44663.
25
Exhibit "A"
GRADALL INDUSTRIES, INC.
1998 STOCK OPTION PLAN
1. General. This Stock Option Plan (the "Plan") provides eligible employees of
Gradall Industries, Inc., a Delaware corporation (the "Company"), and its
subsidiaries with the opportunity to acquire or expand their equity interest in
the Company by making available for purchase shares of Common Stock, par value
$.001 per share, of the Company ("Common Stock"), through the granting of
nontransferable options to purchase shares of Common Stock ("Stock Options").
Stock Options shall be referred to herein as "Grants", and an individual grant
of Stock Options shall be referred to herein as a "Grant".
It is intended that key employees may be granted, simultaneously or from
time to time, Stock Options that qualify as incentive stock options ("Incentive
Stock Options") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or Stock Options which do not qualify as Incentive Stock
Options ("Non-Qualified Stock Options"). With respect to Incentive Stock Options
granted under this Plan, the Plan and Option Agreements entered into pursuant to
this Plan shall be administered and construed in a manner consistent with the
requirements of Section 422 of the Code.
The Plan is intended to conform to the extent necessary with all provisions
of the Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and any and all
regulations and rules promulgated by the Securities and Exchange Commission
hereunder, including, without limitation, Rule 16b-3. The Plan shall be
administered, and Stock Options shall be granted and may be exercised, only in
such a manner as to conform to such laws, rules and regulations, if applicable.
2. Purpose of the Plan. The purpose of the Plan is to provide continuing
incentives to key employees of the Company and its subsidiaries, by encouraging
such key employees to acquire new or additional share ownership in the Company,
thereby increasing their proprietary interest in the Company's business and
enhancing their personal interest in the Company's success. For purposes of the
Plan, a "subsidiary" consists of any corporation fifty percent (50%) of the
stock of which is directly or indirectly owned or controlled by the Company.
3. Effective Date of the Plan. The Plan shall become effective upon its adoption
by the Board of Directors of the Company (the "Board"), subject to approval by
holders of a majority of the outstanding shares of voting capital stock of the
Company. If the Plan is not so approved within twelve (12) months after the date
the Plan is adopted by the Board, the Plan and any Grants made hereunder shall
26
be null and void. However, if the Plan is so approved, no further shareholder
approval shall be required with respect to the making of Grants pursuant to the
Plan.
4. Administration of the Plan. The Plan shall be administered by the Board.
Subject to the terms and conditions of the Plan, the Board, shall be authorized
and empowered:
a. To select the key employees to whom Grants may be made;
b. To determine the number of shares of Common Stock to be covered by any
Grant;
c. To prescribe the terms and conditions of any Grants made under the Plan,
and the form(s) and agreement(s) used in connection with such Grants, which
shall include agreements governing the granting of Stock Options which may
provide that the stock which is the subject of any such Grant shall be subject
to the restrictions on transfer contained in any agreement in effect among the
Company and one or more of its stockholders;
d. To determine the time or times when Stock Options will be granted and
when they will terminate in whole or in part;
e. To determine the time or times when Stock Options that are granted may be
exercised; provided, however, that unless the Board specifically determines
otherwise in any individual instance, the standard vesting schedule for Stock
Options granted hereunder shall be three equal yearly installments;
f. To determine, at the time a Stock Option is granted under the Plan,
whether such Stock Option is an Incentive Stock Option entitled to the benefits
of Section 422 of the Code; and
g. To establish any other Stock Option agreement provisions not inconsistent
with the terms and conditions of the Plan or, where the Stock Option is an
Incentive Stock Option, with the terms and conditions of Section 422 of the
Code; and
h. Make any other determination and take any other action that the Board
deems necessary or desirable for the administration of the Plan.
5. Employees Eligible for Grants. Grants may be made from time to time to those
key employees of the Company or its subsidiaries who are designated by the Board
in its sole and exclusive discretion. Key employees may include, but shall not
necessarily be limited to, members of the Board of Directors (excluding members
27
of the Committee) and officers of the Company and any subsidiary; however, Stock
Options shall be granted to key employees only while actually employed by the
Company or a subsidiary. No Stock Option shall be granted to any key employee
during any period of time when such key employee is on a leave of absence.
6. Stock Subject to the Plan. The shares to be issued pursuant to any Grant made
under the Plan shall be shares of Common Stock. Either shares of Common Stock
held as treasury stock or authorized and unissued shares of Common Stock, or
both, may be so issued, in such amount or amounts within the maximum limits of
the Plan as the Board shall from time to time determine.
