-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UI+R+RoEm1aY2MYVmDgM8qNQ/NFPOU4giUHwH+3oYlh015kUvuM18gESd7hH9QXe lOgNZG05pdL0J8MQArapBw== 0000950123-01-501124.txt : 20010426 0000950123-01-501124.hdr.sgml : 20010426 ACCESSION NUMBER: 0000950123-01-501124 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20010425 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOBAL POWER EQUIPMENT GROUP INC/ CENTRAL INDEX KEY: 0001136294 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED PLATE WORK (BOILER SHOPS) [3443] IRS NUMBER: 731541378 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-56832 FILM NUMBER: 1610011 BUSINESS ADDRESS: STREET 1: 6120 SOUTH YALE STREET 2: SUITE 1480 CITY: TULSA STATE: OK ZIP: 74136 BUSINESS PHONE: 9184880828 MAIL ADDRESS: STREET 1: 6120 SOUTH YALE STREET 2: SUITE 1480 CITY: TULSA STATE: OK ZIP: 74136 FORMER COMPANY: FORMER CONFORMED NAME: GEEG INC DATE OF NAME CHANGE: 20010306 S-1/A 1 y45366a2s-1a.txt AMENDMENT NO. 2 TO FORM S-1 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 2001 REGISTRATION NO. 333-56832 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 2 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ GLOBAL POWER EQUIPMENT GROUP INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------------ DELAWARE 3443 73-1541378 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
6120 SOUTH YALE SUITE 1480 TULSA, OKLAHOMA 74136 (918) 488-0828 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ LARRY D. EDWARDS PRESIDENT AND CHIEF EXECUTIVE OFFICER GLOBAL POWER EQUIPMENT GROUP INC. 6120 SOUTH YALE SUITE 1480 TULSA, OKLAHOMA 74136 (918) 488-0828 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: MAUREEN S. BRUNDAGE, ESQ. KRIS F. HEINZELMAN, ESQ. WHITE & CASE LLP CRAVATH, SWAINE & MOORE 1155 AVENUE OF THE AMERICAS WORLDWIDE PLAZA NEW YORK, NEW YORK 10036-2787 825 EIGHTH AVENUE (212) 819-8200 NEW YORK, NEW YORK 10019 (212) 474-1000
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED APRIL 25, 2001 7,350,000 Shares GLOBAL POWER EQUIPMENT GROUP INC. Common Stock $ per share ------------------ This is our initial public offering and no public market currently exists for our common stock. The initial public offering price is expected to be between $16 and $18 per share. We have applied to list our common stock on the New York Stock Exchange under the symbol "GEG." The selling stockholders have granted the underwriters an option to purchase a maximum of 1,102,500 additional shares to cover over-allotments. INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 6.
PER SHARE TOTAL --------- ------------ Price to public...................................... $ $ Underwriting discounts and commissions............... $ $ Proceeds to Global Power Equipment Group............. $ $
Delivery of the shares of common stock will be made on or about , 2001. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ------------------ CREDIT SUISSE FIRST BOSTON SALOMON SMITH BARNEY ------------------ DEUTSCHE BANC ALEX. BROWN RAYMOND JAMES The date of this prospectus is , 2001. 3 [Inside front cover art on a fold-out page: Graphic of a combined-cycle power plant with the labels "Exhaust Silencer," "Inlet Ductwork," "Inlet Silencer," "Exhaust Ductwork," and "Pre-Cab Assembly," positioned around the graphic and attached by bar lines to the parts of the graphic that the labels describe. The graphic and labels will be encircled with photographs of the following components and assemblies we manufacture which are attached by connectors to the specific part of the graphic that they are representative of: - - Exhaust Stack; - - Filter House; - -Gas Turbine Enclosure; - - Diverter Damper; and - - HRSG. Below each photograph will be the text above identifying the component or assembly.] 4 YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THIS PROSPECTUS. ------------------ TABLE OF CONTENTS
PAGE ---- PROSPECTUS SUMMARY.......................................... 1 RISK FACTORS................................................ 6 CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS...... 13 USE OF PROCEEDS............................................. 14 DIVIDEND POLICY............................................. 14 DILUTION.................................................... 15 CAPITALIZATION.............................................. 16 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS................................................ 17 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA............. 22 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................. 24 BUSINESS.................................................... 34 MANAGEMENT.................................................. 41 PRINCIPAL AND SELLING STOCKHOLDERS.......................... 48 CERTAIN TRANSACTIONS........................................ 52 DESCRIPTION OF CAPITAL STOCK................................ 54 SHARES ELIGIBLE FOR FUTURE SALE............................. 57 CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS OF COMMON STOCK................. 59 UNDERWRITING................................................ 62 NOTICE TO CANADIAN RESIDENTS................................ 65 LEGAL MATTERS............................................... 66 EXPERTS..................................................... 66 WHERE YOU CAN FIND ADDITIONAL INFORMATION................... 66 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................. F-1
------------------ UNTIL , 2001 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. i 5 PROSPECTUS SUMMARY This summary may not contain all of the information that may be important to you. You should read the entire prospectus, including our consolidated financial statements and related notes, before making an investment decision. GLOBAL POWER EQUIPMENT GROUP INC. We are a global designer, engineer and manufacturer of a comprehensive portfolio of equipment for gas turbine power plants, with over 30 years of power generation industry experience. We believe that we are a leader in our industry, offer one of the broadest ranges of gas turbine power plant equipment in the world and hold the number one or number two market position by sales in a majority of our product lines. Our equipment is installed in power plants in more than 30 countries on six continents and we believe that we have one of the largest installed bases of gas turbine power plant equipment in the world. In addition, we provide our customers with value-added services including engineering, retrofit and upgrade, and maintenance and repair. According to the Energy Information Administration, or EIA, U.S. demand for electricity has increased substantially since 1990, while generating capacity has remained relatively flat. To correct this imbalance, the EIA estimates that 1,300 new power generation plants with approximately 390 gigawatts of electrical generation capacity will be needed in the United States by 2020. Internationally, the International Energy Agency, or IEA, estimates that significant new capacity is necessary to keep pace with worldwide demand, which is expanding at more than twice the rate of U.S. demand. Of the various power generation alternatives, gas turbine technology is well-positioned to benefit from the need for new and more efficient power generation infrastructure. Based on IEA projections, approximately 90% of new U.S. generation capacity and approximately 51% of new generation capacity outside the United States, net of retirements, through 2020 will employ gas turbine technology. We sell our products to the gas turbine power generation market, the fastest growing segment of the power generation industry. Our products are critical to the efficient operation of gas turbine power plants and are highly engineered to meet customer-specific requirements. Our products include: - heat recovery steam generators; - filter houses; - inlet systems; - gas and steam turbine enclosures; - exhaust systems; - diverter dampers; and - specialty boilers and related products. We market and sell our products globally under the Deltak, Braden and Consolidated Fabricators brand names through our worldwide sales network. We believe that our design and engineering capabilities differentiate us from our competitors. In addition, our network of exclusive subcontractors, located throughout 30 countries, allows us to manufacture equipment for power plant projects worldwide at competitive prices. Our subcontractors also enable us to meet increasing demand without being restricted by manufacturing capacity limitations, thus limiting our capital expenditure requirements. By providing high-quality products on a timely basis and offering a broad range of equipment, we have forged long-standing relationships with the leading power industry participants, including General Electric, Mitsubishi Heavy Industries, Siemens-Westinghouse, Bechtel and Duke Power. Our revenues have grown from $142.7 million in fiscal year 1997 to $416.6 million in fiscal year 2000, representing a compound annual growth rate of 42.9%. To continue this growth and maximize shareholder value, we will continue to pursue the following objectives: - expand our leading market position in the high-growth U.S. market; - leverage our presence in the emerging international power markets; 1 6 - pursue strategic acquisitions which will increase our market share in existing product lines, broaden our overall product offering and expand our geographic reach; and - leverage our design and engineering capabilities to expand our product lines and to capture a larger share of our customers' total equipment purchases. BACKGROUND On June 5, 1998, GEEG Holdings, L.L.C. acquired Jason Incorporated's power generation division. In August 2000, investment entities controlled by Harvest Partners, Inc. acquired a controlling interest in GEEG Holdings, L.L.C. through a recapitalization of the company. This recapitalization resulted in the entities controlled by Harvest Partners, Inc. owning 81.5% of the outstanding equity interests in GEEG Holdings, L.L.C. and having a majority of the votes on its board of directors. For additional information on this transaction, see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview." In October 2000, GEEG Holdings, L.L.C. acquired Consolidated Fabricators, Inc. Immediately prior to the completion of this offering, GEEG Holdings, L.L.C. will complete a reorganization. As part of this reorganization, the holders of common and preferred membership units of GEEG Holdings, L.L.C. will exchange their units for shares of our common stock and GEEG Holdings, L.L.C. will merge into us, Global Power Equipment Group Inc. As a result, we will be the successor to GEEG Holdings, L.L.C. For additional information on the reorganization, see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- The Reorganization Transaction." Unless this prospectus indicates otherwise or the context otherwise requires, the terms "we," "our," "us" and "Global Power Equipment Group," as used in this prospectus refer to (1) the power generation division of Jason Incorporated for periods prior to June 5, 1998; (2) GEEG Holdings, L.L.C. and its subsidiaries for the period from June 5, 1998 until completion of the reorganization; and (3) Global Power Equipment Group Inc. and its subsidiaries after the reorganization. Our fiscal year ends on the last Saturday in December. As a result, references in this prospectus to fiscal year 1998 refer to the fiscal year ended December 26, 1998, references to fiscal year 1999 refers to the fiscal year ended December 25, 1999 and references to fiscal year 2000 refers to the fiscal year ended December 30, 2000. References in this prospectus to results of operations for fiscal year 1998 refer to the combined results of (1) Jason Incorporated's power generation division for the period from December 27, 1997 through June 4, 1998 and (2) GEEG Holdings, L.L.C. from June 5, 1998 through December 26, 1998. Our principal executive offices are located at 6120 South Yale, Suite 1480, Tulsa, Oklahoma 74136. Our telephone number at that location is (918) 488-0828. 2 7 THE OFFERING Common stock offered.......... 7,350,000 shares Total common stock to be outstanding after this offering(1)................. 44,843,264 shares Use of proceeds............... The net proceeds of this offering will be used to repay existing indebtedness and to pay a distribution in an aggregate amount equal to the accrued and unpaid dividends on the preferred units of GEEG Holdings, L.L.C. See "Use of Proceeds." Proposed NYSE symbol.......... GEG - --------------- (1) This amount excludes 2,921,359 shares of common stock issuable upon exercise of options outstanding as of March 31, 2001. ------------------------ All trademarks and tradenames appearing in this prospectus are owned by their respective holders. ------------------------ Unless otherwise stated, the information in this prospectus assumes: - no exercise of the underwriters' option to purchase up to an additional 1,102,500 shares of common stock to cover over-allotments; and - completion of the reorganization described in "Management's Discussion and Analysis of Financial Condition and Results of Operations -- The Reorganization Transaction." ------------------------ 3 8 SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA The following table sets forth certain summary historical and pro forma consolidated financial data for us and our predecessor for the periods and as of the dates indicated. The financial data has been derived from our audited consolidated financial statements and those of our predecessor, Jason Incorporated's power generation division. The unaudited pro forma data gives effect to the transactions described under "Unaudited Pro Forma Condensed Consolidated Financial Statements." The historical and pro forma data should be read together with the historical consolidated financial statements and related notes and the unaudited pro forma condensed consolidated financial statements and related notes included elsewhere in this prospectus.
PREDECESSOR ------------ DECEMBER 27, 1997 THROUGH JUNE 5 THROUGH PRO FORMA JUNE 4, DECEMBER 26, FISCAL YEAR FISCAL YEAR AS ADJUSTED 1998 1998 1999 2000 FISCAL YEAR 2000 ------------ -------------- ------------ ------------ ---------------- (IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA) STATEMENTS OF OPERATIONS DATA: Revenues........................ $60,881 $98,363 $275,199 $416,591 $447,851 Cost of sales................... 48,529 80,283 226,051 345,688 369,135 ------- ------- -------- -------- -------- Gross profit.................. 12,352 18,080 49,148 70,903 78,716 Selling and administrative expenses...................... 8,787 10,825 23,166 27,045 30,159 Recapitalization charge(1)...... -- -- -- 38,114 -- Amortization expense............ 787 727 1,100 1,250 1,745 ------- ------- -------- -------- -------- Operating income.............. 2,778 6,528 24,882 4,494 46,812 Interest expense, net........... 439 2,966 3,410 12,175 11,589 ------- ------- -------- -------- -------- Income (loss) before income taxes and extraordinary item....................... 2,339 3,562 21,472 (7,681) 35,223 Income tax provision (benefit)..................... 996 176 1,087 (433) 13,576 ------- ------- -------- -------- -------- Income (loss) before extraordinary item......... $ 1,343 $ 3,386 $ 20,385 $ (7,248)(3) $ 21,647(4) ======= ======= ======== ======== ======== PER SHARE DATA: Earnings per share: Basic......................... $ 0.48 ======== Diluted....................... $ 0.48 ======== Weighted average shares outstanding: Basic......................... 44,843 Diluted....................... 44,843 OTHER FINANCIAL DATA: EBITDA, as adjusted(2).......... $ 8,379 $ 28,008 $ 46,919 $ 52,198 Depreciation and amortization... 1,851 3,126 4,311 5,386 Capital expenditures............ 1,065 2,375 2,187 2,301 Net cash provided by (used in): Operating activities.......... 7,514 39,466 24,789 Investing activities.......... (1,065) 1,393 (19,840) Financing activities.......... (213) (39,469) 10,246
4 9
AS OF DECEMBER 30, 2000 ----------------------- PRO FORMA ACTUAL AS ADJUSTED -------- ----------- (IN THOUSANDS) BALANCE SHEET DATA: Working capital(5).......................................... $(39,540) $(23,573) Property, plant and equipment, net.......................... 19,433 19,433 Goodwill(6)................................................. 45,879 45,414 Total assets................................................ 245,693 312,950 Total debt.................................................. 219,094 105,169 Members' deficit............................................ (157,570) -- Stockholders' equity........................................ -- 28,579
- --------------- (1) In fiscal year 2000, we incurred a non-recurring recapitalization charge associated with the cancellation of options outstanding as of the closing date of the August 2000 recapitalization. (2) EBITDA, as adjusted, represents income (loss) before extraordinary item, interest, taxes, depreciation, amortization and recapitalization charge. EBITDA, as adjusted, is presented because we believe that it is frequently used by security analysts in the evaluation of companies. EBITDA, as adjusted, should not be considered as an alternative to cash flow from operating activities, as a measure of liquidity, as an alternative to net income, as an indicator of operating performance, or as an alternative to any other measure of performance in accordance with generally accepted accounting principles. Our EBITDA, before adjusting for the recapitalization charge, was $8.8 million for fiscal year 2000. (3) Extraordinary item represents a $1.5 million loss on extinguishment of debt in fiscal year 2000. (4)Does not include an extraordinary loss of approximately $7.8 million ($12.7 million less the associated tax benefit of $4.9 million) resulting from the write-off of deferred financing costs and debt discount as well as prepayment premiums relating to the repayment of long-term debt. This amount will be charged to earnings in the quarter in which the debt is repaid. We anticipate repaying the debt in the second quarter of fiscal year 2001. (5) Working capital represents current assets (excluding cash and cash equivalents) less current liabilities (excluding current maturities of long-term debt). (6)Goodwill is being amortized on a straight-line basis over 30 years. 5 10 RISK FACTORS You should carefully consider the following risk factors and other information appearing in this prospectus before buying our common stock. RISKS RELATING TO OUR BUSINESS AND INDUSTRY SUBSTANTIALLY ALL OF OUR REVENUES ARE FROM SALES OF EQUIPMENT FOR GAS TURBINE POWER PLANTS. IF CONSTRUCTION OF NEW GAS TURBINE POWER PLANTS WERE TO DECLINE, THE MARKET FOR OUR PRODUCTS WOULD BE SIGNIFICANTLY DIMINISHED. The demand for our products and services depends on the continued construction of gas turbine power generation plants. In fiscal year 2000, approximately 91% of our revenues were from sales of equipment and provision of services for gas turbine power plants. The power generation equipment industry has experienced cyclical periods of slow growth or decline. In periods of decreased demand for new gas turbine power plants, our customers may be more likely to decrease expenditures on the types of products and systems that we supply and, as a result, our sales may decrease. In addition, the gas turbine power industry depends on natural gas. A rise in the price or shortage of natural gas could reduce the profitability of gas turbine power plants, which could adversely affect our sales. Environmental laws and regulations have played a part in the increased use of gas turbine technology in various jurisdictions. These laws and regulations may change or other jurisdictions may not adopt similar laws and regulations. Changes in existing laws and regulations could result in a reduction in the building and refurbishment of gas turbine power plants. In addition, stricter environmental regulation could result in our customers seeking new ways of generating electricity that do not require the use of our products. Furthermore, although gas turbine power plants have lower emissions than coal-fired power plants, emissions from gas turbine power plants remain a concern and attempts to reduce or regulate emissions could increase the cost of gas turbine power plants and result in our customers' switching to alternative sources of power. Other current power technologies, improvements to these technologies and new alternative power technologies that compete or may compete in the future with gas turbine power plants could affect our sales and profitability. Furthermore, in fiscal year 2000, approximately 53% of our revenues were from sales of heat recovery equipment used in combined-cycle power plants. Any change in the power generation industry which results in a decline in the construction of new combined-cycle power plants or a decline in the upgrading of existing simple-cycle power plants to combined-cycle ones could materially adversely affect our sales. Because some of our contracts stipulate that customer progress payments be made in advance of work performed, increases in overall sales volume typically allow us to finance our business through these payments. Conversely, a prolonged decline in our revenues could impair this ability. A SMALL NUMBER OF MAJOR CUSTOMERS ACCOUNT FOR A SIGNIFICANT PORTION OF OUR REVENUES, AND THE LOSS OF ANY OF THESE CUSTOMERS COULD HARM US. We depend on a relatively small number of customers for a significant portion of our revenues. In fiscal year 1998, one customer represented more than 10% of our revenues. In fiscal year 1999, three customers each represented more than 10% of our revenues. In fiscal year 2000, two customers each represented more than 10% of our revenues. Of these two customers, one represented approximately 31% of our revenues and approximately 25% of our backlog at the end of the year, while the other represented approximately 22% of our revenues and approximately 14% of our backlog at the end of the year. In addition, our five largest customers accounted for approximately 75% of our revenues in fiscal year 2000 and approximately 66% of our backlog at the end of the year. Other than their obligations under firm orders placed in our backlog, none of our customers has a long-term contractual obligation to purchase any material amounts of products from us. All of our firm orders contain cancellation provisions which permit us to recover only our costs and a portion of our anticipated profit in the event a customer cancels its 6 11 order. If a customer elects to cancel, we may not realize the full amount of revenues included in our backlog. We expect to continue to depend upon a relatively small number of customers for a significant percentage of our revenues. Because our major customers represent a large part of our business, the loss of any of our major customers could negatively impact our business. IF OUR COSTS EXCEED THE ESTIMATES WE USE TO SET THE FIXED PRICES OF OUR CONTRACTS, OUR EARNINGS WILL BE REDUCED. We enter into all of our contracts on a fixed-price basis. As a result, we benefit from cost savings, but have limited ability to recover for any cost overruns. The costs that we incur in connection with each contract can vary, sometimes substantially, from our original projections. Because of the large scale and long duration of our contracts, unanticipated changes may occur, such as customer budget decisions, design changes, delays in receiving permits and cost increases, that may delay delivery of our products. In addition, under our contracts, we often are subject to liquidated damages for late delivery. Unanticipated cost increases or delays may occur as a result of several factors, including: - increases in the cost, or shortages, of components, materials or labor; - unanticipated technical problems; - required project modifications not initiated by the customer; and - suppliers' or subcontractors' failure to perform. Cost overruns that we cannot pass on to our customers or the payment of liquidated damages under our contracts will lower our earnings. COMPETITION COULD RESULT IN DECREASED SALES OR DECREASED PRICES FOR OUR PRODUCTS AND SERVICES. Our products face and will continue to face significant competition. Competition could result in a reduction in the demand for, or the prices that we can charge for, our products and services. Our success is dependent in large part on our ability to: - anticipate or respond quickly to our customers' needs and enhance and upgrade our existing products and services to meet those needs; - continue to price our products and services competitively and find low cost subcontractors that can produce quality products; and - develop new products and systems that are accepted by our customers and differentiated from our competitors' offerings. Our competitors may: - develop more desirable, efficient, environmentally friendly or less expensive products; - be willing to accept lower prices to protect strategic marketing positions or increase market share; - be better able to take advantage of acquisition opportunities; or - adapt more quickly to changes in customer requirements. As a result of our competitors' business practices, we may need to lower our prices or devote significant resources to marketing our products in order to remain competitive. Lower prices or higher costs would reduce our revenues and our profitability. 