Subject to the provisions of the next succeeding paragraph of this Section
6, the aggregate number of shares of Common Stock that can be actually issued
under the Plan shall be 300,000 shares.
If, at any time subsequent to the adoption of this Plan by the Board the
number of issued and outstanding shares of Common Stock increases or decreases,
or the Common Stock is changed into or exchanged for a different number or kind
of shares of stock or other securities of the Company as a result of a stock
split, stock dividend, combination of shares, reclassification, redesignation,
recapitalization or other similar capital change): (i) there shall automatically
be substituted for each share of Common Stock subject to the Plan and to an
unexercised Stock Option (in whole or in part) granted under the Plan, the
number and kind of shares of stock or other securities into which each share of
outstanding Common Stock shall be changed or for which each such share of Common
Stock shall be exchanged; and (ii) the option price per share of Common Stock or
unit of securities shall be increased or decreased proportionately so that the
aggregate purchase price for the securities subject to a Stock Option shall
remain the same as immediately prior to such event. In addition to the
foregoing, the Board shall be entitled in the event of any such increase,
decrease or exchange of shares of Common Stock to make other adjustments to the
securities subject to a Stock Option, the provisions of the Plan, and to any
related Stock Option agreements (including adjustments which may provide for the
elimination of fractional shares) where necessary (under Section 422(a)(2) of
the Code or otherwise) to preserve the terms and conditions of any Grants
hereunder.
7. Stock Option Provisions.
a. General. The Board may grant to key employees (also referred to as
"optionees") nontransferable Stock Options that qualify as Incentive Stock
Options under Section 422 of the Code or Non-Qualified Stock Options. Stock
Options shall only be granted under this Plan within ten (10) years from the
earlier of (i) the date this Plan is adopted by the Board and (ii) the date this
Plan is approved by the stockholders of the Company.
28
b. Stock Option Price. The option price per share of Common Stock which may
be purchased under an Incentive Stock Option under the Plan shall be determined
by the Board at the time of Grant, but shall not be less than one hundred
percent (100%) of the fair market value of a share of Common Stock, determined
as of the date such Option is granted; however, if a key employee to whom an
Incentive Stock Option is granted is, at the time of the grant of such Option,
an "owner" as defined in Section 422(b)(6) of the Code (modified as provided in
Section 424(d) of the Code) of more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any subsidiary (a
"Substantial Shareholder"), the price per share of Common Stock of such
Incentive Stock Option, as determined by the Board, shall not be less than one
hundred ten percent (110%) of the fair market value of a share of Common Stock
on the date such Incentive Stock Option is granted. The option price per share
of Common Stock under each Non-Qualified Stock Option granted pursuant to the
Plan shall be determined by the Board at the time of Grant. Except as
specifically provided above, the fair market value of a share of Common Stock
shall be the last reported sales price of the Common Stock as reported by The
Nasdaq National Market on the last business day prior to the date of the Grant.
If the Common Stock is not included in The Nasdaq National Market, the fair
market value of the Common Stock shall be determined in accordance with
procedures to be established by the Board. The day on which the Board approves
the granting of a Stock Option shall be considered the date on which such Option
is granted.
c. Period of Stock Option. The Board shall determine when each Stock Option
is to expire. However, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date upon which such Option is granted, or
five (5) years from the date upon which such Option is granted, with respect to
Incentive Stock Options granted to a Substantial Shareholder.
d. Limitation on Exercise and Transfer of Stock Options. Only the key
employee to whom a Stock Option is granted may exercise such Option, except
where a guardian or other legal representative has been duly appointed for such
employee, and except as otherwise provided in the case of such employee's death.
No Stock Option granted hereunder shall be transferable by an optionee other
than by will or the laws of descent and distribution. No Stock Option granted
hereunder may be pledged or hypothecated, nor shall any such Option be subject
to execution, attachment or similar process.
29
e. Payment for Stock Option Price. A Stock Option shall be exercised by an
optionee giving written notice to the Company of his intention to exercise the
same, accompanied by full payment of the purchase price in cash or by check. The
Board may, in its sole discretion, approve other methods of exercise for a Stock
Option or payment of the option price, provided that no such method shall cause
any Incentive Stock Option granted under the Plan to not qualify under Section
422 of the Code, or cause any share of Common Stock issued in connection with
the exercise of an option not to be a fully paid and non-assessable share of
Common Stock.
f. Limitation on Exercisable Stock Option. No Incentive Stock Option shall
be granted to any optionee, to the extent that the aggregate fair market value
of the shares of Common Stock subject to such Option and all other Incentive
Stock Options granted to such optionee, which are first eligible for exercise in
any given calendar year, exceeds the sum of One Hundred Thousand Dollars
($100,000.00). Such aggregate fair market value shall be determined as of the
date such Option is granted, taking into account, in the order in which granted,
any other Incentive Stock Options granted by the Company, or by a parent or
subsidiary thereof.
g. Withholding of Taxes. The Board may, in its sole discretion, require, as
a condition to any Grant or to the delivery of certificates for shares issued
hereunder, that the optionee pay to the Company, in cash, any federal, state or
local taxes of any kind required by law to be withheld with respect to any Grant
or any delivery of shares of Common Stock upon exercise thereof. The Company, to
the extent permitted or required by law, shall have the right to deduct from any
payment of any kind (including salary, bonus, severance of insurance proceeds)
otherwise due to an optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any Grant or to the delivery of
shares of Common Stock under the Plan.
8. Termination of Employment. A Stock Option may be exercised only while the
optionee is an employee of the Company or a subsidiary or within three (3)
months after the termination of employment for any reason other than death,
retirement, "permanent and total disability" (as defined below) or termination
for "cause" (as defined below). Neither the optionee nor any other person shall
have any right after such date to exercise all or any part of his Stock Options
and they shall thereupon be forfeited, declared void and without value, or both.
If termination of employment is due to death or permanent and total
disability, then outstanding Stock Options may be exercised, to the extent they
were exercisable on the date of such termination of employment, within the one
30
(1) year period ending on the anniversary of such death or permanent and total
disability. If termination of employment is without cause or as a result of
retirement, such Stock Options may be exercised, to the extent they were
exercisable on the date of such termination of employment, within three (3)
months of the date of such termination. In the case of death, such outstanding
Stock Options may be exercised by such optionee's estate, or the person
designated by such optionee by Will, or as otherwise designated by the laws of
descent and distribution. Notwithstanding the foregoing, in no event shall any
Stock Option be exercisable after the expiration of the option period.
For purposes hereof, "permanent and total disability" means a permanent and
total disability as defined in Section 22(e)(3) of the Code. For purposes
hereof, termination for "cause" means termination of the employee's employment
by the Company as a result of (i) conviction of the employee for a felony or for
any crime or offense lesser than a felony involving the property of the Company
or a subsidiary; (ii) conduct by the employee that has caused demonstrable and
serious injury to the Company or a subsidiary, monetary or otherwise; or (iii)
substandard performance, or material misconduct or negligence in the
performance, of the employee's duties in the reasonable judgment of the Board.
9. Merger, Sale, etc. In the event of a merger, consolidation or other corporate
reorganization of the Company with respect to which the outstanding shares of
Common Stock of the Company are to be converted into or exchanged for cash, debt
or equity securities or other property, the Company shall pay to each holder of
an outstanding Stock Option on or before the consummation thereof in cash the
amount by which the aggregate value of the consideration receivable in the
transaction by the holder of the number of shares of Common Stock equal to the
number of shares remaining subject to such Stock Option (whether or not then
exercisable) exceeds the aggregate option price of such Stock Option unless (i)
the surviving or acquiring corporation in such merger, consolidation or other
corporate reorganization has agreed to assume such Stock Option or to substitute
a new option therefor in conformity with the requirements of Section 422 and 424
of the Internal Revenue Code and (ii) such holder agrees to such assumption or
substitution.
In the event that (a) the Company sells or otherwise transfers all or
substantially all its assets or (b) all or substantially all the assets of The
Gradall Company are acquired by another corporation or entity (whether by
purchase, merger or otherwise) then, in either of such events, the Company shall
pay to each holder of an outstanding Stock Option on or before the consummation
thereof an amount in cash equal to the product obtained by multiplying (I) the
number of shares remaining subject to such Stock Option (whether or not then
exercisable) by (II) the quotient obtained by dividing (A) the value of the
consideration paid to the Company or The Gradall Company for such assets
(excluding the amount of debt assumed by the acquirer) by (B) the number of
shares of Common Stock of the Company which would then be outstanding (assuming
the exercise of all options, warrants and convertible securities) and
subtracting from the product so obtained the aggregate option price of such
31
Stock Option, unless (i) the acquiring corporation or entity has agreed to
assume such Stock Option or to substitute a new option therefor in conformity
with the requirements of Section 422 and 424 of the Internal Revenue Code and
(ii) such holder agrees to such assumption or substitution.