7 12 IF WE ARE UNABLE TO CONTROL THE QUALITY OR TIMELY PRODUCTION OF PRODUCTS MANUFACTURED FOR US BY SUBCONTRACTORS, OUR REPUTATION COULD BE ADVERSELY AFFECTED AND WE COULD LOSE CUSTOMERS. IF WE ARE UNABLE TO RECOVER ANY ADVANCE PROGRESS PAYMENTS MADE TO SUBCONTRACTORS, OUR PROFITABILITY WOULD BE ADVERSELY AFFECTED. We rely on subcontractors to manufacture and assemble a substantial portion of our products. In fiscal year 2000, we estimate that subcontractors accounted for approximately 70% of our manufacturing costs. Although we have on-site supervision of our subcontractors to review and monitor their quality control systems, the quality and timing of their production is not totally under our control. Our subcontractors may not always meet the level of quality control and the delivery schedules required by our customers. The failure of our subcontractors to produce quality products in a timely manner could adversely affect our reputation and result in the cancellation of orders for our products and the loss of customers. Furthermore, we make advance progress payments to subcontractors in anticipation of their completion of our orders. In the event a subcontractor fails to complete an order, we may be unable to recover those advances. INVESTORS MAY NOT BE ABLE TO PROJECT OUR FUTURE REVENUES BASED UPON THE DOLLAR AMOUNT OF OUR BACKLOG. Customers may cancel or delay projects for reasons beyond our control and we may be unable to replace any canceled orders with new orders. To the extent projects were delayed, the timing of our revenues could be affected. If a customer cancels an order, we may be reimbursed for incurred costs. Typically, however, we have no contractual right to the full amount of the revenues that we would have received if the order had not been canceled, which potential revenues are reflected in our backlog. In addition, projects may remain in our backlog for extended periods of time. Revenue recognition occurs over long periods of time and is subject to unanticipated delays. Fluctuations in our quarterly backlog levels also result from the fact that we may receive a small number of relatively large orders in any given quarter that may be included in our backlog. Because of these large orders, our backlog in that quarter may reach levels that may not be sustained in subsequent quarters. Our backlog, therefore, is not necessarily indicative of our future revenues. IT MAY BE DIFFICULT FOR INVESTORS TO EVALUATE OUR PROSPECTS AND FOR US TO ESTIMATE OUR FUTURE REVENUES AND PROFITS BECAUSE OUR FINANCIAL PERFORMANCE MAY VARY SIGNIFICANTLY FROM QUARTER TO QUARTER. Our quarterly revenues and earnings have varied in the past and are likely to vary in the future. Our contracts stipulate customer-specific delivery terms which, coupled with other factors beyond our control that may occur at any time over a contract cycle of up to a year or more, may result in uneven realization of revenues and earnings over time. Due to our large average contract size, our sales volume during any given period may be concentrated in relatively few orders, intensifying the magnitude of these irregularities. Consequently our quarterly performance may not be indicative of our success in achieving year-over-year growth objectives. Furthermore, some of our operating costs are fixed. As a result, we may have limited ability to reduce our operating costs in response to unanticipated decreases in our revenues or the demand for our products in any given quarter. Therefore, our operating results in any quarter may not be indicative of our future performance, and it may be difficult for you to evaluate our prospects. In addition, because we must make significant estimates related to potential charges when we recognize revenue on a percentage completion basis, we may have difficulty accurately estimating revenues and profits from quarter to quarter. COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS IS COSTLY, AND OUR ONGOING OPERATIONS MAY EXPOSE US TO ENVIRONMENTAL LIABILITIES. Our operations are subject to laws and regulations governing the discharge of materials into the environment or otherwise relating to the protection of the environment or human health. These laws include U.S. federal statutes such as the Resource Conservation and Recovery Act of 1976, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 or CERCLA, the 8 13 Clean Water Act and the Clean Air Act, and the regulations implementing them, as well as similar laws and regulations at the state and local levels and in other countries in which we operate. If we fail to comply with environmental laws or regulations, we may be subject to significant liabilities for fines, penalties or damages, or lose or be denied significant operating permits. In addition, some environmental laws, including CERCLA, impose liability for the costs of investigating and remediating releases of hazardous substances without regard to fault and on a joint and several basis, so that in some circumstances we may be liable for costs attributable to hazardous substances released into the environment by others. Moreover, the environmental laws and regulations to which we are subject are constantly changing, and we cannot predict the effect of these changes on us. A MALFUNCTION IN OUR PRODUCTS COULD RESULT IN UNANTICIPATED WARRANTY COSTS OR PRODUCT LIABILITY NOT COVERED BY OUR INSURANCE WHICH COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION OR RESULTS OF OPERATIONS. We provide warranties for terms of two years or less on our products. These warranties require us to repair or replace faulty products. Warranty claims could result in significant unanticipated costs. The need to repair or replace products with design or manufacturing defects could also temporarily delay the sale of new products and adversely affect our reputation. In addition, we may be subject to product liability claims involving claims of personal injury or property damage. Because our products are used primarily in power plants, claims could arise in different contexts, including the following: - fires, explosions and power surges that can result in significant property damage or personal injury; and - equipment failure that can result in damage to other equipment in the power plant. If a very large product liability claim were sustained, our insurance coverage might not be adequate to cover our defense costs and the amount awarded. Additionally, a well-publicized actual or perceived problem could adversely affect our reputation and reduce demand for our products. IF WE ARE UNABLE TO PROTECT THE PROPRIETARY DESIGN SOFTWARE PROGRAMS THAT WE USE IN OUR BUSINESS AND THIRD PARTIES USED THEM TO DEVELOP PRODUCTS TO COMPETE AGAINST OURS, OUR REVENUES WOULD BE ADVERSELY AFFECTED. We have developed several proprietary software programs to help us design our products. Our ability to protect our proprietary rights to these programs is important to our success. We protect these rights through the use of internal controls and confidentiality and non-disclosure agreements and other legal protections. The legal protections afforded to our proprietary rights and the precautions taken by our company may not be adequate to prevent misappropriation of our proprietary rights. We generally enter into non-disclosure and confidentiality agreements with our employees and subcontractors with access to sensitive design software and technology. However, these contractual protections do not prevent independent third-parties from developing functionally equivalent or superior technologies, programs, products or professional services. Third parties may also infringe upon or misappropriate our proprietary rights and use them to develop competing products. If we were required to commence legal actions to enforce our intellectual property or proprietary rights or to defend ourselves against claims that we are infringing on the intellectual property or proprietary rights of others, we could incur substantial costs and divert management's attention from operations. THE LOSS OF THE SERVICES OF OUR KEY EXECUTIVE OFFICERS COULD HAVE A NEGATIVE EFFECT ON OUR BUSINESS. Our success depends to a significant extent on the continued services of Larry Edwards, our president and chief executive officer, and Gary Obermiller and Gene Schockemoehl, two of our senior executives. Our failure to retain the services of Messrs. Edwards, Obermiller or Schockemoehl, or attract highly qualified management in the future, could adversely affect our ability to grow and manage our operations. Although we have employment agreements containing non-competition clauses with Messrs. Edwards, Obermiller and Schockemoehl, courts are sometimes reluctant to enforce these agreements. In addition, 9 14 although we carry key man life insurance for Messrs. Edwards, Obermiller and Schockemoehl, the loss of their services could disrupt our operations. OUR INABILITY TO ATTRACT AND RETAIN EMPLOYEES WHO FILL KEY REQUIREMENTS OF OUR BUSINESS MAY MAKE IT DIFFICULT TO SUSTAIN OR EXPAND OUR OPERATIONS. We must attract and retain highly qualified experienced mechanical, design, structural and software engineers, service technicians, marketing and sales personnel and other key personnel to expand our operations. If we are unable to attract and retain necessary personnel, we may not be able to sustain or expand our operations. WE MAY NOT BE ABLE TO MAINTAIN OR EXPAND OUR BUSINESS OUTSIDE THE UNITED STATES BECAUSE OF NUMEROUS FACTORS OUTSIDE OUR CONTROL. Our business outside the United States is subject to risks from: - labor unrest; - regional economic uncertainty; - political instability; - restrictions on the transfer of funds into or out of a country; - currency exchange rate fluctuations; - export duties and quotas; - expropriations; - domestic and foreign customs and tariffs; - current and changing regulatory environments; and - potentially adverse tax consequences. These factors may result in a decline in revenues or profitability and could adversely affect our ability to expand our business outside the United States. IF WE WERE REQUIRED TO WRITE-OFF OR ACCELERATE THE AMORTIZATION OF OUR GOODWILL, OUR RESULTS OF OPERATIONS AND STOCKHOLDERS' EQUITY COULD BE MATERIALLY ADVERSELY AFFECTED. As a result of our June 1998 acquisition of the power generation division of Jason Incorporated and our October 2000 acquisition of CFI Holdings, Inc. and its subsidiaries, we have approximately $45.9 million of goodwill recorded on our consolidated balance sheet as of December 30, 2000. We are amortizing the goodwill on a straight-line basis over 30 years. The amount of goodwill that we amortize in any given year is treated as a charge against earnings under accounting principles generally accepted in the United States. If we were required to write-off our goodwill or accelerate the amortization of our goodwill, our results of operations and stockholders' equity could be materially adversely affected. 10 15 RISKS RELATED TO OUR COMMON STOCK HARVEST PARTNERS, INC. AND ITS AFFILIATES WILL CONTINUE TO HAVE SIGNIFICANT INFLUENCE OVER OUR BUSINESS AFTER THIS OFFERING AND THEY MAY NOT ACT IN A MANNER FAVORABLE TO OUR OTHER STOCKHOLDERS. Upon completion of this offering, affiliates of Harvest Partners, Inc. will hold in the aggregate approximately 30.6% of our outstanding common stock. If the underwriters' over-allotment is exercised in full, these affiliates will hold approximately 29.7% of our outstanding common stock. In addition, two of the directors that will serve on our board following this offering are representatives of Harvest Partners, Inc. After this offering, Harvest Partners, Inc. and its affiliates will continue to have a significant influence over all matters submitted to our stockholders, including the election of our directors, and will continue to exercise significant influence over our business, policies and affairs. Such concentration of voting power could have the effect of delaying, deterring or preventing a change of control of our company or other business combination that might otherwise be beneficial to stockholders. PROVISIONS IN OUR CERTIFICATE OF INCORPORATION AND BY-LAWS COULD PREVENT CHANGES IN OUR STRUCTURE OR CONTROL THAT OUR STOCKHOLDERS MAY PREFER. We will have authorized but unissued shares of preferred stock which may be issued by the board of directors with rights, preferences and designations as the board may determine without any vote of the stockholders. We will also have a classified board of directors. Furthermore, our by-laws will (1) eliminate the ability of stockholders to act by written consent; (2) require that special meetings of stockholders may only be called by holders of more than 35% of our common stock; and (3) set forth advance notice requirements that stockholders must meet before submitting proposals to be considered at stockholder meetings. These measures may have the effect of delaying, deterring or preventing a change in our control. In addition, "anti-takeover" provisions of the Delaware General Corporation Law may restrict the ability of our stockholders to authorize a merger, business combination or change of control. YOU WILL PAY A PRICE FOR SHARES OF COMMON STOCK THAT WAS NOT ESTABLISHED IN A COMPETITIVE MARKET AND THE PRICE THAT PREVAILS IN THE MARKET MAY BE LOWER. Before this offering, there has been no public market for our common stock. We will apply to list our common stock for trading on the New York Stock Exchange. After this offering, an active trading market for our common stock might not develop or continue, which could negatively affect the market price of our common stock. The market price of our common stock may decline below the initial public offering price. The initial public offering price for our common stock will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the trading market. Furthermore, a prolonged decline in the market price of our common stock could adversely affect our efforts to retain qualified employees if the prevailing market price of our common stock remains below the exercise price of employee stock options. In addition, the market price for our common stock may be subject to wide fluctuations as a result of a variety of factors, including: - announcements of technological or competitive developments by third parties; - changes in estimates of our financial performance by securities analysts or changes in recommendations by securities analysts regarding us; and - changes in investor perceptions of the industry or any of our particular products or service. Because of this volatility, it is likely we will fail to meet the expectations of our stockholders at some time in the future, resulting in a decline in our stock price. 11 16 FUTURE SALES BY EXISTING STOCKHOLDERS COULD DEPRESS THE MARKET PRICE OF OUR COMMON STOCK. Immediately after this offering there will be a total of 44,843,264 shares of common stock outstanding. The shares of common stock held by substantially all of our existing stockholders are subject to "lock-up" agreements that prohibit them from selling their shares in the public market for 180 days after the date of this prospectus. When the 180-day "lock-up" period expires or if Credit Suisse First Boston Corporation and Salomon Smith Barney Inc. consent, in their sole discretion, to an earlier sale, our existing stockholders will be able to sell their shares in the public market, subject to some legal restrictions. If our existing stockholders were to sell a large number of shares, the market price of shares of our common stock could decline dramatically. Moreover, the perception in the public market that these stockholders might sell shares of common stock could depress the market price of the common stock. Furthermore, some of our existing stockholders have the right to require us to register their shares in future offerings, which may facilitate their sales of shares in the public market. IF OUTSTANDING OR FUTURE OPTIONS ARE EXERCISED, OR IF WE ISSUE ADDITIONAL COMMON STOCK AT PRICES LOWER THAN THE INITIAL OFFERING PRICE, YOU WILL EXPERIENCE DILUTION IN THE NET TANGIBLE BOOK VALUE OF YOUR COMMON STOCK. As a purchaser of our common stock in this offering, you will incur immediate and substantial dilution in the net tangible book value per ordinary share of $16.95 from the price you pay for our common stock based on an assumed initial public offering price of $17.00 per share (the midpoint of the range set forth on the cover of this prospectus). Additionally, your ownership interest will be further diluted if outstanding or future options to purchase our common stock are exercised, or if we issue additional common stock at prices lower than the initial offering price in connection with acquisitions or for other purposes. WE ANTICIPATE THAT THE COVENANTS CONTAINED IN OUR AMENDED AND RESTATED CREDIT FACILITY WILL LIMIT OUR ABILITY TO BORROW ADDITIONAL MONEY, SELL ASSETS AND MAKE ACQUISITIONS. COMPLIANCE WITH THESE RESTRICTIONS AND COVENANTS MAY LIMIT OUR ABILITY TO IMPLEMENT ELEMENTS OF OUR BUSINESS STRATEGY. We anticipate that our amended and restated senior credit facility will contain a number of significant restrictions and covenants limiting our ability to: - borrow more money or make capital expenditures; - incur liens; - pay dividends or make other restricted payments; - merge or sell assets; - enter into transactions with affiliates; and - make acquisitions. We anticipate that the amended and restated senior facility will also impose restrictions on the ability of our subsidiaries to: - pay dividends or make other restricted payments to us; - merge or consolidate with any other person; and - sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of their assets. In addition, we anticipate that our amended and restated senior credit facility will contain other more restrictive covenants, including covenants that will require us to repay our indebtedness with proceeds from asset sales, equity issuances and excess cash flow and to maintain specified financial ratios, including leverage, interest and fixed charge ratios. If we are unable to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, restructure or refinance our indebtedness or seek additional equity capital. Also, compliance with the restrictive covenants of our amended and restated 12 17 credit agreement may limit our ability to operate our business or implement elements of our business strategy. OUR CERTIFICATE OF INCORPORATION AUTHORIZES OUR BOARD OF DIRECTORS, WITHOUT STOCKHOLDER APPROVAL, TO ISSUE PREFERRED STOCK WHICH MAY HAVE RIGHTS, POWERS AND PREFERENCES MORE FAVORABLE THAN THAT OF OUR COMMON STOCK. Our board of directors may determine the rights, preferences, privileges and restrictions of unissued series of preferred stock without any vote or authorization by our stockholders. Therefore, the board can authorize and issue shares of preferred stock with voting or conversion rights that could adversely affect the voting or other rights of holders of our common stock. In addition, the issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control of our company, because the terms of the preferred stock that might be issued could potentially prohibit our consummation of any merger, reorganization, sale of substantially all of our assets, liquidation or other extraordinary corporate transaction without the approval of our preferred stockholders. WE ARE EXPOSED TO MARKET RISKS FROM CHANGES IN INTEREST AND FOREIGN CURRENCY EXCHANGE AND THE CONVERSION BY EUROPEAN UNION NATIONS TO THE EURO CURRENCY. We are subject to market risks from changes in interest rates. We anticipate that our amended and restated senior credit facility will bear interest, at our option, at either the eurodollar rate or an alternate base rate plus, in each case, an applicable margin. Assuming our current level of borrowings, a 100 basis point increase in interest rates under these borrowings would increase our interest expense for fiscal year 2000 by approximately $0.6 million without taking into account our interest rate collar agreement. We are also subject to market risks from fluctuations in foreign currency rates and the anticipated conversion by several European Union members from local currencies to the use of the euro. Portions of our operations are located in foreign jurisdictions and a portion of our billings are paid in foreign currencies. Changes in foreign currency exchange rates or weak economic conditions in foreign markets could therefore cause fluctuations in those revenues derived from foreign operations. In addition, sales of products and services are affected by the value of the U.S. dollar relative to other currencies. Furthermore, the long-term affect of the conversion to the use of the euro on our accounting, treasury and computer systems, as well as its effect on trade competition and our foreign operating subsidiaries, is uncertain. CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS This prospectus includes "forward-looking statements." These forward-looking statements include, in particular, the statements about our plans, strategies, and prospects under the headings "Prospectus Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business." Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we may not achieve our plans, intentions or expectations. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this prospectus are set forth in "Risk Factors" and elsewhere in this prospectus. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in "Risk Factors," in which we have disclosed the material risks related to our business and this offering. These forward-looking statements involve risks and uncertainties, and the cautionary statements identify important factors that could cause actual results to differ materially from those predicted in any forward-looking statements. 13 18 USE OF PROCEEDS We expect that the net proceeds from the sale of our common stock in this offering will be approximately $113.3 million after deducting underwriting discounts and commissions and estimated offering expenses payable by us. These amounts assume the sale of all of our common stock offered by this prospectus at an initial offering price of $17.00 per share (the midpoint of the range set forth on the cover of this prospectus). We intend to use the net proceeds of this offering as follows: - $81.4 million to repay a portion of our senior term loans; - $25.5 million to repay a portion of our senior subordinated loan and to pay related prepayment premiums; and - $6.4 million to make a distribution on the preferred units of GEEG Holdings, L.L.C. in an aggregate amount equal to the accrued and unpaid dividends on those units, subject to reduction for previous excess tax distributions to its members since August 1, 2000. Of the $6.4 million distribution, $3.1 million will be paid to our affiliates. Affiliates of Harvest Partners, Inc. will receive $2.4 million and members of our management and our directors will receive in the aggregate $0.7 million. Our outstanding senior term loans bear interest at rates currently ranging from 8.34% to 9.09% per annum and, as of March 31, 2001, consist of (1) a $27.7 million term A loan maturing in July 2006; (2) a $103.8 million term B loan maturing in July 2008; and (3) a $13.9 million term C loan maturing in July 2006. Our senior subordinated loan has an outstanding principal amount of $67.5 million, matures in August 2010 and bears interest at the rate of 13.5% per annum. The amounts borrowed under the term A loan, the term B loan and the senior subordinated loan financed a portion of the August 2000 recapitalization. We used the term C loan to partially fund the acquisition of CFI Holdings, Inc. in October 2000. We intend to refinance any remaining balances on our senior term loans after the application of the net proceeds of this offering using the proceeds of a new loan under an amended and restated senior credit facility and available cash. We will not receive any proceeds from the sale of our common stock, if any, by the selling stockholders upon the exercise of the underwriters' over-allotment option. DIVIDEND POLICY We intend to retain future earnings for use in our business and do not anticipate declaring or paying any dividends on shares of our common stock in the foreseeable future. In addition, any determination to declare and pay dividends will be made by our board of directors in light of our earnings, financial position, capital requirements, contractual restrictions of any future financing instruments and any other factors as the board of directors deems relevant. Our senior subordinated loan restricts and we anticipate that our amended and restated senior credit facility will restrict our ability to pay dividends. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" for a discussion of restrictions on our ability to pay dividends. 14 19 DILUTION Purchasers of the common stock offered by this prospectus will suffer an immediate and substantial dilution in net tangible book value per share. Dilution is the amount by which the initial public offering price paid by the purchasers of the shares of common stock in this offering will exceed the pro forma net tangible book value per share of common stock after this offering. The pro forma net tangible book value per share of common stock is determined by subtracting pro forma total liabilities from the pro forma tangible assets and dividing the difference by the pro forma number of shares of common stock deemed to be outstanding on the date the book value is determined. The number of shares used in this calculation and otherwise in this section give effect to the reorganization transaction as described under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- The Reorganization Transaction" and assume the exercise of all options held by officers. As of December 30, 2000, our pro forma net tangible book value would have been a deficit of $111.0 million, or $(2.87) per share, based upon an assumed initial public offering price of $17.00 per share (the mid-point of the range set forth on the cover of this prospectus). Assuming the sale of 7,350,000 shares at an assumed initial public offering price of $17.00 per share and deducting underwriters' discounts and commissions and estimated offering expenses, our pro forma tangible book value as of December 30, 2000 would have been $2.3 million, or $.05 per share. This represents an immediate increase in pro forma net tangible book value to existing stockholders prior to the closing of this offering of $2.92 per share and an immediate dilution to new investors of $16.95 per share. The following table illustrates this per share dilution:
PER SHARE ------ Assumed initial public offering price....................... $17.00 Pro forma net tangible book value before this offering.............................................. $(2.87) Increase in pro forma net tangible book value attributable to this offering............................................. 2.92 ------ Pro forma net tangible book value after this offering....... .05 ------ Dilution to new investors................................... $16.95 ======
The following table summarizes, on a pro forma basis as of December 30, 2000, the number of shares of common stock purchased from us, the estimated value of the total consideration paid for or attributed to this common stock, and the average price per share paid by or attributable to existing stockholders along with the exercise of all options held by officers and the new investors purchasing shares in this offering at an assumed initial offering price of $17.00 per share, before deducting underwriting discounts and commissions and estimated offering expenses.