10. Change of Control. In the event that (i) the Company is the surviving
corporation in a merger, combination or other corporate reorganization as a
result of which less than a majority of the outstanding voting securities are
owned by the persons who were shareholders of the Company immediately prior to
such merger or corporate reorganization, (ii) 25% or more of the outstanding
voting securities of the Company become owned (whether directly, indirectly,
beneficially or of record) by any person or group (within the meaning of Section
13(d) or Section 14(d) of the Securities Exchange Act of 1934), other than MLGA
Fund II, L.P. or a pension, retirement, profit sharing, employee stock ownership
or other employee benefit plan of the Company or an affiliate thereof, and the
percentage of voting securities so owned by such person or group exceeds the
percentage of the Company's outstanding voting securities owned by MLGA Fund II,
L. P. or (iii) during any period of two consecutive years, individuals who at
the beginning of any such period constituted the directors of Company cease for
any reason to constitute a majority thereof (provided, however, that for
purposes of this clause (iii) each new director whose nomination for election
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of any such period will be deemed to
have been a director of the Company at the beginning of such period), then in
any of such events each Stock Option which is then outstanding shall immediately
become and be exercisable in full for the remainder of its term, notwithstanding
the subsequent termination by the Company of the optionee's employment with the
Company.
11. Employment by Subsidiary. For purposes of this Plan, employment by a
subsidiary of the Company shall be considered employment by the Company. The
term "subsidiary" as used herein shall have the meaning set forth in Section 424
of the Internal Revenue Code or subsequent comparable statute. All references
herein to the provisions of the Internal Revenue Code are references to the
Internal Revenue Code of 1986, as amended, as in effect from time to time.
12. Amendments to Plan. The Board is authorized to interpret this Plan and from
time to time adopt any rules and regulations for carrying out this Plan that it
may deem advisable. Subject to the approval of the Board, the Board may at any
time amend, modify, suspend or terminate this Plan. In no event, however,
without the approval of the stockholders, shall any action of the Board or the
Board result in:
a. Materially amending, modifying or altering the eligibility requirements
provided in Section 5 hereof;
32
b. Materially increasing, except as provided in Section 6 hereof, the
maximum number of shares of Common Stock that may be made subject to Grants; or
c. Materially increasing the benefits accruing to participants under this
Plan;
except to conform this Plan and any agreements made hereunder to changes in the
Code or required by governing law.
13. Investment Representation, Approvals and Listing. The Board may, if it deems
appropriate, condition its grant of any Stock Option hereunder upon receipt of
the following investment representation from the optionee:
"I agree that any shares of Common Stock of Gradall Industries, Inc. which
I may acquire by virtue of this Stock Option shall be acquired for investment
purposes only and not with a view to distribution or resale, and may not be
transferred, sold, assigned, pledged, hypothecated or otherwise disposed of
unless (i) a registration statement or post-effective amendment to a
registration statement under the Securities Act, with respect to said shares of
Common Stock has become effective so as to permit the sale or other disposition
of said shares by me; or (ii) there is presented to Gradall Industries, Inc. an
opinion of counsel satisfactory to Gradall Industries, Inc. to the effect that
the sale or other proposed disposition of said shares of Common Stock may
lawfully be made otherwise than pursuant to an effective registration statement
or post-effective amendment to a registration statement relating to the said
shares under the Securities Act of 1933, as amended."
The Company shall not be required to issue any certificate for shares of
Common Stock upon the exercise of any Stock Option granted under this Plan prior
to (i) the obtaining of any approval from any governmental agency with the Board
shall, in its sole discretion, determine to be necessary or advisable; (ii) the
admission of such shares to listing on any national securities exchange on which
the shares of Common Stock may be listed; (iii) the completion of any
registration or other qualification of the shares of Common Stock under any
state or federal law or ruling or regulations of any governmental body which the
Board shall, in its sole discretion, determine to be necessary or advisable or
the determination by the Board, in its sole discretion, that any registration or
other qualification of the shares of Common Stock is not necessary or advisable;
or (iv) the obtaining of an investment representation from the optionee in the
form stated above or in such other form as the Board, in its sole discretion,
shall determine to be adequate.
14. General Provisions. The form and substance of Stock Option Agreements made
hereunder, whether granted at the same or different times, need not be
identical. Nothing in this Plan or in any Stock Option agreement shall confer
upon any employee any right to continue in the employ of the Company or any of
33
its subsidiaries or to interfere with or limit the right of the Company or any
subsidiary to terminate his employment at any time, with or without cause.
Nothing contained in this Plan or in any Stock Option Agreement shall be
construed as entitling any optionee to any rights of a stockholder as a result
of the grant of Stock Option, until such time as shares of Common Stock are
actually issued to such optionee pursuant to the exercise of such Option. This
Plan may be assumed by the successors and assigns of the Company. The liability
of the Company under this Plan and any sale made hereunder is limited to the
obligations set forth herein with respect to such sale and no term or provision
of this Plan shall be construed to impose any liability on the Company in favor
of any employee (or any other party acting on his behalf or in his stead) with
respect to any loss, cost or expense which such employee or party may incur in
connection with or arising out of any transaction in connection with this Plan.
The cash proceeds received by the Company from the issuance of shares of Common
Stock pursuant to this Plan will be used for general corporate purposes. The
expense of administering this Plan shall be borne by the Company. The captions
and section numbers appearing in this Plan are inserted only as a matter of
convenience. They do not define, limit, construe or describe the scope or intent
of the provisions of this Plan.
15. Provisions Applicable Solely to Insiders. The provisions of this Section 15
shall apply only to persons who are subject to Section 16 of the Exchange Act
with respect to securities of the Company ("Insiders"), and shall apply to
Insiders notwithstanding any provision of the Plan to the contrary. No Insider
shall be permitted to transfer any security of the Company acquired by him,
except to the extent permitted by 17 C.F.R. 240.16a-2(d)(1), upon the exercise
of any Stock Option, until at least six (6) months and one (1) day after the
later of (i) the day on which such Stock Option is granted to the Insider or
(ii) the day on which the exercise or conversion price of such Stock Option is
fixed.
16. Termination of This Plan. This Plan shall terminate on March 24, 2008, and
thereafter no Stock Options shall be granted hereunder. All Stock Options
outstanding at the time of termination of this Plan shall continue in full force
and effect according to their terms and the terms and conditions of this Plan.
34
Exhibit "B"
GRADALL INDUSTRIES, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. Gradall Industries, Inc., a Delaware corporation (the "Company"),
hereby adopts this Employee Stock Purchase Plan (the "Plan"). The purpose of the
Plan is to provide an opportunity for the employees of the Company and any
current or future subsidiaries designated by the Board of Directors of the
Company (the "Board") to purchase shares of Common Stock, par value $.001, of
the Company ("Common Shares") through voluntary automatic payroll deductions,
thereby attracting, retaining and rewarding such persons and strengthening the
mutuality of interest between such persons and the Company's shareholders.
2. Common Shares Subject to Plan. An aggregate of 300,000 Common Shares of the
Company may be sold pursuant to the Plan. Such Common Shares may be authorized
but unissued Common Shares, treasury shares or Common Shares purchased in the
open market, as the Committee determines. If there is any change in the
outstanding Common Shares by reason of a stock dividend or distribution, stock
split, recapitalization, combination or exchange of shares, or a merger,
consolidation or other corporate reorganization in which the Company is the
surviving corporation, the number of Common Shares available for sale shall be
equitably adjusted by the Committee appointed to administer the Plan to give
proper effect to such change.
3. Administration. The Plan shall be administered by a committee (the
"Committee") consisting of not less than two directors of the Company appointed
by the Board, none of whom shall participate in the Plan and all of whom shall
qualify as disinterested persons within the meaning of Securities and Exchange
Commission Regulation 240.16b-3 or any successor regulation. The Committee is
authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it deems necessary for the proper administration of the Plan and
to make such determinations and interpretations and to take such action in
connection with the Plan and any Common Shares made available hereunder as it
deems necessary or advisable. All determinations and interpretations made by the
Committee shall be binding and conclusive on all participants and their legal
representatives. No member of the Board, no member of the Committee and no
employee of the Company shall be liable for any act or failure to act hereunder,
by any other member or employee or by any agent to whom duties in connection
with the administration of the Plan have been delegated or, except in
circumstances involving his or her bad faith, gross negligence or fraud, for any
act or failure to act by the member or employee.