SHARES OF COMMON TOTAL CASH STOCK HELD CONSIDERATION AVERAGE --------------------- ----------------------- PRICE PER NUMBER PERCENT AMOUNT PERCENT SHARE ---------- ------- ------------ ------- --------- Existing stockholders, assuming exercise of all options held by officers... 38,726,119 84% $112,558,030 47% $ 2.91 New investors................ 7,350,000 16 124,950,000 53 17.00 ---------- --- ------------ --- Total.............. 46,076,119 100% $237,508,030 100% ========== === ============ ===
The discussion and tables above include the assumed exercise of options to purchase 1,232,855 shares of common stock held by officers at December 30, 2000 and exclude options outstanding at December 30, 2000, not held by officers, to purchase a total of 1,688,504 shares of common stock with a weighted average exercise price of $0.36 per share. To the extent these options are exercised, new investors will experience further dilution. 15 20 CAPITALIZATION The following table sets forth our cash and cash equivalents and capitalization as of December 30, 2000 on: - an actual basis; - a pro forma basis giving effect to our planned reorganization; and - a pro forma as adjusted basis to reflect (1) this offering and our use of the net proceeds at an assumed initial public offering price of $17.00 per share (the midpoint of the range set forth on the cover of this prospectus), and (2) the refinancing of our senior term loans, including the application of available cash. The table should be read together with "Use of Proceeds," the audited historical consolidated financial statements and the related notes which are included elsewhere in this prospectus, "Unaudited Pro Forma Condensed Consolidated Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
AT DECEMBER 30, 2000 ------------------------------------------ PRO FORMA ACTUAL PRO FORMA AS ADJUSTED --------- -------------- ----------- (IN THOUSANDS) Cash and cash equivalents.............................. $ 26,308 $ 26,308 $ 13,845 ========= ========= ======== Long-term debt, including current maturities: Senior term loans.................................... $ 154,163 $ 154,163 $ 60,000 Senior subordinated loan, net of discount............ 59,286 59,286 39,524 Other................................................ 5,645 5,645 5,645 --------- --------- -------- Total long-term debt, including current maturities................................. 219,094 219,094 105,169 --------- --------- -------- Members' deficit....................................... (157,570) -- -- --------- --------- -------- Stockholders' equity Preferred stock...................................... -- -- -- Common stock......................................... -- 375 448 Additional paid-in capital deficit................... -- (157,945) (48,100) Retained earnings.................................... -- 84,000 76,231 --------- --------- -------- Total stockholders' equity (deficit)......... -- (73,570) 28,579 --------- --------- -------- Total capitalization..... $ 61,524 $ 145,524 $133,748 ========= ========= ========
16 21 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated financial statements are based on the historical financial statements of GEEG Holdings, L.L.C. included elsewhere in this prospectus, adjusted to give effect to the following transactions, which we refer to as the "Transactions": - the August 2000 recapitalization; - the acquisition of CFI Holdings, Inc. in October 2000; - the reorganization in connection with this offering; - the refinancing of our senior term loans under our amended and restated senior credit facility; and - consummation of this offering and the use of the net proceeds as described under "Use of Proceeds." The unaudited pro forma consolidated statement of income (loss) gives effect to the Transactions as if they had occurred as of December 26, 1999, and the unaudited pro forma condensed consolidated balance sheet gives effect to the Transactions (other than the acquisition of CFI Holdings, Inc. and the August 2000 recapitalization) as if they had occurred as of December 30, 2000. The Transactions are described under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview," "-- The Reorganization Transaction" and "-- Liquidity and Capital Resources" and the related adjustments are described in the notes below. The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. The pro forma condensed consolidated financial statements do not purport to represent what our results of operations or financial condition would actually have been had the Transactions in fact occurred on the dates provided above or to project our results of operations or financial condition for any subsequent period or at any subsequent date. The pro forma condensed consolidated financial statements should be read in conjunction with our audited historical consolidated financial statements and related notes included elsewhere in this prospectus. The acquisition of CFI Holdings, Inc. has been accounted for using the purchase method of accounting. The total purchase price of the acquisition has been allocated to our tangible and intangible assets and liabilities based upon their respective fair values. The allocation of the aggregate purchase price included in the pro forma condensed consolidated financial statements is preliminary as we believe further refinement is impractical to perform at this time. However, we do not expect the final allocation of the purchase price to materially differ from the preliminary allocation set forth below. The unaudited pro forma consolidated statement of income (loss) does not include an extraordinary loss of approximately $7.8 million ($12.7 million less the associated income tax benefit of $4.9 million) resulting from the write-off of deferred financing costs and debt discount, as well as prepayment premiums relating to the repayment of long-term debt. This amount will be charged to earnings in the quarter in which the long-term debt is repaid. We anticipate repaying the debt in the second quarter of fiscal year 2001. The unaudited pro forma consolidated statement of income (loss) also does not give effect to an $84.0 million increase in net income (loss) before extraordinary item that will result from our change from a limited liability company, a non-taxable entity, to a C-corporation, a taxable entity. The unaudited pro forma consolidated statement of income (loss) also does not give effect to a $0.7 million decrease in net income before extraordinary item that will result from the immediate vesting of certain options which were granted at exercise prices which were less than deemed fair value at the date of grant. The accelerated vesting will have no net impact on total stockholders' equity included within the unaudited pro forma condensed consolidated balance sheet. 17 22 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME (LOSS)
FISCAL YEAR 2000 ----------------------------------------------------------------------------------------------------- CFI REORGANIZATION/ CFI ACQUISITION RECAPITALIZATION OFFERING PRO FORMA ACTUAL HISTORICAL(2) ADJUSTMENTS ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED -------- ------------- ----------- ---------------- --------- ----------- --------------- (IN THOUSANDS, EXCEPT INCOME PER COMMON UNIT/SHARE DATA) Revenues................ $416,591 $31,260 $ -- $ -- $447,851 $ -- $447,851 Cost of sales........... 345,688 22,954 493(3) -- 369,135 -- 369,135 -------- ------- ------- -------- -------- ------- -------- Gross profit.......... 70,903 8,306 (493) -- 78,716 -- 78,716 Selling and administrative expenses.............. 27,045 3,114 -- -- 30,159 -- 30,159 Recapitalization charge................ 38,114 -- -- (38,114)(5) -- -- -- Amortization expense.... 1,250 30 465(3) -- 1,745 -- 1,745 -------- ------- ------- -------- -------- ------- -------- Operating income...... 4,494 5,162 (958) 38,114 46,812 -- 46,812 Interest expense, net... 12,175 398 1,543(4) 12,077(6) 26,193 (14,604)(10) 11,589 -------- ------- ------- -------- -------- ------- -------- Income (loss) before income taxes and extraordinary item................ (7,681) 4,764 (2,501) 26,037 20,619 14,604 35,223 Income tax provision (benefit)............. (433) 1,664 (961) 10,180(7) 7,880 5,696(11) 13,576 (2,570)(8) -------- ------- ------- -------- -------- ------- -------- Income (loss) before extraordinary item.................. $ (7,248) $ 3,100 $(1,540) $ 18,427 $ 12,739 $ 8,908 $ 21,647 ======== ======= ======= ======== ======== ======= ======== Income (loss) before extraordinary item per common unit/share Basic................. $ (0.77)(1) $ 0.34(9) $ 0.48(12) Diluted............... $ (0.77)(1) $ 0.34(9) $ 0.48(12) Weighted average common units/shares outstanding Basic................. 13,814 37,493(9) 44,843(12) ======== ======== ======== Diluted............... 13,814 37,493(9) 44,843(12) ======== ======== ========
- --------------- See "Notes to Unaudited Pro Forma Consolidated Statement of Income (Loss)" on the following page. 18 23 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME (LOSS) (1) Calculated by dividing net income (loss) before extraordinary item after adjusting for preferred dividends by the weighted-average number of common units outstanding during the period. Extraordinary item consists of a $1.5 million loss on extinguishment of debt in fiscal year 2000. Preferred dividends were $3.4 million in fiscal year 2000. (2) Represents the actual results of operations of CFI Holdings, Inc. from December 26, 1999, the first day of fiscal 2000, through October 31, 2000, the date of acquisition. (3) Reflects purchase accounting adjustments associated with the CFI acquisition and the resulting additional depreciation and amortization expense. (4) Reflects the incremental interest expense resulting from $15.0 million of borrowings incurred at an interest rate of 9.74%, and a $5.5 million note issued at an interest rate of 10.0%, to finance the CFI acquisition and the retirement of $2.7 million of existing debt of CFI Holdings, Inc. at an assumed interest rate of approximately 9%. (5) Eliminates the non-recurring recapitalization charge associated with the cancellation of options in connection with the August 2000 recapitalization. (6) Reflects the incremental interest expense resulting from $207.5 million of borrowings at an assumed weighted-average interest rate of 11.36% to finance the August 2000 recapitalization and the retirement of $15.0 million of existing debt at an interest rate of 13%. (7) Reflects the income tax effect of the August 2000 recapitalization adjustments at an assumed effective income tax rate of 39%. (8) Reflects the income tax provision for fiscal year 2000 actual results of operations as if we were a C-corporation. (9) Reflects the exchange of the common and preferred units for shares of common stock in the reorganization. (10) Reflects interest expense adjustments as follows: Interest expense on the new $60.0 million senior term loan incurred in the refinancing at an assumed weighted average interest rate of 6%....................................... $ 3,600,000 Amortization of deferred financing costs related to the new senior term loan.......................................... 310,000 Historical interest expense on debt repaid as a part of this offering and the refinancing, including amortization of related deferred financing costs.......................... (18,514,000) ------------ Total....................................................... $(14,604,000) ============
(11) Reflects the income tax effect of the offering adjustments at an assumed effective income tax rate of 39%. (12) Reflects the new shares of common stock issued in this offering. 19 24 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT DECEMBER 30, 2000 ------------------------------------------------------------------------ REORGANIZATION OFFERING PRO FORMA ACTUAL ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED ---------- -------------- --------- ----------- ----------- (IN THOUSANDS) Current assets Cash and cash equivalents....... $ 26,308 $ -- $ 26,308 $ (12,463)(3) $ 13,845 Accounts receivable, net........ 67,798 -- 67,798 -- 67,798 Inventories..................... 9,738 -- 9,738 -- 9,738 Costs and estimated earnings in excess of billings............ 65,260 -- 65,260 -- 65,260 Other current assets............ 1,833 11,000(1) 12,833 -- 12,833 --------- --------- -------- ---------- -------- Total current assets..... 170,937 11,000 181,937 (12,463) 169,474 Property, plant and equipment, net............................. 19,433 -- 19,433 -- 19,433 Goodwill.......................... 45,879 -- 45,879 -- 45,879 Other assets...................... 9,444 73,000(1) 82,444 (4,280)(4) 78,164 --------- --------- -------- ---------- -------- Total assets............. $ 245,693 $ 84,000 $329,693 $ (16,743) $312,950 ========= ========= ======== ========== ======== Current liabilities Current maturities of long-term debt.......................... $ 3,963 $ -- $ 3,963 $ 5,037(5) $ 9,000 Accounts payable................ 38,055 -- 38,055 -- 38,055 Accrued expenses................ 18,002 -- 18,002 (4,967)(6) 13,035 Billings in excess of costs and estimated earnings............ 119,110 -- 119,110 -- 119,110 Other current liabilities....... 9,002 -- 9,002 -- 9,002 --------- --------- -------- ---------- -------- Total current liabilities............ 188,132 -- 188,132 70 188,202 Long-term debt, net of current maturities...................... 215,131 -- 215,131 (118,962)(5) 96,169 Members' equity (deficit)......... (157,570) 157,570(2) -- -- -- Stockholders' equity (deficit).... -- 84,000(1) (73,570) (7,769)(6) 28,579 (157,570)(2) 109,918(7) --------- --------- -------- ---------- -------- Total liabilities and equity................. $ 245,693 $ 84,000 $329,693 $ (16,743) $312,950 ========= ========= ======== ========== ========
- --------------- See "Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet" on the following page. 20 25 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (1) Gives effect to the recording of deferred taxes in connection with the reorganization and resulting change from a non-taxable to a taxable entity. Prior to the reorganization, we will continue to be a non-taxable limited liability company. As a limited liability company, all federal income tax liabilities are the responsibility of individual investors. When the reorganization occurs and the limited liability company structure is converted to a C-corporation, all deferred tax assets and liabilities become our responsibility. At December 30, 2000, approximately $84.0 million of net deferred tax assets are the responsibility of the individual investors. The reorganization would result in an $84.0 million increase in our total assets along with a corresponding increase in net income and stockholders' equity. (2) Reflects the exchange of members' equity for stockholders' equity in connection with the reorganization. (3) Sources and uses of cash from this offering and the refinancing are as follows: Net proceeds from this offering............................. $ 113,303,500 Borrowings under our amended and restated senior credit facility.................................................. 30,375,000 Repayment of debt and related expenditures.................. (152,755,500) Preferred unit dividends (at December 30, 2000)............. (3,386,000) ------------- Net adjustment to cash................................. $ (12,463,000) =============
(4) Reflects the write-off of $5.5 million of deferred financing costs associated with the repayment of debt and the capitalization of new deferred financing costs of $1.2 million related to the refinancing under our amended and restated credit facility. (5) Reflects the repayment of senior term and senior subordinated loans with the proceeds of this offering and borrowings under the amended and restated senior credit facility. (6) Reflects the extraordinary loss of approximately $7.8 million ($12.7 million less the associated income tax benefit of $4.9 million) resulting from the write-off of deferred financing costs and debt discount, as well as prepayment premiums relating to the repayment of long-term debt. (7) To give effect to the receipt of the proceeds from this offering of $125.0 million, net of estimated fees and expense of $11.6 million, assuming the sale of all of our common stock offered by this prospectus at an initial public offering price of $17.00 per share (the midpoint of the range set forth on the cover of this prospectus). Also gives effect to a $3.4 million distribution on the preferred units of GEEG Holdings, L.L.C. in an aggregate amount equal to the accrued and unpaid dividends on those units through December 30, 2000. 21 26 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA The following table sets forth selected historical consolidated financial data of GEEG Holdings, L.L.C. and its predecessor for periods and as of the dates indicated. The financial data of GEEG Holdings, L.L.C.'s predecessor for the fiscal years ended December 27, 1996 and December 26, 1997 has been derived from unaudited consolidated financial statements of the predecessor, which are not included in this prospectus. The financial data for GEEG Holdings, L.L.C.'s predecessor for the period from December 27, 1997 through June 4, 1998 has been derived from audited consolidated financial statements of the predecessor, which are included elsewhere in this prospectus. The financial data for GEEG Holdings, L.L.C. for the period from June 5, 1998 through December 26, 1998 and fiscal year 1999 and fiscal year 2000 has been derived from audited consolidated financial statements of GEEG Holdings, L.L.C., which are included elsewhere in this prospectus. The financial data set forth in the following table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the audited historical consolidated financial statements and related notes.
PREDECESSOR ------------------------------------------ YEAR ENDED PERIOD FROM PERIOD FROM --------------------------- DECEMBER 27, JUNE 5 TO DECEMBER 27, DECEMBER 26, 1997 TO DECEMBER 26, FISCAL YEAR FISCAL YEAR 1996 1997 JUNE 4, 1998 1998 1999 2000 ------------ ------------ ------------ ------------ ----------- ------------ (IN THOUSANDS, EXCEPT EARNINGS PER COMMON UNIT DATA) RESULTS OF OPERATION DATA: Revenues......................... $151,730 $142,714 $60,881 $98,363 $275,199 $416,591 Cost of sales.................... 131,482 118,674 48,529 80,283 226,051 345,688 -------- -------- ------- ------- -------- -------- Gross profit................... 20,248 24,040 12,352 18,080 49,148 70,903 Selling and administrative expenses....................... 16,355 18,070 8,787 10,825 23,166 27,045 Recapitalization charge(1)....... -- -- -- -- -- 38,114 Amortization expense............. 1,824 1,783 787 727 1,100 1,250 -------- -------- ------- ------- -------- -------- Operating income............... 2,069 4,187 2,778 6,528 24,882 4,494 Interest expense, net............ 2,229 1,215 439 2,966 3,410 12,175 -------- -------- ------- ------- -------- -------- Income (loss) before income taxes and extraordinary item......................... (160) 2,972 2,339 3,562 21,472 (7,681) Income tax provision (benefit)... (62) 1,159 996 176 1,087 (433) -------- -------- ------- ------- -------- -------- Income (loss) before extraordinary item............. (98) 1,813 1,343 3,386 20,385 (7,248) -------- -------- ------- ------- -------- -------- Extraordinary loss from extinguishment of debt....... -- -- -- -- -- (1,536) -------- -------- ------- ------- -------- -------- Net income (loss)................ $ (98) $ 1,813 $ 1,343 $ 3,386 $ 20,385 $ (8,784) ======== ======== ======= ======= ======== ======== PER COMMON UNIT DATA(2): Earnings (loss) before extraordinary item per common unit: Basic.......................... $ 0.14 $ 0.89 $ (0.77) ======= ======== ======== Diluted........................ $ 0.11 $ 0.71 $ (0.77) ======= ======== ======== Weighted average common units outstanding: Basic.......................... 21,320 22,526 13,814 Diluted........................ 26,384 28,029 13,814
22 27
PREDECESSOR ------------------------------------------ YEAR ENDED PERIOD FROM PERIOD FROM --------------------------- DECEMBER 27, JUNE 5 TO DECEMBER 27, DECEMBER 26, 1997 TO DECEMBER 26, FISCAL YEAR FISCAL YEAR 1996 1997 JUNE 4, 1998 1998 1999 2000 ------------ ------------ ------------ ------------ ----------- ------------ (IN THOUSANDS, EXCEPT EARNINGS PER COMMON UNIT DATA) OTHER FINANCIAL DATA: EBITDA, as adjusted(3)........... $ 8,379 $ 28,008 $ 46,919 Depreciation and amortization.... 1,851 3,126 4,311 Capital expenditures............. 1,065 2,375 2,187 Net cash provided by (used in): Operating activities........... $ 7,514 $ 39,466 $ 24,789 Investing activities........... (1,065) 1,393 (19,840) Financing activities........... (213) (39,469) 10,246 BALANCE SHEET DATA (AT END OF PERIOD): Property, plant and equipment, net............................ $ 10,917 $ 9,831 $ 9,356 $14,864 $ 15,071 $ 19,433 Total assets..................... 126,777 129,965 136,486 109,316 131,493 245,693 Total debt....................... -- -- -- 44,401 27,421 219,094
- --------------- (1) In fiscal year 2000, we incurred a non-recurring recapitalization charge associated with the cancellation of options outstanding as of the closing date of the August 2000 recapitalization. (2) Income (loss) before extraordinary item per common unit is calculated by dividing income before extraordinary item after adjusting for preferred dividends by the weighted-average number of common units outstanding during each period. Preferred dividends were $0.4 million, $0.4 million and $3.4 million in the period from June 5, 1998 through December 26, 1998, fiscal year 1999 and fiscal year 2000, respectively. (3) EBITDA, as adjusted, represents income (loss) before extraordinary item, interest, taxes, depreciation, amortization and recapitalization charge. EBITDA, as adjusted, is presented because we believe that it is frequently used by security analysts in the evaluation of companies. EBITDA, as adjusted, should not be considered as an alternative to cash flow from operating activities, as a measure of liquidity, as an alternative to net income, as an indicator or operating performance, or as an alternative to any other measure of performance in accordance with generally accepted accounting principles. Our EBITDA, before adjusting for the recapitalization charge, was $8.8 million for fiscal year 2000. 23 28 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW We design, engineer and fabricate a comprehensive portfolio of heat recovery and auxiliary power equipment and provide related services. On May 13, 1998, GEEG Holdings, L.L.C. was formed as a Delaware limited liability company by the management of Jason Incorporated's power generation products division for the purpose of acquiring the division. In addition to the equity units issued to its management members, including Larry Edwards, Michael Hackner, Gene Schockemoehl, Gary Obermiller and James Wilson, all of whom are currently our executive officers, GEEG Holdings, L.L.C. issued equity units to Saw Mill Investments L.L.C. and SMC Power Holdings L.L.C., each an affiliate of Saw Mill Capital, L.L.C., and several other financial investors. On June 5, 1998, GEEG Holdings, L.L.C. acquired Jason Incorporated's power generation division, consisting of Braden Manufacturing L.L.C., Deltak L.L.C. and other subsidiaries. In July 2000, the owners of GEEG Holdings, L.L.C. sought purchasers for the company, as a result of which, in August 2000, GEEG Acquisition Holdings Corp. and GEEG Acquisition Holdings, L.L.C., investment entities controlled by Harvest Partners, Inc., acquired control of GEEG Holdings, L.L.C. in a recapitalization transaction. Pursuant to the operating agreement of GEEG Holdings, L.L.C., the representatives of Harvest Partners, Inc. controlled a majority of the votes on the board of directors. In addition, under the terms of the recapitalization that were negotiated between GEEG Holdings, L.L.C. and Harvest Partners, Inc.: - GEEG Acquisition Holdings, L.L.C. and GEEG Acquisition Holdings Corp. contributed $82.0 million in cash and received equity interests in GEEG Holdings, L.L.C. representing an 81.5% voting interest, including equity interests issued in connection with the senior subordinated loan; - existing investors, including Saw Mill Investments L.L.C., SMC Power Holdings L.L.C., Larry Edwards, Michael Hackner, Gene Schockemoehl, Gary Obermiller and James Wilson, received approximately $233 million in cash and escrow funds; - members of management, including Larry Edwards, Michael Hackner, Gene Schockemoehl, Gary Obermiller and James Wilson, and several financial investors, including Saw Mill Investments L.L.C. and SMC Power Holdings L.L.C., retained an 18.5% equity investment in GEEG Holdings, L.L.C.; and - officers, directors and employees of GEEG Holdings, L.L.C., including Larry Edwards, Michael Hackner, Gene Schockemoehl, Gary Obermiller and James Wilson, received approximately $38.1 million in cash in consideration for the cancellation of options. GEEG Holdings, L.L.C. partially financed the recapitalization with $140.0 million of borrowings under a senior credit facility and a $67.5 million senior subordinated loan. In October 2000, GEEG Holdings, L.L.C. acquired CFI Holdings, Inc. and its subsidiary, Consolidated Fabricators Inc., for $25.2 million. The purchase price consisted of (1) $15.2 million in cash and escrow funds, (2) $5.5 million in promissory notes, (3) $2.5 million in earn-out payments and (4) $2.0 million in equity interests in GEEG Holdings, L.L.C. THE REORGANIZATION TRANSACTION Immediately prior to the completion of this offering, GEEG Holdings, L.L.C. will complete a reorganization, referred to in this prospectus as the reorganization transaction. The beneficial ownership of our common stock immediately after completion of the reorganization transaction, but prior to the closing of this offering, will be identical to the beneficial ownership of the common and preferred units of GEEG 24 29 Holdings, L.L.C. immediately before the reorganization transaction. As part of this reorganization, the following will occur: - GEEG Holdings, L.L.C. will declare a distribution on its preferred units in an aggregate amount equal to the accrued and unpaid dividend on those units, subject to reduction for previous disparate tax distributions to its members since August 1, 2000, to be paid from the proceeds of this offering; - GEEG Holdings, L.L.C. will declare a distribution to its members on account of their remaining fiscal year 2001 tax liability to be paid out of available cash after completion of this offering once the amount of the tax liability is determined; and - the holders of common and preferred units of GEEG Holdings, L.L.C. will exchange their units for shares of our common stock. The common units of GEEG Holdings, L.L.C. will be converted into 31,558,514 shares of our common stock. Each preferred unit of GEEG Holdings, L.L.C. will be converted into the number of shares of our common stock equal to the liquidation preference of the preferred unit divided by the initial public offering price of a share of our common stock. Assuming an initial public offering price of $17.00 per share (the mid-point of the range set forth on the cover of this prospectus) all of the preferred units would be convertible into 5,934,750 shares of our common stock. Upon completion of the reorganization transaction, (1) GEEG Holdings, L.L.C. will become our wholly-owned subsidiary and then will merge into us and (2) GEEG Acquisition Holdings Corp. and GEEG Acquisition Holdings L.L.C. intend to liquidate and distribute our common stock held by them to their equity holders as a result of which, after this offering, and assuming no exercise of the underwriters' overallotment option, the affiliates of Harvest Partners, Inc. will control 30.6% of our common stock. In connection with the reorganization and this offering, we intend to refinance a portion of our outstanding indebtedness. We will use a portion of the net proceeds from this offering to repay a portion of our outstanding senior subordinated loan and a portion of our outstanding senior term loans. We intend to refinance any remaining balances on our senior term loans using the proceeds of a new loan under an amended and restated senior credit facility and approximately $4.0 million of available cash. For additional information, see "Use of Proceeds" and "-- Liquidity and Capital Resources" below. We expect that this refinancing of our outstanding indebtedness will result in an approximate $7 million after-tax extraordinary loss from the write-off of deferred financing costs and debt discount, as well as prepayment premiums relating to the prepayment of long-term debt. This amount will be charged to earnings in the quarter in which the long-term debt is repaid. RESULTS OF OPERATIONS As a result of the transactions described above, our historical financial statements prior to June 5, 1998 are those of Jason Incorporated's power generation division, the predecessor of GEEG Holdings, L.L.C., and from June 5, 1998 are those of GEEG Holdings, L.L.C. The table below represents the historical operating results of GEEG Holdings, L.L.C. and its predecessor for the three-year period ended December 30, 2000. The combined fiscal year 1998 results noted below represent the combination of the results of operations from (1) the power generation division of Jason Incorporated from December 26, 1997 through June 4, 1998 and (2) GEEG Holdings, L.L.C. from June 5, 1998 through December 26, 1998. The combined fiscal year 1998 results set forth below may not be indicative of the results that would have been realized had GEEG Holdings, L.L.C. owned Jason Incorporated's power generation division from December 26, 1997. The combined fiscal year 1998 results are not comparable to subsequent periods because the basis of accounting for the period after June 5, 1998 is different from the basis of accounting prior to June 5, 1998, as a result of purchase accounting adjustments made upon the acquisition of the power generation division. Nevertheless, although purchase accounting adjustments resulted in a different basis of accounting at GEEG Holdings, L.L.C. prior to June 5, 1998, these adjustments did not materially affect revenues or gross profit. We believe that a discussion of the results of operations of fiscal year 1999 compared to fiscal year 1998 using the combined fiscal year 1998 is more meaningful to potential investors than a discussion using uncombined results for 25 30 fiscal year 1998. As a result, the discussion below with respect to fiscal year 1998 is based upon the combined results for fiscal year 1998.