35
4. Eligibility. All regular employees of the Company, and of each qualified
subsidiary of the Company designated for participation by the Board of
Directors, other than:
(a) full-time employees who have been employed for less than three months;
(b) employees whose customary employment is 20 hours or less per week or is
for not more than five months in any calendar year; and
(c) employees who own 5% or more of the voting shares or value of the
Company or any of its subsidiaries, determined in accordance with Section 424(d)
of the Internal Revenue Code.
shall be eligible to participate in the Plan. For the purposes of this Plan, (a)
an employee shall be considered a "full-time employee" if such employee is
customarily employed more than 20 hours per week, and (b) the term "qualified
subsidiary" means such subsidiary in which the Company, directly or indirectly,
owns 50% or more of the total combined voting power of all classes of stock.
5. Participation. An eligible employee may elect to participate in the Plan as
of any "Enrollment Date". Enrollment Dates shall occur on the first day of each
quarterly Offering Period (as defined in paragraph 8). Any such election shall
be made by completing and forwarding to the Company an enrollment/election form
at least 10 days prior to such Enrollment Date, authorizing payroll deductions
in such amount as the employee may request but in no event less than the minimum
nor more than the maximum amount as the Committee shall determine. Unless
otherwise determined by the Committee, the maximum payroll deductions which any
eligible employee may make during any calendar year shall not exceed ten percent
(10%) of such employee's "compensation" from the Company. For the purposes of
this paragraph 5, "compensation" shall mean an amount equal to the sum of (i)
the gross base pay of the eligible employee during the Offering Period, and (ii)
the gross amount paid to the employee by the Company or any subsidiary under any
incentive compensation plan or bonus plan during the Offering Period. A
participating employee may increase or decrease his payroll deductions as of any
subsequent Enrollment Date by completing and forwarding to the Company a revised
enrollment/election form at least 10 days prior to such Enrollment Date;
provided, that changes in payroll deductions shall not be permitted to the
extent that they would result in total payroll deductions below the minimum or
above the maximum amount as set forth above or as is specified by the Committee.
6. Payroll Deduction Accounts. The Company shall establish on its books and
records a "Payroll Deduction Account" for each participating employee, and shall
credit all payroll deductions made on behalf of each employee pursuant to
paragraph 5 to his or her Payroll Deduction Account. No interest shall be
credited to any Payroll Deduction Account.
36
7. Withdrawals. An employee may withdraw from the Plan at any time by completing
and forwarding a written enrollment/election to the Company. Upon receipt of
such form, payroll deductions on behalf of the employee shall be discontinued
commencing with the immediately following payroll period, and such employee may
not again be eligible to participate in the Plan until the next Enrollment Date.
If such withdrawal notice is received by the Company at least 10 days prior to a
Share Purchase Date, amounts credited to the Payroll Deduction Account of any
employee who withdraws shall be refunded to the employee as soon as practicable
after the withdrawal. If a withdrawal notice is not received prior to 10 days
before a Share Purchase Date, amounts credited to the Payroll Deduction Account
of any employee who withdraws shall be used to purchase Common Shares on such
Share Purchase Date.
8. Offering Periods. The Plan shall be implemented by consecutive three-month
Offering Periods with a new Offering Period commencing on the first trading day
on or after the first day of each January, April, July and October during the
term of the Plan, or on such other date as the Committee shall determine, and
continuing thereafter to the end of such period, subject to termination of the
Plan in accordance with paragraph 18 hereof. The first Offering Period hereunder
shall commence on July 1, 1998 "Trading day" shall mean a day on which the
Nasdaq National Market System is open for trading. The Committee shall have the
power to change the duration of Offering Periods (including the commencement
dates thereof) with respect to future offerings. The last trading day of each
Offering Period prior to the termination of the Plan (or such other trading date
as the Committee shall determine) shall constitute the purchase dates (the
"Share Purchase Dates") on which each employee for whom a Payroll Deduction
Account has been maintained shall purchase the number of Common Shares
determined under paragraph 9(a). Notwithstanding the foregoing, the Company
shall not permit the exercise of any right to purchase Common Shares
(a) to an employee who, immediately after the right is granted, would own
Common Shares possessing 5% or more of the total combined voting power or value
of all classes of stock of the Company or any subsidiary,
(b) which would permit an employee's right to purchase Common Shares under
this Plan, or under any other employee stock purchase plan qualifying under
Section 423 of the Internal Revenue Code, maintained by the Company or any
subsidiary, to accrue at a rate in excess of $25,000 in fair market value for
each calendar year, or
(c) to the extent that any employee would purchase more than 250 Common
Shares during any Offering Period.