PREDECESSOR ------------ DECEMBER 27, JUNE 5, 1997 1998 THROUGH THROUGH COMBINED JUNE 4, DECEMBER 26, FISCAL YEAR FISCAL YEAR FISCAL YEAR 1998 1998 1998 1999 2000 ------------ ------------ ----------- ----------- ----------- (IN THOUSANDS) Revenues..................................... $60,881 $98,363 $159,244 $275,199 $416,591 Cost of sales................................ 48,529 80,283 128,812 226,051 345,688 ------- ------- -------- -------- -------- Gross profit............................... 12,352 18,080 30,432 49,148 70,903 Selling and administrative expenses.......... 8,787 10,825 19,612 23,166 27,045 Recapitalization charge...................... -- -- -- -- 38,114 Amortization expense......................... 787 727 1,514 1,100 1,250 ------- ------- -------- -------- -------- Operating income........................... 2,778 6,528 9,306 24,882 4,494 Interest expense, net........................ 439 2,966 3,405 3,410 12,175 ------- ------- -------- -------- -------- Income (loss) before income taxes and extraordinary item....................... 2,339 3,562 5,901 21,472 (7,681) Income tax provision (benefit)............... 996 176 1,172 1,087 (433) ------- ------- -------- -------- -------- Income (loss) before extraordinary item.... $ 1,343 $ 3,386 $ 4,729 $ 20,385 $ (7,248) ======= ======= ======== ======== ========
The following information should be read in conjunction with our consolidated financial statements and notes and those of our predecessor included elsewhere in this prospectus. See notes to the audited historical consolidated financial statements included elsewhere in this prospectus for the income, assets and other information of our segments. FISCAL YEAR 2000 COMPARED TO FISCAL YEAR 1999 Revenues Revenues increased 51.4% to $416.6 million for fiscal year 2000 from $275.2 million for fiscal year 1999. This increase is primarily the result of larger multiple unit orders for HRSGs and a significant increase in the volume of auxiliary power equipment products sold. These increases in order size and volume were caused by the higher demand experienced overall in the gas turbine power generation equipment industry. Development of gas turbine power plants continued to increase substantially in 2000 as the number and size of projects grew. The following table sets forth our segment revenues for fiscal year 1999 and fiscal year 2000 (dollars in thousands):
FISCAL YEAR 1999 FISCAL YEAR 2000 PERCENTAGE CHANGE ---------------- ---------------- ----------------- Heat recovery equipment segment: HRSGs.............................. $134,036 219,649 63.9% Specialty boilers.................. 51,538 38,995 (24.3) -------- -------- Total segment.............. $185,574 $258,644 39.4% ======== ======== Auxiliary power equipment segment: Exhaust systems.................... $ 54,722 $ 86,228 57.6% Inlet systems...................... 22,550 52,004 130.6 Other.............................. 12,353 19,715 59.6 -------- -------- Total segment.............. $ 89,625 $157,947 76.2% ======== ========
The heat recovery equipment segment revenues increased 39.4% to $258.6 million for fiscal year 2000. Revenues for HRSGs increased 63.9% to $219.7 million. Although the volume of orders did not increase 26 31 significantly, the size of the orders increased to allow us to recognize significantly higher revenues over the year. Revenues for specialty boilers decreased by 24.3%, to $39.0 million. This decrease is due primarily to the fact that fiscal year 1999 results included $28.0 million in revenues from one order delivered during that year. The auxiliary power equipment segment revenues increased 76.2% to $157.9 million for fiscal year 2000. Revenues for exhaust systems increased by 57.6% to $86.2 million. This increase is due primarily to the increased volume of orders, combined with our ability to handle increased orders through our use of subcontractors to manufacture products. Revenues for inlet systems increased by 130.6%, to $52.0 million. This increase is due primarily to the increased volume of orders, with a broader scope of equipment included in each order. Revenues for other equipment increased by 59.6% to $19.7 million. This increase is due primarily to our focus on the retrofit market, which has provided us with access to a broader customer base. The following table presents our revenues by geographic region:
FISCAL YEAR FISCAL YEAR 1999 2000 ----------- ----------- United States............................................... $208.1 $380.4 Asia........................................................ 37.0 11.8 Europe...................................................... 17.6 11.6 Other....................................................... 12.5 12.8 ------ ------ Total............................................. $275.2 $416.6 ====== ======
Revenues in the United States comprised 91.3% of our revenues for fiscal year 2000 and 75.6% for fiscal year 1999. Revenues in the United States increased 82.8% to $380.4 million for fiscal year 2000, primarily as a result of significant increases in the volume of products sold. This volume increase was caused primarily by the increase in demand experienced overall in the U.S. gas turbine power generation equipment industry. This increase in industry demand reflected the rapid increase in demand for electricity and the lack of sufficient power generation facilities in the United States. Revenues in Asia decreased by 68.1% to $11.8 million for fiscal year 2000 as a result of that region's economic instability and decline in power plant construction. Gross Profit Gross profit increased 44.3% to $70.9 million for fiscal year 2000 from $49.1 million for fiscal year 1999 as a result of the increase in our revenues. Gross profit as a percentage of revenues decreased slightly to 17.0% in fiscal year 2000 from 17.9% in fiscal year 1999. Selling and Administrative Expenses Selling and administrative expenses increased 16.7% to $27.0 million for fiscal year 2000 from $23.2 million for fiscal year 1999. Of this increase, $1.5 million resulted from the hiring of additional sales and administrative personnel in connection with the growth of our business. A total of $1.0 million of the increase resulted from outside sales representative commissions associated with the increased revenue volume. Although our bad debt experience historically has been low, the provision for bad debts increased by a total of $0.8 million, due to uncertainty as to collectability of amounts due on several projects. Changes in our provision for bad debts primarily are impacted by the circumstances relating to specific projects, and not by the overall growth of our business. As a result, whether any increase in the provision will be required in future periods largely will depend on the status of particular projects at the time. As a percentage of revenues, selling and administrative expenses decreased to 6.5% for fiscal year 2000 from 8.4% for the comparable prior period as a result of our revenues growing at a higher rate than the expenses. With the significant growth in revenues being driven by larger project size and not numbers of orders, we were able to reduce our selling and administrative expenses as a percentage of revenues. 27 32 Operating Income Operating income decreased to $4.5 million for fiscal year 2000 from $24.9 million in fiscal year 1999. This decrease was the result of the $38.1 million non-recurring recapitalization charge relating to cash payments made to officers, directors and employees for option cancellations in connection with the August 2000 recapitalization discussed above. Excluding this charge, operating income would have been $42.6 million, or an increase of 71.2%, compared to fiscal year 1999. The increase in revenues, and associated gross profit, together with the decrease in selling and administrative expenses as a percent of revenues, contributed to this increase in operating income. Interest Expense, Net Net interest expense increased to $12.2 million for fiscal year 2000 from $3.4 million for fiscal year 1999. This increase is due primarily to the additional borrowings incurred in connection with the August 2000 recapitalization. Income Taxes GEEG Holdings, L.L.C. and most of its operating subsidiaries are limited liability companies and have been treated as partnerships for income tax purposes. As a result, no income tax provision was made with respect to these entities for fiscal year 2000 or fiscal year 1999. However, because some of GEEG Holdings, L.L.C.'s subsidiaries are corporations, our historical consolidated financial statements reflect a small income tax provision. As a result of the reorganization transaction, we will be subject to corporate federal and state income taxes. At the time of the reorganization transaction, we will record a deferred tax benefit and related deferred tax asset of approximately $84 million which primarily represents the excess tax basis over book basis related to the August 2000 recapitalization. For informational purposes, our consolidated statements of income (loss) for fiscal year 2000 include pro forma income on an after-tax basis assuming we had been taxed as a corporation since January 1, 2000. We did not have any net operating loss carryforwards at December 30, 2000. FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998 Revenues Revenues increased 72.8% to $275.2 million for fiscal year 1999 from $159.2 million for fiscal year 1998. This increase is primarily the result of larger multiple unit orders for heat recovery equipment products and a significant increase in the volume of auxiliary power equipment products sold. Development of gas turbine power plants continued to increase significantly in fiscal year 1999 as a result of developments in the deregulation of the power industry and a renewed interest in the U.S. market, which began after 1997 when a number of power plant projects in Asia were put on hold. The number of U.S. projects increased and were larger. 28 33 The following table sets forth our segment revenues for fiscal year 1998 and fiscal year 1999 (dollars in thousands):
FISCAL YEAR 1998 FISCAL YEAR 1999 PERCENTAGE CHANGE ---------------- ---------------- ----------------- Heat recovery equipment segment: HRSGs.............................. $ 72,254 $134,036 85.5% Specialty boilers.................. 30,295 51,538 70.1 -------- -------- Total segment.............. $102,549 $185,574 81.0% ======== ======== Auxiliary power equipment segment: Exhaust systems.................... $ 28,163 $ 54,722 94.3% Inlet systems...................... 16,145 22,550 39.7 Other.............................. 12,387 12,353 (0.3) -------- -------- Total segment.............. $ 56,695 $ 89,625 58.1% ======== ========
The heat recovery equipment segment revenues increased 81.0% to $185.6 million for fiscal year 1999. Revenues for HRSGs increased 85.5% to $134.0 million. Although the volume of orders did not increase significantly, the size of the orders increased to allow us to recognize significantly higher revenues over the year. Revenues for specialty boilers increased by 70.1% to $51.5 million. This increase is due primarily to the fact that fiscal year 1999 results included $28.0 million in revenues from one order delivered during that year. The auxiliary power equipment segment revenues increased 58.1% to $89.6 million for fiscal year 1999. Revenues for exhaust systems increased by 94.3% to $54.7 million. This increase is due primarily to the increased volume of orders, combined with our ability to handle increased orders through our use of subcontractors to manufacture products. Revenues for inlet systems increased by 39.7%, to $22.6 million. This increase is due primarily to the increased volume of orders, while pricing did not increase significantly. Revenues for other equipment declined slightly. The following table presents our revenues by geographic region:
FISCAL YEAR FISCAL YEAR 1998 1999 ----------- ----------- United States............................................... $ 86.2 $208.1 Asia........................................................ 31.0 37.0 Europe...................................................... 10.8 17.6 Other....................................................... 31.2 12.5 ------ ------ Total............................................. $159.2 $275.2 ====== ======
Revenues within the United States comprised 75.6% of our revenues for fiscal year 1999 and 54.1% of our revenues for fiscal year 1998. Revenues in the United States increased 141.4% to $208.1 million for fiscal year 1999 due to significant increases in the volume of products sold. This volume increase was caused primarily by the increase in demand experienced in the U.S. gas turbine power generation equipment industry referred to above. Revenues in Asia increased 242.6% to $37.0 million in fiscal year 1999 as a result of the delivery of a large order in that region. Gross Profit Gross profit increased 61.5% to $49.1 million for fiscal year 1999 from $30.4 million for fiscal year 1998 as a result of our increase in revenues. Gross profit as a percentage of revenues decreased slightly to 17.9% in fiscal year 1999 from 19.1% in fiscal year 1998 because of a change in our product mix. 29 34 Selling and Administrative Expenses Selling and administrative expenses increased 18.1% to $23.2 million for fiscal year 1999 from $19.6 million for fiscal year 1998. Of this increase, $2.5 million resulted from the hiring of sales and administrative support staff and other compensation costs incurred in response to the growth of our business. As a percentage of revenues, selling and administrative expenses decreased to 8.4% for fiscal year 1999 from 12.3% for the comparable prior period as a result of our revenues growing at a higher rate than these expenses. Because the growth in revenues was driven by larger project size as well as an increase in the number of orders, we were able to reduce our selling and administrative expenses as a percentage of revenues. Operating Income Operating income increased 167.4% to $24.9 million for fiscal year 1999 from $9.3 million in fiscal year 1998 for reasons discussed above. The increase in revenues, and associated gross profit, combined with the decrease in selling and administrative expenses as a percent of revenues, contributed to this increase in operating income. Interest Expense, Net Net interest expense was $3.4 million for fiscal year 1999 and $3.4 million for fiscal year 1998. Income Taxes Income taxes decreased 7.3% to $1.1 million for fiscal year 1999 from $1.2 million in fiscal year 1998, because of the different tax treatments of GEEG Holdings, L.L.C. and the Jason Incorporated power generation division. GEEG Holdings, L.L.C. and most of its operating subsidiaries are limited liability companies and have been treated as partnerships for income tax purposes. As a result, no income tax provision was made in respect to these entities for fiscal year 1999. However, because some of GEEG Holdings, L.L.C.'s subsidiaries are corporations, our historical consolidated financial statements reflect a small income tax provision. Jason Incorporated was taxed as a C-corporation and therefore the income tax provision for fiscal year 1998 reflects different tax treatments for the predecessor company period and the post-acquisition period. LIQUIDITY AND CAPITAL RESOURCES Our primary sources of cash are net cash flow from operations and borrowings under our senior credit facility. Our primary uses of this cash are principal and interest payments on indebtedness and capital expenditures. To finance the August 2000 recapitalization, GEEG Holdings, L.L.C. obtained $207.5 million as follows: (1) $30.0 million under our senior credit facility in the form of a term A loan maturing in July 2006 which bears interest at LIBOR plus 3.25% per annum, (2) $110.0 million under our senior credit facility in the form of a term B loan maturing in July 2008 which bears interest at LIBOR plus 4.00% per annum and (3) $67.5 million in the form of a senior subordinated loan maturing in August 2010 which bears interest at a rate of 13.5% per annum. In October 2000, GEEG Holdings, L.L.C. borrowed an additional $15.0 million under our senior credit facility in the form of a term C loan which matures July 2006 and bears interest at LIBOR plus 3.25% per annum. The loan was used to fund a portion of the acquisition of CFI Holdings, Inc. The senior credit facility includes a revolving loan facility of $55.0 million. Amounts borrowed under the revolving credit facility are available from time to time for general corporate and working capital purposes. Our senior credit facility is secured by a lien on all our and our domestic subsidiaries' property and assets, including, without limitation, a pledge of all of the capital stock owned by us and our domestic subsidiaries, subject to a limitation of 65% of the voting stock of any foreign subsidiary. At December 30, 2000, a total of $154.2 million was outstanding under the senior credit facility. 30 35 Our senior subordinated loan agreement, among other things, restricts our ability to incur additional indebtedness, sell assets other than in the ordinary course of business, pay dividends, make investments and acquisitions and enter into mergers, consolidations or similar transactions. We intend to use a portion of the net proceeds of this offering to repay $81.4 million of the outstanding loans under our existing senior credit facility, plus accrued and unpaid interest, and to repay $22.5 million of our senior subordinated loan, plus accrued and unpaid interest, and to pay related prepayment premiums, fees and expenses. See "Use of Proceeds." We intend to refinance any balances on our senior term loans remaining after the application of the net proceeds of this offering using the proceeds of a new loan under an amended and restated senior credit facility described below and approximately $4.0 million in available cash. We have received a commitment from Bankers Trust Company (an affiliate of Deutsche Banc Alex. Brown Inc., one of the underwriters of this offering) to amend and restate our existing senior credit facility at or prior to the closing of this offering. Our amended and restated senior credit facility will consist of a term loan facility of up to $60.0 million and a revolving loan facility of up to $75.0 million. We anticipate that, at closing, we will borrow the full amount available under the term loan. Amounts borrowed under the term loan facility will amortize over four years and will mature on the fourth anniversary of the closing of the amended and restated credit facility. The revolving credit facility will mature on the fourth anniversary of the closing of the amended and restated credit facility. At our option, amounts borrowed under the amended and restated senior credit facility will bear interest at either the eurodollar rate or an alternate base rate, plus, in each case, an applicable margin. The applicable margin will range from 1.0% to 2.25% in the case of a eurodollar based loan and from 0% to 1.25% in the case of a base rate loan, in each case, based on a leverage ratio. We anticipate that our amended and restated senior credit facility will: - be guaranteed by all of our domestic subsidiaries; - secured by a lien on all our and our domestic subsidiaries' property and assets, including, without limitation, a pledge of all of the capital stock of our domestic subsidiaries and 65% of the capital stock owned by us and our domestic subsidiaries, subject to a limitation of 65% of the voting stock of any foreign subsidiary; - require us to maintain minimum interest and fixed charge coverage ratios and limit our maximum leverage; and - among other things, restrict our ability to (1) incur additional indebtedness, (2) sell assets other than in the ordinary course of business, (3) pay dividends in excess of 25% of our cumulative net income from January 1, 2001 through the most recent fiscal year, subject to customary restrictions, (4) make capital expenditures in excess of $10 million with adjustments for carry-overs from previous years, (5) make investments and acquisitions and (6) enter into mergers, consolidations or similar transactions. Under the anticipated provisions of our amended and restated senior credit facility, the maximum amount of additional indebtedness that we would have been able to incur as of December 30, 2000 would have been $ , the maximum amount of dividends that we would have been able to declare as of December 30, 2000 would have been $ and the maximum amount of capital expenditures that we would have been able to make as of December 30, 2000 would have been $ . In April 2001, we declared a distribution equal to $5.0 million to our members on account of their first quarter fiscal year 2001 tax liability. In addition, in connection with the reorganization transaction, we will declare (1) a distribution on account of our members' remaining fiscal year 2001 tax liability and (2) a distribution on our preferred units in an aggregate amount equal to the accrued and unpaid dividends on those units. We will pay these distributions after the closing of this offering. We will use a portion of the net proceeds from this offering to pay the preferred distribution. 31 36 Net cash provided by operations decreased 37.2% to $24.8 million for fiscal year 2000 from $39.5 million for fiscal year 1999. The decrease in net operating cash flow resulted from the non-recurring $38.1 recapitalization charge relating to option cancellation payments made in connection with the August 2000 recapitalization. This decrease was partially offset by a reduction in working capital. Net cash provided by investing activities was $1.4 million in fiscal year 1999 and net cash used for investing activities was $19.8 million in fiscal year 2000. Net cash used for investing activities in fiscal year 2000 was primarily the result of the acquisition of CFI Holdings, Inc. Net cash used for financing activities was $39.5 million in fiscal year 1999 and net cash provided by financing activities was $10.2 million in fiscal year 2000. In fiscal year 1999, cash was used in financing activities to prepay long-term debt, to make tax distributions to members of GEEG Holdings, L.L.C. and to redeem preferred units. In fiscal year 2000, net cash provided by financing activities was primarily in connection with the August 2000 recapitalization. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks. Market risk is the potential loss arising from adverse changes in market prices and interest and foreign currency rates. We do not enter into derivative or other financial instruments for speculative purposes. Our market risk could arise from changes in interest rates and foreign currency exchange. Interest Rate Risk. We are subject to market risk exposure related to changes in interest rates. Assuming our current level of borrowings, a 100 basis point increase in interest rates under these borrowings would increase our interest expense for fiscal year 2000 by approximately $1.5 million without taking into effect our interest rate collar agreement. We manage our exposure to interest rate fluctuations on our variable rate debt through the use of an interest rate collar agreement with a notional amount of $77.1 million at December 30, 2000. The fair value of the collar was not significant as of December 30, 2000. Foreign Currency Exchange Risk. Portions of our operations are located in foreign jurisdictions including Europe and Mexico. Our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. In addition, sales of products and services are affected by the value of the U.S. dollar relative to other currencies. We manage our foreign currency exposure through the use of foreign currency option contracts. Notional amounts outstanding under such contracts totaled $3.6 million at December 30, 2000. The fair values of the option contracts were not significant as of December 30, 2000. Euro Currency Conversion. On January 1, 1999, several member countries of the European Union established fixed conversion rates and adopted the euro as their new legal currency. On that date, the euro began trading on currency exchanges while legacy currencies remain legal tender in the participating countries for a transition period between January 1, 1999 and January 1, 2002. During the transition period, parties can elect to pay for goods and services and transact business using either the euro or a legacy currency. Between January 1, 2002 and July 1, 2002, the participating countries will introduce euro hard currency and withdraw all legacy currencies. Our foreign operating subsidiaries affected by the euro conversion are evaluating the business issues raised, including the competitive impact of cross-border price transparency. We do not anticipate any significant near-term business ramifications. However, long-term implications such as the euro currency conversions effect on accounting, treasury and computer systems are under review. RECENT ACCOUNTING PRONOUNCEMENTS We adopted Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," effective December 31, 2000. This standard establishes accounting and reporting standards requiring that every derivative instrument be recorded on the balance sheet as either an asset or a liability measured at fair value. SFAS 133 requires that changes in a 32 37 derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting treatment. The impact of adopting SFAS 133 was not material. In December 1999, the SEC staff released Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements." The adoption of this statement in the fourth quarter of fiscal year 2000 did not have a material impact on our financial position or results of operations. 33 38 BUSINESS OVERVIEW We are a global designer, engineer and fabricator of a comprehensive portfolio of equipment for gas turbine power plants, with over 30 years of power generation industry experience. We believe that we are a leader in our industry, offer one of the broadest ranges of gas turbine power plant equipment in the world and hold the number one or number two market position by sales in a majority of our product lines. Our equipment is installed in power plants in more than 30 countries on six continents and we believe that we have one of the largest installed bases of gas turbine power plant equipment in the world. In addition, we provide our customers with value-added services including engineering, retrofit and upgrade, and maintenance and repair. We sell our products to the gas turbine power generation market, the fastest growing segment of the power generation industry. Our products are critical to the efficient operation of gas turbine power plants and are highly engineered to meet customer-specific requirements. Our products include: - heat recovery steam generators; - filter houses; - inlet systems; - gas and steam turbine enclosures; - exhaust systems; - diverter dampers; and - specialty boilers and related products. We market and sell our products globally under the Deltak, Braden and Consolidated Fabricators brand names through our worldwide sales network. We fabricate our equipment through a combination of in-house manufacturing and extensive outsourcing relationships. Our network of exclusive subcontractors, located throughout 30 countries, allows us to manufacture equipment for power plant projects worldwide at competitive prices. Our subcontractors also enable us to meet increasing demand without being restricted by manufacturing capacity limitations, thus limiting capital expenditure requirements. We believe our design and engineering capabilities differentiate us from our competitors. By providing high-quality products on a timely basis and offering a broad range of equipment, we have forged long-standing relationships with the leading power industry participants, including General Electric, Mitsubishi Heavy Industries, Siemens-Westinghouse, Bechtel and Duke Power. Our revenues have grown from $142.7 million in fiscal year 1997 to $416.6 million in fiscal year 2000, representing a compound annual growth rate of 42.9%. GROWTH STRATEGY To maximize shareholder value and enhance our market position in the growing power generation industry, we will continue to pursue the following growth strategies: - Expand our leading market position in the high-growth U.S. market. Our design and engineering expertise positions us to bid on and execute virtually any major gas turbine power plant project. According to the Energy Information Administration, or EIA, over 1,300 new power generation plants with approximately 390 gigawatts of electrical generation capacity will be needed in the United States by 2020 to meet demand. We believe that our reputation for quality products, low-cost fabrication and on-time delivery of a broad line of equipment have made us a critical supplier to our customers and end users, further strengthening our position as a market leader. - Leverage our presence in the emerging international power markets. Through our international presence, we are positioned to undertake power generation projects throughout the world. According to the International Energy Agency, or IEA, approximately 90% of the $2.9 trillion in worldwide electrical generation capacity investment through 2020 will be expended outside of North America. 34 39 Our global presence and experience allows us to serve our multinational customers' needs in a timely and efficient manner. - Pursue strategic acquisitions. We intend to pursue selective acquisitions which will increase our market share in existing product lines, broaden our overall product offering and expand our geographic reach. The power generation equipment industry is highly fragmented, comprised largely of small companies or corporate divisions with relatively limited product lines. The fragmented nature of the industry provides us with numerous acquisition opportunities. - Leverage our design and engineering capabilities to expand our product lines. We intend to expand our product lines to capture a larger share of our customers' equipment purchases. Through our design and engineering capabilities and experience in gas turbine technology, we have developed a number of complementary product lines, including inlet cooling systems, pulse filters, air filter elements and diverter dampers. Throughout our 30-year history, we have also successfully introduced new end-use applications for our underlying technologies, including products for the process, marine, pulp and paper and pharmaceutical industries. INDUSTRY OVERVIEW Supply and Demand Trends According to the EIA, U.S. demand for electricity generation has increased substantially since 1990, while capacity has remained relatively flat. Underbuilding of new power generation capacity due to deregulation uncertainty and environmental concerns has caused reserve margins to fall. Based on North American Electric Reliability Council, or NERC, data, reserve margins, the difference between total capacity and peak electricity demand as a percentage of total capacity, have fallen to historically low levels over the last decade. U.S. reserve margins have fallen from 21.1% in 1992 to 7.1% in 1999, resulting in electricity price increases. In some areas of the United States, such as California, these margins have fallen even lower, causing numerous brownouts. Internationally, although many developing countries are moving towards industrialization and electrification, according to the IEA, approximately one-third of the world's population is still without electricity. Significant new worldwide generation capacity is necessary to keep pace with international demand growth, which is expanding at more than twice the rate of U.S. demand. Gas Turbine Technology Gas turbine power plants are well-positioned to benefit from the need for new or more efficient power generation infrastructure. The advantages of power generation plants utilizing gas turbine technologies versus other technologies include: - lower construction costs; - shorter construction period; - improved operating efficiency; - lower environmental impact; - ability to expand plant capacity; and - rapid start-up and shut-down time. Due to these advantages, IEA projects that approximately 90% of new U.S. generation capacity and approximately 51% of new generation capacity outside the United States, net of retirements, through 2020 will utilize gas turbine technology. Gas turbine power plants can have either a simple-cycle or combined-cycle configuration, both of which utilize a gas turbine and a generator to produce electricity. A simple-cycle gas turbine plant incorporates many of the products which we manufacture, including filter houses, inlet and exhaust 35 40 systems and turbine enclosures. A simple-cycle plant converts approximately 33% of the fuel's energy content into electricity. A combined-cycle plant has the same components as a simple-cycle plant, with the addition of a heat recovery steam generator, or HRSG. In a combined-cycle plant, the hot exhaust from the gas turbine is routed through the HRSG where steam is generated which is used to power a steam turbine and produce more electricity. A combined-cycle power plant converts up to 57% of the fuel's energy content into electricity. As a result of this increased efficiency, the EIA projects that domestic combined-cycle plant capacity will increase more than ten times over the next 20 years. As a leading provider of equipment for simple- and combined-cycle power plants, we are well-positioned to benefit from these trends and, as a result, to increase our revenues and earnings. PRODUCTS AND SERVICES We conduct our business through two operating segments: our heat recovery equipment segment and our auxiliary power equipment segment. We offer a broad range of products that are integral parts of gas turbine power plants. We also provide advanced engineering, retrofit and upgrade, maintenance and repair services to the power generation industry. For information regarding our revenues, profitability and total assets by segment, see note 11 to our consolidated financial statements included elsewhere in this prospectus. Heat Recovery Equipment Our heat recovery equipment segment is a leader in the production of HRSGs and specialty boilers. Our products in this segment are marketed under the Deltak brand name. - Heat Recovery Steam Generators. A HRSG is a boiler that creates steam in a combined-cycle power plant using the hot exhaust emitted by a gas turbine. This steam generates additional electricity by driving a steam turbine in a combined-cycle power plant. Each HRSG is custom-designed and engineered to meet the specifications of the customer, taking into account the type of gas turbine and environmental locale. We design and manufacture HRSGs for all size applications for both new combined cycle and retrofitted simple-cycle power plants. We believe we are the overall market leader with the largest installed base of gas turbine HRSGs in the world. - Specialty Boilers and Related Products. Specialty boilers are a highly customized class of equipment that capture waste heat and convert it into steam. We produce specialty boilers used in process heat recovery and incineration systems, small power generation systems and marine cogeneration systems. Our specialty boilers, which require creative engineering solutions, are used in a wide range of markets, including oil and gas, pulp and paper, chemicals, petrochemical, marine and food industries. We have an installed base of more than 600 specialty boilers in over 30 countries. In addition, we design and manufacture catalytic recovery systems for gas turbine exhaust systems which reduce emissions. Auxiliary Power Equipment Our auxiliary power equipment segment includes a variety of products and services critical to the operation of gas turbine power plants. These products are marketed under the Braden and Consolidated Fabricators brand names. - Filter Houses. A filter house cleans debris, dirt and other contaminants from the air that enters the turbine, using either a barrier filter or a pulse filter. Barrier filters use a series of filter elements contained in a large filter house to remove airborne contaminants. Pulse filters are self-cleaning filters that use a blast of air to expel dirt or ice from the filter element. In addition, a filter house may include evaporative coolers, chiller coils, fog cooling systems, anti-icing systems and a broad range of other equipment that treats the air that is pulled through the turbine. 36 41 - Inlet Systems. Inlet systems are large air intake ducts that connect the filter house to the gas turbine and provide silencing for the noise emanating from the gas turbine through the inlet. The major components of an inlet system are inlet silencers, expansion joints and inlet ductwork. - Gas and Steam Turbine Enclosures. Gas and steam turbine enclosures protect the turbines from the environment. In addition, they provide acoustical treatment to reduce the noise produced by gas and steam turbines. Fire suppression systems are also an integral feature of most enclosures. - Exhaust Systems. Exhaust systems direct the hot exhaust from the turbine to the atmosphere. The main components of an exhaust system are exhaust ductwork, acoustic silencing equipment and the stack. Exhaust systems are highly engineered and very complex due to the severe turbulence and heat exposure that they must endure. - Diverter Dampers. Diverter dampers divert the hot exhaust from the gas turbine into a HRSG when the power plant is operated as a combined-cycle facility or into the exhaust stack in the case of simple-cycle operation. We also design and manufacture various other types of dampers. BACKLOG The time frame between receipt of an order and actual completion or delivery of our products can stretch from a few weeks to a year or more. At the time we receive a firm order from a customer, that order is added to our backlog. Over the last five years, virtually all backlog has been subsequently recognized as revenues.
AT FISCAL YEAR END, -------------------------- 1998 1999 2000 ------ ------ ------ (IN MILLIONS) Backlog.................................................. $206.0 $289.4 $464.6
We estimate that approximately $427 million, or 92%, of our backlog at December 30, 2000, will be recognized as a portion of our revenues in fiscal year 2001. SALES AND MARKETING We have an extensive sales network consisting of employees and independent representatives worldwide. We have sales offices in Australia, China, Egypt, the Netherlands, Singapore, South Korea and the United States. Our international sales force allows us to assess local market conditions, utilize local contacts and respond quickly to our customers' regional needs. We focus our sales and marketing efforts on end users of our products, including the developers and operators of gas turbine power plants, and on gas turbine original equipment manufacturers who may order our products directly or specify the use of our products. CUSTOMERS Customers for both our heat recovery equipment segment and our auxiliary power equipment segment include original equipment manufacturers, engineering and construction firms and operators of power generation facilities. The end users of most of our products are developers and operators of gas turbine power plants. Our top ten customers vary from year to year due to the relative size and duration of our projects. In fiscal year 2000, General Electric accounted for approximately 31% of our revenues and Mitsubishi Heavy Industries accounted for approximately 22% of our revenues. For information with respect to our geographic markets, see note 11 to our consolidated financial statements included elsewhere in this prospectus. ENGINEERING AND DESIGN CAPABILITIES Our business is driven by design and engineering expertise, an area in which we believe that we are an industry leader. Our products are custom-designed and engineered to meet the precise specifications of our 37 42 customers, and may require a significant number of engineering hours to design. As of December 30, 2000, we employed 136 degreed engineers specializing in thermal, structural, electrical, mechanical, acoustical and chemical engineering. Our engineers utilize an extensive PC-based network and engineering programs such as AutoCad(TM), ANSYS(TM), StruCAD(TM) and several internally developed proprietary programs. Our proprietary programs enable us to use design elements from previous projects, thereby increasing our engineering efficiency on subsequent projects. MANUFACTURING AND OUTSOURCING Our products are fabricated utilizing a combination of in-house manufacturing and subcontractors. Our extensive use of outsourcing relationships provides us the following benefits: - flexibility to rapidly expand or contract manufacturing capacity without increasing capital expenditures; - ability to manufacture in low cost countries, thereby reducing the overall cost of our products; and - ability to satisfy local content requirements. In fiscal year 2000, we estimate that subcontractors accounted for approximately 70% of our manufacturing costs. Our subcontractors manufacture products on a fixed-price basis for each project. Typically, our subcontractors agree not to manufacture competing products. We provide on-site technical advisors at our subcontracted facilities to ensure high levels of quality and workmanship. We are constantly pursuing new international subcontractor relationships to enhance our ability to manufacture equipment at the lowest cost while maintaining high-quality standards and on-time delivery. While a majority of our manufacturing is outsourced, we maintain significant in-house capabilities. Our in-house manufacturing capability allows us to internally develop production methods, train personnel, protect highly sensitive designs and fabricate products whose complexity may preclude their production by subcontractors. RAW MATERIALS AND SUPPLIERS The principal raw materials for our products are stainless steel sheet products, carbon steel plate and structural shapes, insulation and finned tubing. We obtain these products from a number of domestic and foreign suppliers. The market for most of the raw materials we use is comprised of numerous participants and we believe that we can obtain each of the raw materials we required from more than one supplier. COMPETITION We compete with a large number of U.S. and international companies along all of our major products lines. We believe that our major competitors generally are small companies or corporate divisions that offer relatively limited product lines and do not compete on a global basis. We compete based on the price, quality, reliability and reputation of our products. We believe that no single competitor offers our breadth of products to the gas turbine power generation industry. EMPLOYEES As of December 30, 2000, we had 1,405 employees. Other than 156 of our manufacturing employees located in Tulsa, Oklahoma and 155 of our production employees at our three Mexico facilities, none of our employees are represented by unions. We believe our employee relations are satisfactory. INTELLECTUAL PROPERTY We depend upon a combination of patents, trademarks and nondisclosure and confidentiality agreements with our employees, customers and others and various security measures to protect our proprietary rights. Designs and processes are developed for specific projects and are charged directly to such projects. Due to the unique nature of each project, we typically do not reuse our designs. Also, our 38 43 customers are contractually obligated to treat these designs as confidential and proprietary. For these reasons, we do not generally pursue patent protection. However, we believe that intellectual property protection is less important than our ability to continue to develop new design applications that meet the demands of our customers. As a result, we do not believe that any single patent or trademark is material to our business. We typically enter into non-disclosure and confidentiality agreements with our employees and subcontractors with access to sensitive design software and technology. However, this protection does not preclude others from creating programs which perform the same function. In addition, our agreements may be breached and we may not have adequate remedies for any breach. FACILITIES Our executive offices currently occupy 5,300 square feet in Tulsa, Oklahoma. The lease for this facility expires in May 2002. We have 13 other U.S. facilities, as well as facilities in the Netherlands, Singapore and Mexico. Information about our material facilities is described below: Heat Recovery Equipment Segment
LEASED/OWNED LOCATION SQUARE FEET (EXPIRATION DATE) PRINCIPAL USES - -------- ----------- ----------------- -------------- Plymouth, Minnesota 38,000 leased (12/31/03) manufacturing, engineering 92,000 leased (1/31/06) and administrative office 84,900 owned
Auxiliary Power Equipment Segment
LEASED/OWNED LOCATION SQUARE FEET (EXPIRATION DATE) PRINCIPAL USES - -------- ----------- ----------------- -------------- Auburn, Massachusetts 69,000 owned manufacturing, engineering and administrative office Clinton, South Carolina 71,000 owned manufacturing and engineering Fort Smith, Arkansas 94,000 owned manufacturing 15,000 leased (2/13/03) Heerlen, The Netherlands 10,000 leased (10/31/01) engineering Monterrey, Mexico 100,000 owned manufacturing San Antonio, Mexico 40,000 leased (2/1/06) manufacturing Toluca, Mexico 60,000 leased (5/1/04) manufacturing Tulsa, Oklahoma 164,000 leased (8/31/11) manufacturing, engineering 39,000 leased (10/31/02) and administrative office Worcester, Massachusetts 26,000 leased (12/31/02) manufacturing
LEGAL PROCEEDINGS We are subject to routine litigation arising out of the normal and ordinary operation of our business. We believe that any litigation will not result in a material adverse effect on our business, results of operations or financial condition. ENVIRONMENTAL MATTERS Our operations are subject to laws and regulations governing the discharge of materials into the environment or otherwise relating to the protection of the environment or human health. These laws include U.S. federal statutes such as the Resource Conservation and Recovery Act of 1976, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, or CERCLA, the 39 44 Clean Water Act and the Clean Air Act, and the regulations implementing them, as well as similar laws and regulations at the state and local levels and in other countries in which we operate. Failure to comply with environmental laws or regulations could subject us to significant liabilities for fines, penalties or damages, or result in the denial or loss of significant operating permits. In addition, some environmental laws, including CERCLA, impose liability for the costs of investigating and remediating releases of hazardous substances without regard to fault and on a joint and several basis, so that in some circumstances we may be liable for costs attributable to hazardous substances released into the environment by others. Our manufacturing facilities use and produce wastes containing various substances classified as hazardous or otherwise regulated under environmental laws and regulations, and are subject to ongoing compliance costs and capital expenditure requirements. We believe we are in substantial compliance with applicable environmental laws and regulations and that the costs of compliance are not material to us. However, any newly-discovered environmental conditions could result in unanticipated expenses or liabilities that would be material. Moreover, the environmental laws and regulations to which we are subject are constantly changing, and it is impossible to predict the effect of these changes on us. We cannot give any assurances that our operations will comply with future laws and regulations or that these laws and regulations will not significantly adversely affect us. 40 45 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS At the completion of the offering made by this prospectus, our executive officers and directors and their ages will be as set forth below. Following this offering, Harvest Partners, Inc. will no longer control a majority of the votes on our board of directors.
NAME AGE POSITION - ---- --- -------- Larry Edwards........................ 51 President, Chief Executive Officer and Director Gary Obermiller...................... 52 Senior Vice President and President, Deltak Gene Schockemoehl.................... 51 Senior Vice President and President, Braden Michael Hackner...................... 53 Chief Financial Officer, Vice President of Finance and Treasurer James Wilson......................... 41 Vice President of Administration and Secretary Stephen Eisenstein................... 39 Chairman of the Board Ira Kleinman......................... 44 Director Bengt Sohlen......................... 68 Director Edgar Hotard......................... 51 Director
Larry Edwards will be our president, chief executive officer and one of our directors upon completion of the reorganization transaction. Since June 1998, Mr. Edwards has served as a director of and chief executive officer of GEEG Holdings, L.L.C and as president and chief executive officer of GEEG, Inc. From February 1994 until June 1998, Mr. Edwards served as the president of Jason Incorporated's power generation division, the predecessor of GEEG Holdings, L.L.C. From 1976 until 1994, Mr. Edwards held the following positions with Braden: systems analyst; manager of data processing; manager of management services; manager of purchasing and traffic; manager of operations; vice president of operations; general manager; and president of Braden. Mr. Edwards earned a B.S. in Industrial Engineering and Management from Oklahoma State University and an M.B.A. with honors from Oklahoma City University. Gary Obermiller will be our senior vice president upon completion of the reorganization transaction. Mr. Obermiller has served as president of Deltak since June 1997 and as a director and vice president of GEEG Holdings, L.L.C. since June 1998. Mr. Obermiller joined Deltak in 1990 as vice president of engineering and in 1993 became executive vice president of operations. Mr. Obermiller has over 29 years of management, engineering, operations, sales, and marketing experience. He previously served as manager of market development and manager of the adhesive business unit at Graco, Inc. and held various positions, including manager of project management, sales manager and vice president of engineering, at Econotherm Energy Systems Corporation. Mr. Obermiller earned a B.S. in Mechanical Engineering from the University of Minnesota and an M.B.A. from the University of St. Thomas. Mr. Obermiller is also a licensed mechanical engineer and a member of both A.S.M.E. and A.I.A.A. Gene Schockemoehl will be our senior vice president upon completion of the reorganization transaction. Mr. Schockemoehl has served as president of Braden since January 1994 and as a director and vice president of GEEG Holdings, L.L.C. since June 1998. He began his employment at Braden in 1968, progressing through the plant production area into management positions, and served as plant superintendent and manager of manufacturing through 1985. In mid-1985, Mr. Schockemoehl became operations manager and in 1990 became vice president of operations. He served as vice president of sales from mid-1991 until January 1994. Mr. Schockemoehl has a manufacturing and general business educational background, having attended both Tulsa Community College and Rogers State College. Michael Hackner will be our chief financial officer, vice president of finance and treasurer upon the completion of the reorganization transaction. Since June 1998, Mr. Hackner has served GEEG Holdings, L.L.C. in the same capacities. Mr. Hackner joined Deltak in 1985 as controller and was promoted to vice president of finance and administration, Deltak in 1989. Previously, Mr. Hackner held various accounting 41 46 and finance positions at Proform, Inc., was manager of accounting and systems development at Polaris/ EZ-GO, a division of Textron, Inc., and held various positions in the audit and taxation department of Peat, Marwick, Mitchell and Company. Mr. Hackner received a B.S. from the University of Minnesota and attended the Minnesota Management Institute. Mr. Hackner has earned a C.P.A. designation and been a member of the American Institute of Certified Public Accountants since 1974. James Wilson will be our secretary upon the completion of the reorganization tranaction. Mr. Wilson has served GEEG Holdings, L.L.C. as secretary since June 1998 and as vice president of administration since September 2000. He joined Braden in 1986 as controller and became vice president of finance, Braden in 1989. Between 1982 and 1986, Mr. Wilson was employed as a senior auditor with Arthur Andersen LLP. Mr. Wilson has received the C.P.A. designation and had been a member of the American Institute of Certified Public Accountants since 1983. He earned a B.S. in Accounting from Oral Roberts University. Stephen Eisenstein will be chairman of our board upon the completion of the reorganization transaction. He has served as chairman of the board of GEEG Holdings, L.L.C. and a director of GEEG, Inc. since August 2000. Mr. Eisenstein has been a general partner of Harvest Partners, Inc. since September 1999. Before joining Harvest Partners, Inc. he was a founding partner at Paribas Principal Partners, which was created in 1996. From 1990 to September 1996, Mr. Eisenstein worked at Paribas in the Merchant Banking Group where he was a managing director specializing in financing and investing in leveraged buyouts. From 1988 until 1990, he worked at the Chase Manhattan Bank in the Media and Telecom Corporate Finance Group, and at Paine Webber Inc. in the Equity Research Department from 1984 to 1986. He earned a B.A. in Economics from Tufts University and an M.B.A. from the Wharton School at the University of Pennsylvania. Ira Kleinman will be one of our directors upon completion of the reorganization transaction. Mr. Kleinman has served as a director of GEEG Holdings, L.L.C. since August 2000. Since 1992, Mr. Kleinman has served as a general partner of Harvest Partners, Inc. Prior to joining Harvest Partners, Inc., he held financial management positions at American International Group and Bank of New York. Mr. Kleinman is a Certified Public Accountant and earned his bachelors from the State University of New York at Binghamton and his M.B.A. from St. John's University. Bengt Sohlen will be one of our directors upon completion of the reorganization transaction. Mr. Sohlen has served as a director of GEEG Holdings, L.L.C. since December 2000. Since January 1997, Mr. Sohlen has served as a member of Harvest Partners, Inc.'s advisory board, an informal committee that advises Harvest Partners, Inc. on investment opportunities. In September 1997, Mr. Sohlen retired from ABB Inc., a subsidiary of ABB Ltd., which manufactures equipment and provides services to the power transmission and distribution, automation, and oil, gas and petro-chemical industries, for which he served as vice president for strategy and corporate development since November 1983. Mr. Sohlen served as a director of ABB Inc. between September 1976 and October 1983. Mr. Sohlen has an engineering background derived from training in his native Sweden. Edgar Hotard will be one of our directors upon completion of the reorganization transaction. Mr. Hotard has been a private consultant since January 1999. From July 1992 to January 1999, Mr. Hotard served as president and chief operating officer of Praxair Inc., an industrial gases, electronics materials, medical services and surface technology company. From January 1996 to February 1997, he also served as chairman and chief executive officer of Chicago Bridge & Iron Company NV, a global engineering and construction company. He has served as a director of Edgen Corp. since August 1999 and Home Care Supply, Inc. since July 2000, each of which is a private company managed by Harvest Partners, Inc. In addition, since April 1999, Mr. Hotard has served as a director of Global Industries, Ltd., a public company that provides marine construction and support services. Mr. Hotard earned a B.S. in Mechanical Engineering form Northwestern University and is a member of the board of directors of the U.S.-China Business Council. 42 47 COMMITTEES OF THE BOARD Our board of directors has the authority to perform management and administration functions. Following this offering, we intend to establish an audit committee, a compensation committee and an executive committee. Upon completion of this offering, we will adopt an audit committee charter and establish an audit committee comprised of three directors who satisfy the New York Stock Exchange rules on the independence of audit committee members. Initially, Mr. Sohlen will serve on our audit committee. The functions of the audit committee will include reviewing the adequacy of our systems of internal accounting controls; reviewing the results of the independent auditors' annual audit, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management; reviewing our audited financial statements and discussing them with management; reviewing the audit reports submitted by the independent auditors; reviewing disclosure by independent auditors concerning relationships with our company and the performance of our independent auditors and annually recommending independent auditors; adopting and annually assessing our audit charter; and preparing any reports or statements as may be required by the New York Stock Exchange and the securities laws. Upon the completion of this offering, the compensation committee will consist of at least two non-employee directors, as defined in Rule 16b-3 under the Securities Act. Mr. Sohlen and a non-employee director to be appointed after completion of this offering will serve on our compensation committee. The compensation committee will review and make recommendations to the board regarding our compensation policies and all forms of compensation to be provided to our executive officers and directors. In addition, the compensation committee will review bonus and stock compensation arrangements for all of our employees and directors. The executive committee will consist of Messrs. Eisenstein, Kleinman and Edwards. The functions of the executive committee will include the oversight of general corporate matters and approval of all major capital expenditures. SENIOR MANAGEMENT EMPLOYMENT AGREEMENTS GEEG Holdings, L.L.C. entered into employment agreements dated August 1, 2000 with each named executive which provide for annual base salaries of not less than $275,000 for Mr. Edwards, $200,000 for Mr. Obermiller, $157,000 for Mr. Schockemoehl, $120,778 for Mr. Hackner and $108,800 for Mr. Wilson. Each agreement is for a term of two years ending August 1, 2002, automatically renewable unless we give sixty days written notice, and contains customary non-competition, non-solicitation of employees and confidentiality provisions. DIRECTOR COMPENSATION Except for a quarterly fee of $5,000 paid to Mr. Sohlen and for fees paid to directors of GEEG Holdings, L.L.C. appointed pursuant to the management agreements with Harvest Partners, Inc. and Saw Mill Capital L.L.C, described in "Certain Transactions," we currently do not pay any compensation to directors for serving in that capacity. We reimburse directors for out-of-pocket expenses incurred in attending board meetings. Our board of directors has the discretion to grant options to non-employee directors under our stock option plans. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION We currently do not have a compensation committee. The compensation arrangements for each of our executive officers were established under the terms of the respective employment agreements between us and each executive officer. The terms of the employment agreements were established in arms-length negotiations between us and each executive officer and approved by our board of directors. Mr. Sohlen and another non-employee director to be appointed after completion of this offering will serve on the compensation committee. Mr. Sohlen has never been an officer or employee of ours. Prior to 43 48 formation of the compensation committee, all decisions regarding executive compensation will be made by the full board of directors. No interlocking relationship will exist between the board of directors or the compensation committee and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past. EXECUTIVE COMPENSATION The following table summarizes the compensation paid to the chief executive officer of GEEG Holdings, L.L.C. and to each of the other four most highly compensated executive officers of GEEG Holdings, L.L.C. for fiscal year 2000. These named executive officers will continue to serve in comparable capacities for us after completion of the reorganization transaction.