37
For the purposes of subparagraph (a), the provisions of Section 424(d) of
the Internal Revenue Code shall apply in determining the stock ownership of an
employee, and the shares which an employee may purchase under outstanding rights
or options shall be treated as shares owned by the employee.
9. Purchase of Common Shares.
(a) Subject to the limitations set forth in paragraphs 7 and 8, each
employee participating in an offering shall purchase as many whole Common Shares
(plus any fractional interest in a Common Share) as is determined by dividing
the amounts credited to his or her Payroll Deduction Account four days prior to
the Share Purchase Date (or such other date as the Committee shall determine)
(the "Cutoff Date") by the Purchase Price for the Common Shares. Employees may
purchase Common Shares only through payroll deductions, and cash contributions
shall not be permitted.
(b) The "Purchase Price" for Common Shares purchased under the Plan shall be
not less than the lesser of (i) an amount equal to 85% of the closing price of
the Common Shares on the first Trading Day of the Offering Period, or (ii) 85%
of the closing price of the Common Shares on the Share Purchase Date. For these
purposes, the last reported sales price shall be as reported on the Nasdaq
National Market System. The Committee shall have the authority to establish a
different Purchase Price as long as such Purchase Price complies with the
provisions of Section 423 of the Internal Revenue Code.
(c) On each Share Purchase Date, the amount credited to each participating
employee's Payroll Deduction Account as of the immediately preceding Cutoff Date
shall be applied to purchase as many whole Common Shares (plus any fractional
interest in a Share) as may be purchased with such amount at the applicable
Purchase Price. Any amount remaining in an employee's Payroll Deduction Account
as of the relevant Cutoff Date in excess of the amount that may properly be
applied to the purchase of Common Shares shall be refunded to the employee as
soon as practicable.
10. Transfer Restrictions. Common Shares purchased pursuant to the Plan may not
be sold or otherwise transferred by a participant for a period of one year
following the date that such Common Shares are purchased, unless the participant
dies, retires or becomes disabled. If a participant dies, reties or becomes
disabled then the Common Shares in such participant's account may be sold by
such participant or the participant's estate at any time following such event.
For purposes of this Plan, a participant shall be considered disabled if the
participant is unable to perform his or her stated duties with the Company by
38
reason of illness, accident or other incapacity and does not engage in any
occupation or employment for wage or profit for which the participant is
reasonably qualified by education, training, or experience. A participant shall
be deemed to be retired when he or she receives pension benefits from the
Company or the IAM National Pension Fund. The Committee may provide for
exceptions to the transfer restrictions set forth in this Section, and allow a
participant to transfer Common Shares purchased pursuant to the Plan, in those
circumstances that the Committee deems appropriate.
11. Brokerage Accounts or Plan Share Accounts. By enrolling in the Plan, each
participating employee shall be deemed to have authorized the establishment of a
brokerage account on his or her behalf at a securities brokerage firm selected
by the Committee. Alternatively, the Committee may provide for Plan share
accounts for each participating employee to be established by the Company or by
an outside entity selected by the Committee which is not a brokerage firm.
Common Shares purchased by an employee pursuant to the Plan shall be held in the
employee's brokerage or Plan share account ("Plan Share Account") in his or her
name, or if the employee so indicates on his or her enrollment/election form, in
the employee's name jointly with a member of the employee's family, who is of
legal age, with right of survivorship.
12. Rights as Shareholder. An employee shall have no rights as a shareholder
with respect to Common Shares subject to any rights granted under this Plan
until payment for such Common Shares has been completed at the close of business
on the relevant Share Purchase Date.
13. Certificates. Certificates for Common Shares purchased under the Plan will
not be issued automatically. However, certificates for whole Common Shares
purchased shall be issued as soon as practicable following an employee's written
request. The Company may impose a reasonable charge for the issuance of such
certificates. Fractional interests in Common Shares shall be carried forward in
an employee's Plan Share Account until they equal one whole Share or until the
termination of the employee's participation in the Plan, in which event an
amount in cash equal to the value of such fractional interest shall be paid to
the employee in cash.
14. Termination of Employment. If a participating employee's employment is
terminated for any reason, if an employee dies, if an employee is granted a
leave of absence of more than 90 days duration, or if an employee otherwise
ceases to be eligible to participate in the Plan, payroll deductions on behalf
of the employee shall be discontinued. Any amounts then credited to the
employee's Payroll Deduction Account shall remain in the account and shall be
used to purchase Common Shares on the next scheduled Share Purchase Date.