ANNUAL COMPENSATION LONG-TERM ------------------- OTHER ANNUAL COMPENSATION ALL OTHER NAME AND PRINCIPAL POSITIONS SALARY BONUS(1) COMPENSATION (2) OPTIONS(3) COMPENSATION (4) - ---------------------------- -------- -------- ---------------- ------------ ---------------- Larry Edwards..................... $275,000 $275,000 -- 377,151 $3,494,985 Chief Executive Officer Gary Obermiller................... 200,000 160,000 -- 293,137 2,834,703 Vice President Gene Schockemoehl................. 157,000 125,600 -- 279,606 2,548,542 Vice President Michael Hackner................... 120,778 72,467 -- 152,405 1,301,636 Chief Financial Officer, Vice President of Finance and Treasurer James Wilson...................... 110,317 66,190 -- 130,567 1,236,854 Vice President of Administration and Secretary
- --------------- (1) Represents payments made in 2001 on amounts accrued in 2000 under the Management Incentive Compensation Plan. (2) Excludes perquisites and other personal benefits unless the aggregate amount of the compensation exceeds the lesser of either $50,000 or 10% of the total of annual salary and bonus reported for the named executive officer. (3) Represents options to purchase our common stock, giving effect to our assumption of the 2000 Option Plan of GEEG Holdings, L.L.C. and the conversion of options to purchase common units granted under the plan into economically equivalent options to purchase shares of our common stock. (4) Includes cash payments made by GEEG Holdings, L.L.C. in exchange for the cancellation of options issued under its 1998 Option Plan in connection with the August 1 recapitalization. Includes matching contributions of $6,800, $5,250, $6,280, $3,623 and $4,413 to the accounts of Messrs. Edwards, Obermiller, Schockemoehl, Hackner and Wilson, respectively, under our 401(k) plan. Includes contributions of $15,300 to the account of Mr. Obermiller and $10,870 to the account of Mr. Hackner under our Deltak Profit Sharing Plan. Also includes the taxable portions of term life insurance premiums of $1,380 for Mr. Edwards, $690 for Mr. Obermiller, $729 for Mr. Schockemoehl, $529 for Mr. Hackner and $214 for Mr. Wilson. 44 49 OPTION GRANTS The following table sets forth information regarding options to acquire common units granted by GEEG Holdings, L.L.C. to the named executive officers during fiscal year 2000. Any options outstanding at the time of the reorganization transaction will be converted into economically equivalent options to purchase our common stock. These options will fully vest upon completion of this offering. Information regarding those assumed options is also set forth below.
ASSUMED OPTIONS AFTER ACTUAL REORGANIZATION INDIVIDUAL GRANTS TRANSACTION POTENTIAL REALIZABLE ----------------------------------------------- --------------------- VALUE AT ASSUMED NUMBER OF % OF TOTAL NUMBER OF ANNUAL RATES OF UNITS OPTIONS SHARES STOCK APPRECIATION UNDERLYING GRANTED TO UNDERLYING FOR OPTION TERM(2) OPTIONS EMPLOYEES EXERCISE EXPIRATION OPTIONS EXERCISE --------------------- NAME GRANTED IN 2000 PRICE(1) DATE ASSUMED PRICE 5% 10% - ---- ---------- ---------- -------- ---------- ---------- -------- --------- --------- Larry Edwards.................. 13,412.2 12.9% $10.00 8/1/10 377,151 $0.36 $ 85,388 $216,389 Gary Obermiller................ 10,424.5 10.0 10.00 8/1/10 293,137 0.36 66,367 168,186 Gene Schockemoehl.............. 9,943.3 9.6 10.00 8/1/10 279,606 0.36 63,303 160,423 Michael Hackner................ 5,419.8 5.2 10.00 8/1/10 152,405 0.36 34,505 87,442 James Wilson................... 4,643.2 4.5 10.00 8/1/10 130,567 0.36 29,561 74,912
- --------------- (1) The options were granted on the date of grant with a term of 10 years, unless otherwise noted. (2) In accordance with the rules of the SEC, we have included the gains or "option spreads" that would exist for the respective options granted. These gains are based on the assumed rates of annual compound stock price appreciation of 5% and 10% from the date the option was granted over the full option term. These assumed annual compound rates of stock price appreciation are mandated by the rules of the SEC and do not represent our estimate or projection of our future common stock prices. OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END VALUES The following table sets forth information concerning options issued under GEEG Holdings, L.L.C.'s option plans to purchase common units exercised by the named executive officers during fiscal year 2000 and the number and value of unexercised options held by each of the named executive officers, on an actual basis and on a pro forma basis to give effect to the reorganization transaction, and the value of these unexercised options. Information is given for fiscal year 2000.
NUMBER OF UNITS PRO FORMA NUMBER OF UNDERLYING UNEXERCISED SHARES UNDERLYING ASSUMED SHARES OPTIONS AT UNEXERCISABLE OPTIONS AT ACQUIRED DECEMBER 30, 2000 DECEMBER 30, 2000 ON VALUE --------------------------- --------------------------- NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---- -------- -------- ----------- ------------- ----------- ------------- Larry Edwards.......... -- -- -- 13,412.2 -- 377,151 Gary Obermiller........ -- -- -- 10,424.5 -- 293,137 Gene Schockemoehl...... -- -- -- 9,943.3 -- 279,606 Michael Hackner........ -- -- -- 5,419.8 -- 152,405 James Wilson........... -- -- -- 4,643.2 -- 130,567 VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS AT DECEMBER 30, 2000(1) --------------------------- NAME EXERCISABLE UNEXERCISABLE - ---- ----------- ------------- Larry Edwards.......... -- $6,275,793 Gary Obermiller........ -- 4,877,800 Gene Schockemoehl...... -- 4,652,644 Michael Hackner........ -- 2,536,019 James Wilson........... -- 2,172,635
- --------------- (1) There was no public market for the common stock on December 30, 2000. The value of unexercised in-the-money options at December 30, 2000 has been calculated assuming completion of the reorganization transaction and using an initial public offering price of $17.00 per share (the midpoint of the range set forth on the cover of this prospectus). MANAGEMENT INCENTIVE COMPENSATION PLAN Our 2000 Management Incentive Compensation Plan became effective on January 1, 2000 to reward our chief executive officer, vice presidents and other key management with additional performance-based 45 50 compensation. The Management Incentive Compensation Plan effective for fiscal year 2000 and prior years allowed an eligible participant to earn bonuses up to stated percentages of base salary for the achievement of 100% of our targeted performance as established at the time of our business plan. These bonuses were paid in the first quarter of each calendar year following the accrual. For fiscal year 2000, the percentages for the participants were (1) up to a maximum of 100% for Mr. Edwards; (2) up to a maximum of 80% for Messrs. Obermiller and Schockemoehl; and (3) up to a maximum of 60% for our vice presidents and other participants. We will adopt a 2001 Management Incentive Compensation Plan. The new plan will allow eligible participants to earn bonuses up to stated percentages of their base salary with maximum bonuses of (1) up to 150% for our president and chief executive officer; (2) up to 110% for our senior vice presidents; and (3) up to 90% for our vice presidents and other participants. The bonuses will be paid in the first quarter of the following calendar year and will be based on our specific achievement of enterprise valuation goals. 2000 OPTION PLAN The board of directors of GEEG Holdings, L.L.C. approved its 2000 Option Plan in August 2000. The 2000 Option Plan provided for the grant of options to acquire class A or class B common units in GEEG Holdings, L.L.C. When we complete the reorganization transaction, all options outstanding under the 2000 Option Plan prior to the reorganization will vest and become fully exercisable and will be converted into options to purchase shares of our common stock with the same economic value, and otherwise on the same terms. Similarly, we will assume the 2000 Option Plan and common units available for option grants under such plan will be replaced by shares of our common stock with the same economic value as of the completion of the reorganization transaction. The following is a summary description of the 2000 Option Plan as it will apply to us after the reorganization transaction. You should read the text of the 2000 Option Plan, which we have filed as an exhibit to the registration statement of which this prospectus is a part, for a full statement of the terms and provisions of the 2000 Option Plan. The board of directors administers the 2000 Option Plan and may grant options under the plan to selected key executives or employees to purchase up to an aggregate total of 3,440,257 shares of common stock, subject to adjustment if particular capital changes affect the common stock, as described below. An option permits, but does not require, the option holder to purchase up to a particular number of shares of common stock, by exercising the option, at a price fixed by the board of directors when the option is granted, during a specified period of time following grant of the option if particular conditions are satisfied. Those conditions may relate to one or more of the following: (1) the passage of a specified period of time, (2) our achievement of particular performance goals or (3) the fulfillment of other specified conditions. In the event of a sale of the business, as defined in the 2000 Option Plan, the board of directors may, in its discretion under the plan, notify plan participants that any or all options outstanding under the plan will (1) become immediately vested and, if not exercised, will terminate on the date of the sale of the company or another date designated by the board of directors, or (2) become a right to receive consideration that the board of directors deems equitable in the circumstances based on the difference between the consideration to be received in connection with such sale of the business and the exercise price of the options. For purposes of the option plan, a sale of the company generally means any transaction or series of transactions which results, directly or indirectly, in (1) the sale of all or substantially all of the company's and its subsidiaries' assets to persons other than Harvest Partners, Inc. or its affiliates or (2) a sale or transfer of a majority of our outstanding voting securities or the outstanding voting securities of GEEG Acquisition Holdings Corp. to persons other than Harvest Partners, Inc. or its affiliates. The exercise price of options may be paid by option holders in cash, using shares of our common stock already owned by the option holder, through a cashless exercise procedure approved by the board of directors or a combination of these payment methods. Option holders may not transfer their options under the option plan. However, if an option holder becomes disabled or dies, that option holder's options may be exercised by the legal representative of the 46 51 option holder or of his or her estate, or by the laws of descent and distribution. An option holder may exercise his or her option under the 2000 Option Plan within 90 days after his or her employment with the company or any of our subsidiaries terminates, or, if such termination of employment is due to the option holder's death, the option may be exercised within 180 days after his or her death. However, the option may only be exercised after the option holder's employment terminates to the extent that it is vested on the date of termination, and an option cannot be exercised after its stated expiration date. In the event of particular changes in our capital structure, such as a recapitalization, reorganization, consolidation, merger, asset sale, unit or stock dividend or split or other change in our common stock, we may make certain changes to the 2000 Option Plan or options granted under the plan. If the particular change in our capital structure results in holders of common stock becoming entitled to receive units, stock, securities or assets in respect of their common stock, options under the 2000 Option Plan may only be exercised for those units, shares of stock, securities or assets, including cash, that would be issued or paid in respect of the number and class of shares of common stock subject to the options prior to that change in our capital structure. The board of directors may terminate options outstanding under the plan in the event of a change in our capital structure described in the preceding sentence, subject to payment to the holders of those options of the consideration that the board of directors deems equitable in the circumstances. The board of directors may, as it determines to be appropriate and equitable, adjust (1) the number and type of units or shares or other consideration as to which options may be granted under the 2000 Option Plan, (2) the number and type of units or shares covered by outstanding options, (3) the exercise prices of outstanding options and (4) other provisions of the 2000 Option Plan specifying a number of units or shares, to prevent dilution or enlargement of rights under the 2000 Option Plan or outstanding options in the event of particular changes in our capital structure specified in the plan. To date, options to purchase 2,921,359 shares of common stock have been granted under the 2000 Option Plan and 518,898 shares of common stock remain available for future option grants under the 2000 Option Plan. No options have been exercised under the 2000 Option Plan. We have the right under the 200 Option Plan to repurchase common stock issued to an option holder upon any exercise of his or her options under the plan if the option holder's employment terminates, and, if the termination is due to the option holder's death or disability, the option holder or his or her executor or administrator can require us to repurchase his or her shares of common stock that are not otherwise repurchased by us according to the terms of the plan. These repurchase rights will terminate upon the closing of this offering. The 2000 Option Plan restricts the transferability of shares of common stock purchased under the option plan; however, the 2000 Option Plan permits the board of directors to waive these restrictions and, in any event, permits option holders to transfer their shares of common stock in public sales beginning two years after this offering. If requested by Harvest Partners, Inc., participants in the 2000 Option Plan will be deemed to have agreed to vote any shares of common stock purchased under their options in favor of any sale of the business, as defined in the plan, and to sell those shares in connection with that sale of the business. The board of directors may amend or terminate the 2000 Option Plan, subject to particular limitations specified in the plan. No options may be granted under the 2000 Option Plan after August 1, 2010. 47 52 PRINCIPAL AND SELLING STOCKHOLDERS The following table sets forth information with respect to the beneficial ownership of our common stock on a pro forma basis to give effect to the reorganization transaction both immediately before and immediately following this offering by: - each person that we know will own beneficially more than five percent, in the aggregate, of the outstanding shares of our common stock; - our directors and our named executive officers; - all executive officers and directors as a group; and - each selling stockholder. The information in this table is based upon the beneficial ownership of equity interests in GEEG Holdings, L.L.C. as of March 31, 2001, and gives effect to the exchange of these interests for shares of our common stock in connection with the reorganization transaction and the distribution of those shares, assuming an initial public offering price of $17.00 (the mid-point of the range set forth on the cover of this prospectus). The selling stockholders have granted the underwriters an option to purchase up to 1,102,500 shares of common stock to cover over-allotments, if any. If the underwriters exercise this over-allotment option in full, the selling stockholders will beneficially own shares ( %) of the total number of shares of common stock outstanding after the offering. If the underwriters do not exercise their over-allotment option, the selling stockholders will not sell any shares in the offering. We determined beneficial ownership in accordance with the rules of the SEC, which generally require inclusion of shares over which a person has voting or investment power. Share ownership in each case includes shares issuable upon exercise of outstanding options that are exercisable within 60 days. Except as otherwise indicated, the address for each of the named individuals is c/o Global Power Equipment Group Inc., 6120 South Yale, Suite 1480, Tulsa, Oklahoma 74136.
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED OWNED PRIOR TO THIS OFFERING AFTER THIS OFFERING(1) ---------------------- ---------------------- SHARES OFFERED NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT IN OVER-ALLOTMENT - ------------------------ ----------- -------- ----------- -------- ----------------- Harvest Associates III, L.L.C.(2)............. 13,733,072 36.6% 13,733,072 30.6% 280 Park Avenue, 33rd Floor New York, New York 10017 Saw Mill Capital L.L.C.(3).................... 1,881,832 5.0 1,881,832 4.2 Pleasantville Road, South Building, Suite 220 Briarcliff Manor, New York 10510 Q.P.O.N. Beteiligungs GmbH.................... 1,921,294 5.1 1,921,294 4.3 Emil von Behring Strasse D-60439 Frankfurt, Germany PPM America Private Equity Fund, L.P.......... 5,012,070 13.4 5,012,070 11.2 225 West Wacker Drive Suite 1200 Chicago, Illinois 60606 Credit Suisse First Boston Corporation(4)..... 2,709,232 7.2 2,709,232 6.0 Eleven Madison Avenue New York, New York 10010 Deutsche Banc Alex. Brown Inc.(5)............. 1,363,818 3.6 1,363,818 3.0 130 Liberty Street New York, New York 10006 National City Equity Partners, Inc. .......... 610,637 1.6 610,637 1.4 1965 East Sixth Street Suite 1010 Cleveland, Ohio 44114
48 53
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED OWNED PRIOR TO THIS OFFERING AFTER THIS OFFERING(1) ---------------------- ---------------------- SHARES OFFERED NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT IN OVER-ALLOTMENT - ------------------------ ----------- -------- ----------- -------- ----------------- Great Lakes Capital Investments II, LLC....... 107,760 * 107,760 * 1965 East Sixth Street Suite 1010 Cleveland, Ohio 44114 Heller Financial.............................. 501,207 1.3 501,207 1.1 500 West Monroe Street Chicago, Illinois 60661 BancBoston Capital Investments II, LLC........ 1,336,552 3.6 1,336,552 3.0 175 Federal Street 10th Floor Boston, Massachusetts 02110 Liberty Mutual Insurance Company.............. 1,670,690 4.5 1,670,690 3.7 175 Berkley Street Boston, Massachusetts 02117 Carlyle High Yield Partners, L.P.............. 81,764 * 81,764 * 520 Madison Avenue 41st Floor New York, New York 10022 J.H. Whitney Market Value Fund, L.P........... 81,764 * 81,764 * 177 Broad Street Stamford, Connecticut 06901 Highland Legacy Limited....................... 54,531 * 54,531 * P.O. Box 309 GT Ugland House, South Church Street George Town, Grand Cayman Larry Edwards(6).............................. 1,124,137 3.0 1,124,137 2.5 Stephen Eisenstein(7)......................... 13,733,072 36.6 13,733,072 30.6 Michael Hackner(8)............................ 454,259 1.2 454,259 1.0 Edgar Hotard.................................. -- -- -- -- Ira Kleinman(9)............................... 13,733,072 36.6 13,733,072 30.6 Gary Obermiller(10)........................... 873,732 2.3 873,732 1.9 Gene Schockemoehl(11)......................... 833,396 2.2 833,396 1.8 Bengt Sohlen.................................. 33,885 * 33,885 * Howard Unger(12).............................. 1,881,832 5.0 1,881,832 4.2 James Wilson(13).............................. 389,163 1.0 389,163 * All executive officers and directors as a group (9 persons)(14)....................... 17,441,644 46.4 17,441,644 38.8
- --------------- * Less than 1%. (1) The numbers below assume no exercise by the underwriters of their over-allotment option. (2) Includes 12,085,103 shares of common stock owned by Harvest Partners III, LP, and 1,647,969 shares of common stock owned by Harvest Partners III, GbR, for each of which Harvest Associates III, L.L.C. is the general partner. Harvest Associates III, L.L.C. has six members, each of whom has equal voting rights in the company and who may be deemed to share beneficial ownership of the shares of our common stock beneficially owned by it. The six members are Stephen Eisenstein and Ira Kleinman, each of whom is one of our directors, and Harvey Wertheim, Harvey Mallement, William Kane and Thomas Arenz. Each of Messrs. Eisenstein, Kleinman, Wertheim, Mallement, Kane and Arenz disclaims beneficial ownership of the shares of common stock owned by Harvest Partners III, L.P. and Harvest Partners III, GbR. Harvest Partners, Inc., which is controlled by Messrs. Wertheim and Mallement, provides management services for Harvest Associates III, L.L.C. in connection with Harvest Partners III, L.P. and Harvest Partners III, GbR and may be deemed to share beneficial ownership of the shares of common stock owned by Harvest Partners III, L.P. and 49 54 Harvest Partners III, GbR. Each of Messrs. Wertheim and Mallement disclaim beneficial ownership of the shares of common stock which Harvest Partners, Inc. may be deemed to share with Harvest Associates III, L.L.C. Each of Messrs. Eisenstein and Kleinman is an employee of Harvest Partners, Inc. If the over-allotment is exercised in full, Harvest Partners III, LP will sell shares of common stock in this offering and will hold shares of common stock, or %, after this offering, and Harvest Partners III, GbR will sell shares of common stock in this offering and will hold shares of common stock, or %, after this offering. (3) Includes 906,767 shares of common stock owned by SMC Power Holdings, L.L.C., and 975,065 shares of common stock held by Saw Mill Investments, L.L.C., both of which are affiliates of Saw Mill Capital L.L.C. Mr. Howard Unger serves as managing member of Saw Mill Capital L.L.C. and disclaims beneficial ownership of shares owned by SMC Power Holdings, L.L.C. and Saw Mill Investments, L.L.C. If the over-allotment is exercised in full, SMC Power Holdings, L.L.C. will sell shares of common stock in this offering and will hold shares of common stock, or %, after this offering, and Saw Mill Investments, L.L.C. will sell shares of common stock in this offering and will hold shares of common stock, or %, after this offering. (4) Includes 1,392,023 shares of common stock owned by Donaldson, Lufkin & Jenrette Securities Corporation, 418,175 shares of common stock owned by DLJ Investment Partners II, L.P., 581,402 shares of common stock owned by DLJ Capital Partners V, LLC, 39,529 shares of common stock owned by DLJ Investment Funding II, Inc., 92,289 shares of common stock owned by DLJ ESC II, L.P. and 185,815 shares of common stock owned by DLJ Investment Partners, L.P. If the over-allotment is exercised in full, DLJ Investment Partners, L.P. will sell shares of common stock in this offering and will hold shares of common stock, or %, after the offering, DLJ Investment Partners II, L.P. will sell shares of common stock in this offering and will hold shares of common stock, or %, after this offering, DLJ Capital Partners V, LLC will sell shares of common stock in this offering and will hold shares of common stock, or %, after this offing, DLJ Investment Funding II, Inc. will sell shares of common stock in this offering and will hold shares of common stock, or %, after this offering, and DLJ ESC II, L.P. will sell shares of common stock in this offering and will hold shares of common stock, or %, after this offering. (5) Includes 1,336,552 shares of common stock owned by BT Investment Partners, Inc., and 27,266 shares of common stock held by Golden Tree Asset Management, L.P., as Agent for Deutsche Banc Sharps Pixley Inc. If the over-allotment is exercised in full, BT Investment Partners, Inc. will sell shares of common stock in this offering and will hold shares of common stock, or %, after this offering; and Golden Tree Asset Management, L.P., as Agent for Deutsche Banc Sharps Pixley Inc., will sell shares of common stock in this offering and will hold shares of common stock, or %, after this offering. (6) Includes options to purchase 377,151 shares of common stock. (7) Includes 12,085,103 shares of common stock owned by Harvest Partners III, LP, and 1,647,969 shares of common stock owned by Harvest Partners III, GbR, for each of which Harvest Associates III, L.L.C. is the general partner. Mr. Eisenstein is a member of Harvest Associates III, L.L.C. and may be deemed to share beneficial ownership of the shares of our common stock beneficially owned by it. Mr. Eisenstein disclaims beneficial ownership of shares owned by Harvest Partners III, L.P. and Harvest Partners III GbR. (8) Includes options to purchase 152,405 shares of common stock. (9) Includes 12,085,103 shares of common stock owned by Harvest Partners III, LP, and 1,657,969 shares of common stock owned by Harvest Partners III, GbR, for each of which Harvest Associates III, L.L.C. is the general partner. Mr. Kleinman is a member of Harvest Associates III, L.L.C. and may be deemed to share beneficial ownership of the shares of our common stock beneficially owned by it. Mr. Kleinman disclaims beneficial ownership of shares owned by Harvest Partners III, L.P. and Harvest Partners III GbR. 50 55 (10) Includes options to purchase 293,137 shares of common stock. (11) Includes options to purchase 279,606 shares of common stock. (12) Includes 906,767 shares of common stock owned by SMC Power Holdings, L.L.C., and 975,065 shares of common stock held by Saw Mill Investments, L.L.C., both of which are affiliates of Saw Mill Capital L.L.C. Mr. Unger serves as managing member of Saw Mill Capital L.L.C. and disclaims beneficial ownership of shares owned by SMC Power Holdings, L.L.C. and Saw Mill Investments, L.L.C. (13) Includes options to purchase 130,567 shares of common stock. (14) Includes options to purchase 1,232,866 shares of common stock. 51 56 CERTAIN TRANSACTIONS THE AUGUST 2000 RECAPITALIZATION In connection with the August 2000 recapitalization, we paid existing investors in GEEG Holdings, L.L.C. approximately $233 million for certain of their equity interests and officers, directors and employees of GEEG Holdings, L.L.C. approximately $38.1 million in consideration for cancellation of options. For additional information regarding the August 2000 recapitalization, see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview." A portion of the financing for the August 2000 recapitalization was provided by affiliates of Credit Suisse First Boston Corporation and Deutsche Banc Alex. Brown Inc. See "Underwriting." HARVEST MANAGEMENT AGREEMENT In connection with the August 2000 recapitalization, Global Energy Equipment Group, L.L.C., an indirect, wholly-owned subsidiary of GEEG Holdings, L.L.C., entered into a management agreement with Harvest Partners, Inc. which will be amended and assumed by us immediately prior to completion of this offering. Under this agreement, in August 2000, Harvest Partners, Inc. received from Global Energy Equipment Group, L.L.C. a one time fee of $5.0 million for structuring and implementing the recapitalization and its equity investment. This fee was fully disclosed to the equity holders of GEEG Holdings, L.L.C. and we believe this fee is customary for transactions like the recapitalization. In addition, Global Energy Equipment Group, L.L.C. paid Harvest Partners, Inc. fees and reimbursed expenses aggregating $420,000 in 2000 and $400,000 in February 2001 for financial advisory and strategic planning services provided to Global Energy Equipment Group, L.L.C. and its subsidiaries and affiliates. Under the amended agreement, Harvest Partners, Inc. will provide us with financial advisory and strategic planning services. For these ongoing services under the amended management agreement, Harvest Partners, Inc. will receive an annual management fee of $1.25 million, payable semi-annually in advance beginning on August 1, 2001. In addition, under the amended agreement, Harvest Partners, Inc. will receive a one-time payment of $500,000 in connection with the refinancing of our senior credit facility. We will also reimburse Harvest Partners, Inc. for all reasonable out-of-pocket expenses related to the services it provides. Stephen Eisenstein, who is one of our directors and a director of GEEG Holdings, L.L.C., has been a general partner of Harvest Partners, Inc. and a member of Harvest Associates III, L.L.C., since 1999. Ira Kleinman, who is a director of GEEG Holdings, L.L.C. and who will be a member of our board of directors at the completion of this offering, has been a general partner of Harvest Partners, Inc. and a member of Harvest Associates III, L.L.C. since 1992. For information regarding the equity ownership of GEEG Holdings, L.L.C. by affiliates of Harvest Partners, Inc., see "Principal and Selling Stockholders." SAW MILL MANAGEMENT AGREEMENT In connection with the August 2000 recapitalization, Global Energy Equipment Group, L.L.C. (1) terminated an existing management agreement with Saw Mill Capital L.L.C. and paid it $550,000 and (2) entered into a new management agreement with Saw Mill Capital L.L.C. which will be terminated immediately prior to the completion of this offering. Under this agreement, Global Energy Equipment Group, L.L.C. paid Saw Mill Capital L.L.C. fees and reimbursed expenses aggregating $233,864 in 2000 and $75,000 in February 2001. After completion of this offering and the reorganization transaction, we will pay Saw Mill Capital L.L.C. the sum of $278,711 for termination of the existing management agreement. For information regarding Saw Mill Capital L.L.C.'s equity ownership of GEEG Holdings, L.L.C., see "Principal and Selling Stockholders." EQUITYHOLDERS AND REGISTRATION RIGHTS AGREEMENT Upon the completion of the August 2000 recapitalization, GEEG Holdings, L.L.C. and all of its direct and indirect equityholders, including Harvest Partners, Inc., on behalf of the limited partnerships which are stockholders of GEEG Acquisition Holdings Corp., and Saw Mill Capital L.L.C., entered into an equityholders agreement. Under this agreement, GEEG Holdings, L.L.C. agrees to use its reasonable 52 57 efforts to register an equityholder's common equity (1) at any time if requested by Harvest Partners, Inc. or (2) at any time after 18 months from the date of its initial public offering if requested by Saw Mill Capital L.L.C. or the holders of 25% of the common equity issued in connection with the senior subordinated loan. If GEEG Holdings, L.L.C. proposes to register a public offering of any of its securities under the Securities Act, either for its own account after this offering or for the account of other security holders exercising registration rights at any time, the parties to the equityholders agreement are entitled to notice of the registration and are entitled to include securities in the registration. After completion of this offering and the reorganization transaction, the equityholders agreement will terminate and we will enter into a registration rights agreement with the former members of GEEG Holdings, L.L.C. containing substantially the same registration rights as described above. 53 58 DESCRIPTION OF CAPITAL STOCK The following is a summary of the material provisions of our certificate of incorporation as it will be amended and restated immediately prior to the closing of the offering made by this prospectus. A copy of our certificate of incorporation and the form of the amended and restated certificate of incorporation to be filed prior to the closing of the offering being made by this prospectus are filed as exhibits to the registration statement of which this prospectus is a part. Our capital stock will consist of (1) 100,000,000 authorized shares of common stock, $0.01 par value per share, of which 37,493,264 will be outstanding based on the number of preferred and common units of GEEG Holdings, L.L.C. outstanding immediately prior to the completion of this offering and (2) 5,000,000 authorized shares of preferred stock, $0.01 par value per share, of which no shares will be outstanding. COMMON STOCK The holders of our common stock will be entitled to one vote for each share held on all matters voted upon by stockholders, including the election of directors and any proposed amendment to the certificate of incorporation. The holders of our common stock will not have cumulative voting rights and therefore holders of a majority of the shares voting for the election of directors will be able to elect all of the directors. In this event, the holders of the remaining shares will not be able to elect any directors. The holders of our common stock will be entitled to any dividends as may be declared at the discretion of our board of directors out of funds legally available for that purpose. The holders of our common stock will be entitled to share ratably in our net assets upon liquidation after payment or provision for all liabilities and the preferential amounts owing with respect to any outstanding preferred stock. All shares of common stock will be fully paid and non-assessable. PREFERRED STOCK Our board of directors has the authority to issue preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued shares of undesignated preferred stock and to fix the number of shares constituting any series and the designations of that series, without any further vote or action by the stockholders. Our board of directors, without stockholder approval, can issue preferred stock with voting and conversion rights which could adversely affect the voting power of the holders of common stock. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our company, or could delay or prevent a transaction that might otherwise give our stockholders an opportunity to realize a premium over the then prevailing market price of our common stock. PROVISIONS IN CERTIFICATE OF INCORPORATION AND BY-LAWS Anti-Takeover Effects of Provisions of the Certificate of Incorporation, Bylaws and Delaware Law Certificate of Incorporation and Bylaws We have provisions in our certificate of incorporation and bylaws that: - provide that all directors will be part of a classified board of directors that results in only approximately one-third of our directors within the classified board being elected at each annual meeting of stockholders; - require approval of at least 35% of our stockholders in order to call a special meeting of stockholders or bring matters before a special meeting of stockholders; - eliminate the ability of our stockholders to act by written consent; - require stockholders to give us advance notice of their intent to nominate directors or bring matters before an annual meeting of stockholders; and - permit the board of directors to create one or more series of preferred stock and to issue the shares thereof. 54 59 These provisions could adversely affect the rights of the holders of common stock by delaying, deferring or preventing a change in control or the removal of the incumbent board of directors. These provisions are intended to enhance the likelihood of continuity and stability in the composition of the board of directors and in the policies formulated by the board of directors and to discourage any types of transactions that may involve an actual or threatened change of control. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal and to discourage tactics that may be used in proxy fights. However, these provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they also may inhibit fluctuations in the market price of our shares that could result from actual or rumored takeover attempts. These provisions also may have the effect of preventing changes in our management. Delaware Anti-Takeover Statute Currently, our certificate of incorporation provides that we have opted out of Section 203 of the Delaware General Corporation Law. Upon the filing of our amended and restated certificate of incorporation, we will become subject to Section 203; however, under Section 203(b)(7), because each of Harvest Partners III, L.P. and Harvest Partners III, GbR was an "interested stockholder" prior to this amendment, neither will be subject to the restrictions of Section 203. Section 203, subject to specific exceptions, prohibits a publicly held Delaware corporation from engaging in any "business combination" with any "interested stockholder" for a period of three years following the date that the stockholder became an interested stockholder, unless: - prior to that date, the board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; - upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned by directors, officers and specific employee stock plans; or - on or after that date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder. Section 203 defines "business combination" to include: - any merger or consolidation involving the corporation and the interested stockholder; - any sale, transfer, pledge or other disposition of 10% or more of our assets involving the interested stockholder; - subject to limited exceptions, any transaction that results in the issuance or transfer by us of any of our stock to the interested stockholder; - any transaction involving us that has the effect of increasing the proportionate share of the stock of any class or series beneficially owned by the interested stockholder; and - the receipt by the "interested stockholder" of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. In general, Section 203 defines an interested stockholder as an entity or person beneficially owning 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by that entity or person. LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS Our certificate of incorporation limits the liability of our directors and officers to the fullest extent permitted by the Delaware General Corporation Law. 55 60 LISTING We have applied to have our common stock listed on the New York Stock Exchange under the trading symbol "GEG." TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for our common stock is EquiServe Trust Company, N.A. 56 61 SHARES ELIGIBLE FOR FUTURE SALE Before this offering, there has been no public market for our common stock. The sale or availability for sale of substantial amounts of common stock in the public market after this offering, or the perception that these types of sales could occur, could adversely affect market prices prevailing from time to time. Sales of substantial amounts of common stock in the public market after this offering could also adversely affect our ability to raise equity capital in the future. After this offering, we will have 44,843,264 shares of common stock outstanding assuming no exercise of outstanding options. Of these shares, 7,350,000 shares of common stock (8,452,500 shares if the overallotment option is exercised in full) sold in this offering will be freely tradable without restriction under the Securities Act, unless purchased by our "affiliates" as that term is defined in Rule 144 promulgated under the Securities Act. Shares held by our affiliates and the remaining shares of common stock held by existing stockholders are "restricted securities" under Rule 144 of the Securities Act of 1933, as amended. Generally, restricted securities that have been owned for two years may be sold immediately after the completion of this offering and restricted securities that have been owned for at least one year may be sold 90 days after completion of this offering subject to compliance with the volume and other limitations of Rule 144, which are summarized below. The following table illustrates the shares eligible for sale in the public market (assuming no exercise of the overallotment option), subject to the lock-up agreements described below and in "Underwriting."
NUMBER OF SHARES DATE - ---------------- ---- 7,350,000 Upon the date of this prospectus subject, in some cases, to volume and manner of sale limitations under Rule 144. 37,493,264 At various times after the later of 180 days after the date of this prospectus or expiration of applicable one year holding periods, subject to volume and manner of sale limitations under Rule 144.
RULE 144 In general, under Rule 144 as currently in effect, beginning 90 days after this offering, a person who has beneficially owned "restricted securities" for at least one year is entitled to sell within any three-month period a number of shares that does not exceed the greater of 1% of our then-outstanding shares of common stock or the average weekly trading volume of our common stock on the New York Stock Exchange during the four calendar weeks preceding the filing of a notice of the sale on Form 144. Sales under Rule 144 are also subject to manner of sale provisions, notice requirements and the availability of current public information about us. A person who is not deemed to have been one of our affiliates at any time during the three months preceding a sale, and who has beneficially owned "restricted securities" for at least two years would be entitled to sell the shares under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information requirements or notice requirements. Therefore, unless otherwise restricted, shares eligible for sale under Rule 144(k) may be sold immediately upon completion of this offering. RULE 701 Our employees, directors, officers, consultants or advisers who purchased common stock from us under written compensatory benefit plans or written contracts relating to the compensation of these persons prior to the date we became subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, may rely on Rule 701 with respect to the resale of that stock. Rule 701 will also apply to stock options we granted before we became subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of the options, including exercises after the date of this prospectus. Shares of common stock we issued in reliance on Rule 701 are restricted securities and, 57 62 subject to the contractual restrictions described above, persons other than affiliates may sell those shares, subject only to the manner of sale provisions of Rule 144. Persons who are affiliates under Rule 144 may sell those shares without compliance with its minimum holding period requirements. All holders of Rule 701 shares must wait until 90 days after the date of this prospectus before selling their shares. REGISTRATION RIGHTS The holders of the shares of common stock outstanding before the closing of this offering will be entitled to registration rights under a registration rights agreement that we will enter into as part of the reorganization transaction. These rights, which will relate to approximately 37.5 million shares of common stock, assuming no exercise of the overallotment option, will require us to use our reasonable efforts to register a holder's common stock (1) at any time if requested by Harvest Partners, Inc. or (2) at any time after 18 months from the date of this offering if requested by Saw Mill Capital L.L.C. or the holders of 25% of the common stock issued to holders of our senior subordinated debt. If we propose to register a public offering of any of our securities under the Securities Act, either for our own account after this offering or for the account of other security holders exercising registration rights at any time, the parties to the registration rights agreement will be entitled to notice of such registration and will be entitled to include shares of such common stock in the registration. The number of shares sold in the public market could increase if these rights are exercised. STOCK OPTIONS Following the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering shares of common stock issued or reserved for issuance under our stock option plan. The registration statement will become effective automatically upon filing. As of March 31, 2001, options to purchase 2,921,359 shares of common stock were issued and outstanding, all of which options will fully vest upon completion of this offering. Accordingly, shares registered under the registration statement will, subject to vesting provisions, the waiver of transfer restrictions in the option plan and Rule 144 volume limitations applicable to our affiliates, be available for sale in the open market immediately after the 180-day lock-up agreements expire. LOCK-UP AGREEMENTS Our company, all of our officers and directors and holders of substantially all of our equity interests, including each selling stockholder, have entered into contractual "lock-up" agreements providing that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, subject to certain exceptions, without, in each case, the prior written consent of Credit Suisse First Boston Corporation and Salomon Smith Barney Inc. for a period of 180 days after the date of this prospectus. As a result of these restrictions, notwithstanding possible earlier eligibility for sale under the provisions of Rule 144, shares subject to lock-up agreements will not be salable until the agreements expire. 58 63 CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS OF COMMON STOCK The following is a general discussion of material U.S. federal tax consequences relating to the ownership and disposition of common stock by a Non-U.S. Holder. A "Non-U.S. Holder" is a foreign corporation, a nonresident alien individual, a foreign partnership, any foreign estate or trust, or a foreign branch of a U.S. person that furnishes an intermediary withholding certificate identifying it as an intermediary of a foreign person or payee, as these terms are defined in the Internal Revenue Code of 1986, as amended. The following discussion is based on (1) the Internal Revenue Code, (2) the U.S. Treasury Regulations issued under the Internal Revenue Code and (3) administrative and judicial interpretations of the Internal Revenue Code and Treasury Regulations, each as in effect and available on the date of this prospectus. The Internal Revenue Code, Treasury Regulations, and interpretations, however, may change at any time, and any change could be retroactive to the date of this prospectus. We do not address all of the tax consequences that may be relevant to a holder of common stock. Except as specifically noted, this description addresses only U.S. federal tax considerations to Non-U.S. Holders that are initial purchasers of common stock and that will hold common stock as capital assets, as defined in the Internal Revenue Code. We do not address any tax consequences to: - holders of common stock that may be subject to special tax treatment such as financial institutions, real estate investment trusts, tax-exempt organizations, regulated investment companies, insurance companies, and brokers and dealers or traders in securities or currencies; - persons who acquired common stock through an exercise of employee stock options or rights or otherwise as compensation; - persons whose functional currency is not the U.S. dollar; and - persons that hold or will hold common stock as part of a position in a straddle or as part of a hedging or conversion transaction. Further, we do not address any state, local or foreign tax consequences relating to the ownership and disposition of common stock. If a partnership holds common stock, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. Partners in a partnership holding common stock should consult with their own tax advisors. PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE U.S. FEDERAL TAX CONSEQUENCES RELATING TO THE OWNERSHIP AND DISPOSITION OF THE COMMON STOCK AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS. DISTRIBUTIONS Generally, dividends paid to a Non-U.S. Holder will be subject to withholding tax at a 30% rate or whatever lower rate as may be specified by an applicable tax treaty. A Non-U.S. Holder must file the appropriate forms to obtain the benefit of an applicable tax treaty. In general, a Non-U.S. Holder that is eligible for a reduced rate of United States withholding tax under an income tax treaty may obtain a refund of any excess amounts withheld by filing appropriate claim for a refund with the United States Internal Revenue Service. Except as may be otherwise provided in an applicable tax treaty, a Non-U.S. Holder will be taxed at ordinary federal income tax rates, on a net income basis, on dividends that are effectively connected with the conduct of a trade or business of that Non-U.S. Holder within the United States and these dividends will not be subject to the withholding tax described above. If the Non-U.S. Holder is a foreign corporation, it may also be subject to a branch profits tax at a 30 percent rate unless it qualifies for a lower rate under an applicable tax treaty. Non-U.S. Holders are required to file prescribed forms with the 59 64 withholding agent in order to establish exemption from withholding based on income being effectively connected with a U.S. trade or business. SALE OR EXCHANGE OF COMMON SHARES Generally, a Non-U.S. Holder will not be subject to U.S. federal income tax on any gain realized on the sale or exchange of our common stock unless: - the gain is effectively connected with a trade or business conducted by the Non-U.S. Holder within the United States, in which case, the branch profits tax described above under "Distributions" may also apply if the holder is a foreign corporation; - the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of the sale or exchange and meets other necessary conditions; - the Non-U.S. Holder is subject to tax under the provisions of the U.S. federal tax law applicable to some U.S. expatriates; or - we are or have been during some periods a "U.S. real property holding corporation" for federal income tax purposes and, assuming the common stock is "regularly traded on an established securities market" for tax purposes, the Non-U.S. Holder held, directly or indirectly, at any time during the five-year period on the date of the disposition, or any shorter period that shares were held, more than 5% of our common stock. We believe that we will not be treated as a U.S. real property holding corporation. FEDERAL ESTATE TAXES Unless an applicable estate tax treaty provides otherwise, common stock that is held by an individual who at the time of death is not a citizen or resident of the United States generally will be included in the individual's gross estate for U.S. federal estate tax purposes and may be subject to estate tax. BACKUP WITHHOLDING TAX AND INFORMATION REPORTING REQUIREMENTS Under the United States information reporting rules, when a holder of common stock receives dividends or proceeds from the sale of common stock, the appropriate intermediary must report to the Internal Revenue Service and to the holder the amount of the dividends or sale proceeds. Some holders, including all corporations, are exempt from these rules. In addition, a nonexempt holder must provide the intermediary with certain identifying information. If this information is not supplied, or if the intermediary knows or has reason to know that it is not true, dividends or sale proceeds are subject to "backup withholding" at a rate of 31%. Backup withholding is not an additional tax, and the holder may use the tax as a credit against the tax it otherwise owes. Generally, dividends paid to holders outside the United States that are subject to the 30% or treaty-reduced rate of withholding tax will be exempt from backup withholding tax. However, payments within the United States are subject to both backup withholding and information reporting unless the holder certifies under penalties of perjury to the payor or in the manner required as to its non-United States person status or otherwise establishes an exemption. If any dividend payment is made to a beneficial owner of our common stock by the foreign office of a foreign custodian, foreign nominee or other foreign agent of a beneficial owner, or the foreign office of a foreign "broker", as defined in applicable Treasury Regulations, pays the proceeds of the sale of our common stock to the seller thereof, backup withholding and information reporting will not apply, provided that the nominee, custodian, agent or broker (1) derives less than 50% of its gross income for specific 60 65 periods from the conduct of trade or businesses in the United States, (2) is not a controlled foreign corporation, and (3) is not a foreign partnership: - one or more of the partners of which, at any time during its tax year, is a U.S. person who, in the aggregate, holds more than 50% of the income or capital interest in the partnership; or - which, at any time during its tax year, is engaged in the conduct of trade or business in the United States. Moreover, any dividends on common stock so made by the foreign offices of other custodians, nominees or agents, or the payment by the foreign office of other brokers of the proceeds of the sale of common stock will not be subject to a backup withholding, unless the payor has actual knowledge that the payee is a United States person, but will be subject to information reporting unless the custodian, nominee, agent or broker had documentary evidence in its records that the beneficial owner is not a United States person and specific conditions are met, or the beneficial owner otherwise establishes an exemption. Prospective investors are urged to consult their tax advisors concerning information reporting and backup withholding. THE ABOVE DESCRIPTION IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES TO A NON-U.S. HOLDER RELATING TO THE OWNERSHIP AND DISPOSITION OF COMMON STOCK. PROSPECTIVE PURCHASERS OF COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL TAX LAWS TO THEIR PARTICULAR SITUATIONS, AS WELL AS ANY TAX CONSEQUENCES WHICH MAY ARISE UNDER THE LAWS OF ANY FOREIGN, STATE, LOCAL OR OTHER TAXING JURISDICTION. 61 66 UNDERWRITING Credit Suisse First Boston Corporation and Salomon Smith Barney Inc. are acting as joint bookrunning managers of the offering and, together with Deutsche Banc Alex. Brown Inc. and Raymond James & Associates, Inc., are acting as representatives of the underwriters named below. Under the terms and subject to the conditions contained in an underwriting agreement dated , 2001 we have agreed to sell to the underwriters named below, the following respective numbers of shares of common stock:
UNDERWRITER NUMBER OF SHARES ----------- ---------------- Credit Suisse First Boston Corporation...................... Salomon Smith Barney Inc. .................................. Deutsche Banc Alex. Brown Inc. ............................. Raymond James & Associates, Inc. ........................... ---------- Total............................................. 7,350,000 ==========
The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the over-allotment option described below. The underwriting agreement also provides that if an underwriter defaults the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated. The selling stockholders have granted to the underwriters a 30-day option to purchase up to 1,102,500 additional shares at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock. The underwriters propose to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of $ per share. The underwriters and selling group members may allow a discount of $ per share on sales to other broker/dealers. After the initial public offering, the representatives may change the public offering price and concession and discount to broker/dealers. The following table summarizes the compensation and estimated expenses we will pay:
UNDERWRITING DISCOUNTS AND COMMISSIONS PAYABLE BY SELLING UNDERWRITING STOCKHOLDERS EXPENSES PAYABLE BY US DISCOUNTS AND UPON FULL ---------------------------------- COMMISSIONS EXERCISE OF NO EXERCISE OF FULL EXERCISE OF PAYABLE BY US OVERALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT -------------- ---------------- -------------- ---------------- Per share.................. Total......................