39
15. Rights Not Transferable. Rights granted under this Plan are not transferable
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during an employee's lifetime only by the
employee.
16. Employment Rights. Neither participation in the Plan, nor the exercise of
any right granted under the Plan, shall be made a condition of employment, or of
continued employment with the Company or any subsidiary. Participation in the
Plan does not limit the right of the Company or any subsidiary to terminate a
participating employee's employment at any time or give any right to an employee
to remain employed by the Company or any subsidiary in any particular position
or at any particular rate of remuneration.
17. Application of Funds. All funds received by the Company for Common Shares
sold by the Company on any Share Purchase Date pursuant to this Plan may be used
for any corporate purpose.
18. Amendments and Termination. The Board may amend the Plan at any time,
provided that if shareholder approval is required for the Plan to continue to
comply with the requirements of Securities and Exchange Commission Regulation
240.16b-3 or Section 423 of the Internal Revenue Code, then no such amendment
shall be effective unless such amendment is approved by the Company's
shareholders within 12 months after the date of its adoption by the Board of
Directors. The Board of Directors may suspend the Plan or discontinue the Plan
at any time. Upon termination of the Plan, all payroll deductions shall cease
and all amounts then credited to the participating employees' Payroll Deduction
Accounts shall be equitably applied to the purchase of whole Common Shares then
available for sale, and any remaining amounts shall be promptly refunded to the
participating employees.
19. Applicable Laws. This Plan, and all rights granted hereunder, are intended
to meet the requirements of an "employee stock purchase plan" under Section 423
of the Internal Revenue Code, as from time to time amended, and the Plan shall
be construed and interpreted to accomplish this intent. Sales of Common Shares
under the Plan are subject to, and shall be accomplished only in accordance
with, the requirements of all applicable securities and other laws.
20. Expenses. Except to the extent provided in paragraph 13, all expenses of
administering the Plan, including expenses incurred in connection with the
purchase of Common Shares in the open market for sale to participating
employees, shall be borne by the Company and its subsidiaries.
21. Shareholder Approval. The Plan was adopted by the Board of Directors on
March 25, 1998, subject to shareholder approval. The Plan and any action taken
hereunder shall be null and void if shareholder approval is not obtained at the
next annual meeting of shareholders.
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GRADALL INDUSTRIES, INC.
EMPLOYEE STOCK PURCHASE PLAN
ENROLLMENT/ELECTION FORM
SOCIAL SECURITY NUMBER
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(STOCK WILL BE HELD IN YOUR ACCOUNT AS IT APPEARS BELOW)
ACCOUNT TYPE [ ] INDIVIDUAL [ ] JOINT TENANT WITH RIGHT OF SURVIVORSHIP
ACCOUNT NAME
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ADDRESS
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HOME PHONE NUMBER
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COMPANY
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I hereby elect to participate in the Gradall Industries, Inc. Employee Stock
Purchase Plan (the "Plan") and hereby authorize my employer to make a payroll
deduction of _____% (maximum of 10%) of my gross pay which will be used to
purchase Gradall Industries, Inc. Common Shares through the Plan. (Indicate
whole percentage.)
The effective date of this deduction/election is [ ] January 1 [ ] July 1
[ ] April 1 [ ] October 1
This is (check one):
[ ] A new enrollment
[ ] A change to increase or decrease my contribution amount effective on the
first day of the next Offering Period.
[ ] A withdraw from the Plan and discontinue contributions to the Plan on the
next available payroll period.
I understand that my deduction will be made each pay period that I participate
in the Plan. I also understand that the payroll deduction percent I indicated
above will be computed on my gross pay (pre-401k) and therefore that dollar
amount may vary each pay period based on my gross pay. I understand that the
deduction is made as an after-tax deduction and that deductions credited to my
account will not earn interest. I also understand that unless I retire, die or
become disabled, I may not sell or otherwise transfer the Common Shares acquired
pursuant to the Plan for a period of one year after the date that they are
purchased.
I certify that I am at least 18 years of age and have received and read the
Gradall Industries, Inc. Enrollment Guide/Prospectus.
I understand that the payroll deduction will continue in each Offering Period
until Gradall Industries, Inc. receives written instructions to withdraw my Plan
participation.
EMPLOYEE SIGNATURE DATE
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