We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, subject to certain exceptions, without the prior written consent of Credit Suisse First Boston Corporation and Salomon Smith Barney Inc. for a period of 180 days after the date of this prospectus. Our officers and directors and holders of substantially all of our equity securities, including each selling stockholder, have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic 62 67 consequences of ownership of our common stock whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, subject to certain exceptions, without, in each case, the prior written consent of Credit Suisse First Boston Corporation and Salomon Smith Barney Inc. for a period of 180 days after the date of this prospectus. At our request, the underwriters have reserved up to 5% of the shares of common stock for sale at the initial public offering price to persons who are our employees, or who are otherwise associated with us, through a directed share program. The number of shares of common stock available for sale to the general public will be reduced by the number of directed shares purchased by participants in the program. Any directed shares not purchased will be offered by the underwriters to the general public on the same basis as all other shares of common stock offered. We and the selling stockholders have agreed to indemnify the underwriters against certain liabilities and expenses, including liabilities under the Securities Act. Additionally, we have agreed to indemnify the underwriters against certain liabilities and expenses in connection with the sales of the directed shares. We have applied to list our shares of common stock on the New York Stock Exchange under the symbol "GEG." The underwriters have undertaken to sell shares of common stock to a minimum of 2,000 beneficial owners in lots of 100 or more shares to meet the New York Stock Exchange distribution requirements for trading. Prior to this offering there has been no public market for our common stock. Consequently, the initial public offering price for the shares will be determined by negotiations between us and the representatives. Among the factors to be considered in determining the initial public offering price is our record of operations, our current financial condition, our future prospects, our markets, the economic conditions in and future prospects for the industry in which we compete, our management, and currently prevailing general conditions in the equity securities markets, including current market valuations of publicly traded companies we consider comparable to us. There can be no assurance, however, that the price at which our shares will sell in the public market after this offering will not be lower than the price at which our shares are sold by the underwriters or that an active trading market in our common stock will develop and continue after this offering. In connection with this offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act. - Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. - Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicated short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by either exercising their over-allotment option and/or purchasing shares in the open market. - Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created 63 68 if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. - Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The New York Stock Exchange or otherwise and, if commenced, may be discontinued at any time. A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters participating in this offering. The representatives may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters that will make internet distributions on the same basis as other allocations. Credit Suisse First Boston Corporation may effect an on-line distribution through its affiliate, CSFBdirect Inc., an on-line broker dealer, as a selling group member. The representatives have performed investment banking and advisory services for us from time to time for which they have received customary fees and expenses. The representatives may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business. Giving effect to the reorganization transaction as described under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- The Reorganization Transaction" and assuming no exercise of the over-allotment option, affiliates of Credit Suisse First Boston Corporation will own approximately 2,709,232 shares of our common stock, or approximately 6.0% of the outstanding shares following this offering and affiliates of Deutsche Banc Alex. Brown Inc. will own approximately 1,363,818 shares of our common stock, or approximately 3.0% of the outstanding shares following this offering. Several banks affiliated with the underwriters participating in this offering are lenders under our senior credit facility and our senior subordinated loan agreement. Affiliates of Credit Suisse First Boston Corporation are lenders and syndication agent under our existing senior credit facility and our senior subordinated loan agreement and will receive a portion of the proceeds of this offering from the repayment of those facilities. In addition, an affiliate of Deutsche Banc Alex. Brown Inc. is a lender and administrative agent under our existing senior credit facility and will receive a portion of the proceeds of this offering from the repayment of that facility. We are currently in compliance with the terms of the indebtedness owed by us to banks affiliated with the underwriters. The decision of the underwriters to distribute our common stock was made independently of the banks affiliated with those underwriters, which banks had no involvement in determining whether or when we would sell our common stock or the terms of the offering. Because affiliates of Credit Suisse First Boston Corporation and Deutsche Banc Alex. Brown Inc. hold substantial amounts of our debt and will receive more than 10% of the net proceeds of the offering through repayment of this debt, those underwriters may be deemed to have a "conflict of interest" with us under Rule 2710(c)(8) of the National Association of Securities Dealers, Inc. When a NASD member with a conflict of interest participates as an underwriter in an initial public offering, Rule 2720 of the NASD requires that the initial public offering price may be no higher than that recommended by a "qualified independent underwriter," as defined by NASD. In accordance with this rule, Salomon Smith Barney Inc. has assumed the responsibilities of acting as a qualified independent underwriter. In its role as a qualified independent underwriter, Salomon Smith Barney Inc. has performed a due diligence investigation and participated in the preparation of the registration statement of which this prospectus is a part. Salomon Smith Barney Inc. will not receive any additional fees for serving as qualified independent underwriter in connection with this offering. We have agreed to indemnify Salomon Smith Barney Inc. against liabilities incurred in connection with acting as a qualified independent underwriter, including liabilities under the Securities Act. 64 69 NOTICE TO CANADIAN RESIDENTS RESALE RESTRICTIONS The distribution of the common stock in Canada is being made only on a private placement basis exempt from the requirement that we prepare and file a prospectus with the securities regulatory authorities in each province where trades of common stock are made. Any resale of the common stock in Canada must be made under applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advise prior to any resale of the common stock. REPRESENTATIONS OF PURCHASERS By purchasing common stock in Canada and accepting a purchase confirmation, a purchaser is representing to us and the dealer from whom the purchase confirmation is received that - the purchaser is entitled under applicable provincial securities laws to purchase the common stock without the benefit of a prospectus qualified under those securities laws; - where required by law, that the purchaser is purchasing as principal and not as agent; and - the purchaser has reviewed the text above under Resale Restrictions. RIGHTS OF ACTION (ONTARIO PURCHASERS) The securities being offered are those of a foreign issuer and Ontario purchasers will not receive the contractual right of action prescribed by Ontario securities law. As a result, Ontario purchasers must rely on other remedies that may be available, including common law rights of action for damages or rescission or rights of action under the civil liability provisions of the U.S. federal securities laws. ENFORCEMENT OF LEGAL RIGHTS All of the issuer's directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon the issuer or such persons. All or a substantial portion of the assets and of the issuer and such persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against the issuer or such persons in Canada or to enforce a judgment obtained in Canadian courts against such issuer or persons outside of Canada. NOTICE TO BRITISH COLUMBIA RESIDENTS A purchaser of common stock to whom the Securities Act (British Columbia) applies is advised that the purchaser is required to file with the British Columbia Securities Commission a report within ten days of the sale of any common stock acquired by the purchaser pursuant to this offering. The report must be in the form attached to British Columbia Securities Commission Blanket Order BOR #95/17, a copy of which may be obtained from us. Only one report must be filed for common stock acquired on the same date and under the same prospectus exemption. TAXATION AND ELIGIBILITY OR INVESTMENT Canadian purchasers of common stock should consult their own legal and tax advisors with respect to the tax consequences of an investment in the common stock in their particular circumstances and about the eligibility of the common stock for investment by the purchaser under relevant Canadian legislation. 65 70 LEGAL MATTERS The validity of the issuance of securities offered by this prospectus will be passed upon for us by White & Case LLP, New York, New York. Various legal matters related to this offering will be passed upon for the underwriters by Cravath, Swaine & Moore, New York, New York. EXPERTS The consolidated financial statements and schedules included in this prospectus and elsewhere in the registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. WHERE YOU CAN FIND ADDITIONAL INFORMATION We have filed with the SEC a registration statement on Form S-1 with respect to the shares offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules which are part of the registration statement. For further information about us and our shares, you should refer to the registration statement. With respect to any contract, agreement or other document filed as an exhibit to the registration statement, we refer you to the exhibit for a more complete description of the matter involved. You may read and copy all or any portion of the registration statement or any reports, statements or other information in the files at the public reference facilities of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the SEC located at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can request copies of these documents upon payment of a duplicating fee by writing to the SEC. You may call the SEC at 1-800-SEC-0330 for further information on the operation of its public reference rooms. Our filings, including the registration statement, will also be available to you on the Internet site maintained by the SEC at http://www.sec.gov. As a result of this offering, we will become subject to the full informational requirements of the Securities Exchange Act of 1934, and will file annual, quarterly and current reports, proxy statements and other information with the SEC. You can request copies of these documents, for a copying fee, by writing to the SEC. We intend to furnish our stockholders with annual reports containing financial statements audited by our independent auditors. 66 71 GEEG HOLDINGS, L.L.C. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES Report of Independent Public Accountants.................... F-2 Consolidated Balance Sheets as of December 25, 1999 and December 30, 2000......................................... F-3 Consolidated Statements of Income (Loss) for the Period From June 5, 1998 (Inception) through December 26, 1998 and for the Years Ended December 25, 1999 and December 30, 2000... F-4 Consolidated Statements of Comprehensive Income (Loss) for the Period from June 5, 1998 (Inception) through December 26, 1998 and for the Years Ended December 25, 1999 and December 30, 2000......................................... F-5 Consolidated Statements of Members' Equity (Deficit) for the Period from June 5, 1998 (Inception) through December 26, 1998 and for the Years Ended December 25, 1999 and December 30, 2000......................................... F-6 Consolidated Statements of Cash Flows for the Period from June 5, 1998 (Inception) through December 26, 1998 and for the Years Ended December 25, 1999 and December 30, 2000... F-7 Notes to Consolidated Financial Statements.................. F-8 JASON INCORPORATED POWER GENERATION DIVISION (PREDECESSOR) Report of Independent Public Accountants.................... F-24 Consolidated Statement of Income and Comprehensive Income for the Period from December 27, 1997 through June 4, 1998...................................................... F-25 Consolidated Statement of Equity for the Period from December 27, 1997 through June 4, 1998.................... F-26 Consolidated Statement of Cash Flows for the Period from December 27, 1997 through June 4, 1998.................... F-27 Notes to Consolidated Financial Statements.................. F-28
F-1 72 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To GEEG Holdings, L.L.C.: We have audited the accompanying consolidated balance sheets of GEEG Holdings, L.L.C. (a Delaware limited liability company) and Subsidiaries as of December 25, 1999 and December 30, 2000, and the related consolidated statements of income (loss), comprehensive income (loss), members' equity (deficit) and cash flows for the period from June 5, 1998 (inception) through December 26, 1998 and for each of the two years in the period ended December 30, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of GEEG Holdings, L.L.C. and Subsidiaries as of December 25, 1999 and December 30, 2000, and the results of their operations and their cash flows for the period from June 5, 1998 (inception) through December 26, 1998 and for each of the two years in the period ended December 30, 2000 in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Minneapolis, Minnesota, February 16, 2001 F-2 73 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
UNAUDITED PRO FORMA STOCKHOLDERS' DEFICIT DECEMBER 30, DECEMBER 25, DECEMBER 30, 2000 1999 2000 (SEE NOTE 2) ------------ ------------ ------------- ASSETS Current assets: Cash and cash equivalents........................... $ 11,113 $ 26,308 Accounts receivable, net of allowance of $985 and $1,841........................................... 48,003 67,798 Inventories......................................... 4,239 9,738 Costs and estimated earnings in excess of billings......................................... 21,845 65,260 Other current assets................................ 305 1,833 -------- --------- Total current assets........................ 85,505 170,937 Property, plant and equipment, net.................... 15,071 19,433 Goodwill.............................................. 29,455 45,879 Other assets, principally deferred financing costs.... 1,462 9,444 -------- --------- Total assets................................ $131,493 $ 245,693 ======== ========= LIABILITIES AND MEMBERS' EQUITY (DEFICIT) Current liabilities: Current maturities of long-term debt................ $ 1,158 $ 3,963 Accounts payable.................................... 14,550 38,055 Accrued compensation and employee benefits.......... 8,910 8,282 Accrued warranty.................................... 5,991 9,720 Billings in excess of costs and estimated earnings......................................... 58,631 119,110 Other current liabilities........................... 5,791 9,002 -------- --------- Total current liabilities................... 95,031 188,132 Long-term debt, net of current maturities............. 26,263 215,131 Commitments and contingencies (Notes 5 and 9) Members' equity (deficit)............................. 10,199 (157,570) $ -- Stockholders' deficit: Common stock........................................ -- -- 375 Additional paid-in capital.......................... -- -- (157,945) Retained earnings................................... -- -- 84,000 -------- --------- --------- Total stockholders' deficit................. -- -- $ (73,570) ========= Total liabilities and equity (deficit)...... $131,493 $ 245,693 ======== =========
The accompanying notes are an integral part of these consolidated financial statements. F-3 74 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
FOR THE PERIOD FROM FOR THE YEAR FOR THE YEAR JUNE 5, 1998 ENDED ENDED (INCEPTION) THROUGH DECEMBER 25, DECEMBER 30, DECEMBER 26, 1998 1999 2000 ------------------- ------------ ------------ Revenues................................................ $98,363 $275,199 $416,591 Cost of sales........................................... 80,283 226,051 345,688 ------- -------- -------- Gross profit.......................................... 18,080 49,148 70,903 Selling and administrative expenses..................... 10,825 23,166 27,045 Recapitalization charge (Note 3)........................ -- -- 38,114 Amortization expense.................................... 727 1,100 1,250 ------- -------- -------- Operating income...................................... 6,528 24,882 4,494 Interest expense, net................................... 2,966 3,410 12,175 ------- -------- -------- Income (loss) before income taxes and extraordinary item............................................... 3,562 21,472 (7,681) Income tax provision (benefit).......................... 176 1,087 (433) ------- -------- -------- Income (loss) before extraordinary item............... 3,386 20,385 (7,248) Extraordinary loss from extinguishment of debt.......... -- -- (1,536) ------- -------- -------- Net income (loss)..................................... $ 3,386 $ 20,385 $ (8,784) Preferred dividend...................................... (420) (420) (3,386) ------- -------- -------- Net income (loss) available to common unit holders.... $ 2,966 $ 19,965 $(12,170) ======= ======== ======== Basic income (loss) per common unit Income (loss) before extraordinary item............... $ 0.14 $ 0.89 $ (0.77) Extraordinary item.................................... -- -- (0.11) ------- -------- -------- Net income (loss) available to common unit holders.... $ 0.14 $ 0.89 $ (0.88) ======= ======== ======== Diluted income (loss) per common unit Income (loss) before extraordinary item............... $ 0.11 $ 0.71 $ (0.77) Extraordinary item.................................... -- -- (0.11) ------- -------- -------- Net income (loss) available to common unit holders.... $ 0.11 $ 0.71 $ (0.88) ======= ======== ======== Unaudited pro forma amounts to reflect income taxes (Note 2) Income (loss) before income taxes and extraordinary item............................................... 3,562 21,472 (7,681) Pro forma income tax provision (benefit).............. 1,229 8,329 (3,003) ------- -------- -------- Pro forma income (loss) before extraordinary item..... $ 2,333 $ 13,143 $ (4,678) ======= ======== ======== Income (loss) per common unit before extraordinary item Pro forma -- Basic income (loss) per common unit...... $ 0.09 $ 0.56 $ (0.58) Pro forma -- Diluted income (loss) per common unit.... 0.07 0.45 (0.58)
The accompanying notes are an integral part of these consolidated financial statements. F-4 75 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (IN THOUSANDS)
FOR THE PERIOD FROM JUNE 5, 1998 (INCEPTION) FOR THE YEAR FOR THE YEAR THROUGH ENDED ENDED DECEMBER 26, DECEMBER 25, DECEMBER 30, 1998 1999 2000 -------------- ------------ ------------ Net income (loss)..................................... $3,386 $20,385 $(8,784) Foreign currency translation adjustments.............. 37 (77) (17) ------ ------- ------- Comprehensive income (loss)......................... $3,423 $20,308 $(8,801) ====== ======= =======
The accompanying notes are an integral part of these consolidated financial statements. F-5 76 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (DEFICIT) (IN THOUSANDS, EXCEPT UNIT AMOUNTS)
COMMON UNITS ----------------------------------------------------------------- PREFERRED UNITS SERIES A SERIES B JUNIOR ------------------- --------------------- ------------------- ------------------- NUMBER OF NUMBER OF NUMBER OF NUMBER OF UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT WARRANTS --------- ------- ----------- ------- ---------- ------ ---------- ------ -------- Initial Capitalization, June 5, 1998 (inception)............. 90,000 $9,000 16,195,575 $1,026 2,368,254 $150 2,709,554 $ 10 $134 Issuance of preferred and common units............... 900 90 157,884 10 -- -- -- -- -- Options exercised............ -- -- 1,094,243 69 -- -- -- -- -- Preferred dividend........... -- 420 -- -- -- -- -- -- -- Foreign currency translation adjustment................. -- -- -- -- -- -- -- -- -- Net income................... -- -- -- -- -- -- -- -- -- Tax distributions............ -- -- -- -- -- -- -- -- -- --------- ------- ----------- ------- ---------- ---- ---------- ---- ---- Balance, December 26, 1998..... 90,900 9,510 17,447,702 1,105 2,368,254 150 2,709,554 10 134 Preferred dividend........... -- 420 -- -- -- -- -- -- -- Redemption of preferred units...................... (90,900) (9,930) -- -- -- -- -- -- -- Foreign currency translation adjustment................. -- -- -- -- -- -- -- -- -- Net income................... -- -- -- -- -- -- -- -- -- Tax distributions............ -- -- -- -- -- -- -- -- -- --------- ------- ----------- ------- ---------- ---- ---------- ---- ---- Balance, December 25, 1999..... -- -- 17,447,702 1,105 2,368,254 150 2,709,554 10 134 Purchase and conversion of equity instruments......... 183,600 18,360 (17,243,702) 935 (2,368,254) (150) (2,709,554) (10) (134) Issuance of preferred units...................... 825,368 77,166 -- -- -- -- -- -- -- Issuance of common units..... -- -- 918,280 8,646 -- -- -- -- -- Preferred dividend........... -- 3,386 -- -- -- -- -- -- -- Foreign currency translation adjustment................. -- -- -- -- -- -- -- -- -- Net loss..................... -- -- -- -- -- -- -- -- -- Tax distributions............ -- -- -- -- -- -- -- -- -- --------- ------- ----------- ------- ---------- ---- ---------- ---- ---- Balance, December 30, 2000..... 1,008,968 $98,912 1,122,280 $10,686 -- $ -- -- $ -- $ -- ========= ======= =========== ======= ========== ==== ========== ==== ==== NOTES ACCUMULATED RECEIVABLE UNDISTRIBUTED OTHER FROM EARNINGS COMPREHENSIVE MEMBERS (DEFICIT) INCOME TOTAL ---------- ------------- ------------- --------- Initial Capitalization, June 5, 1998 (inception)............. $(400) $ -- $ -- $ 9,920 Issuance of preferred and common units............... -- -- -- 100 Options exercised............ (69) -- -- -- Preferred dividend........... -- (420) -- -- Foreign currency translation adjustment................. -- -- 37 37 Net income................... -- 3,386 -- 3,386 Tax distributions............ -- (1,100) -- (1,100) ----- --------- ---- --------- Balance, December 26, 1998..... (469) 1,866 37 12,343 Preferred dividend........... -- (420) -- -- Redemption of preferred units...................... 469 -- -- (9,461) Foreign currency translation adjustment................. -- -- (77) (77) Net income................... -- 20,385 -- 20,385 Tax distributions............ -- (12,991) -- (12,991) ----- --------- ---- --------- Balance, December 25, 1999..... -- 8,840 (40) 10,199 Purchase and conversion of equity instruments......... -- (251,839) -- (232,838) Issuance of preferred units...................... -- -- -- 77,166 Issuance of common units..... -- -- -- 8,646 Preferred dividend........... -- (3,386) -- -- Foreign currency translation adjustment................. -- -- (17) (17) Net loss..................... -- (8,784) -- (8,784) Tax distributions............ -- (11,942) -- (11,942) ----- --------- ---- --------- Balance, December 30, 2000..... $ -- $(267,111) $(57) $(157,570) ===== ========= ==== =========
The accompanying notes are an integral part of these consolidated financial statements. F-6 77 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FOR THE PERIOD FROM JUNE 5, 1998 (INCEPTION) FOR THE FOR THE THROUGH YEAR ENDED YEAR ENDED DECEMBER 26, DECEMBER 25, DECEMBER 30, 1998 1999 2000 -------------- ------------ ------------ Operating activities: Net income (loss).................................. $ 3,386 $ 20,385 $ (8,784) Adjustments to reconcile net income (loss) to net cash provided by operating activities -- Extraordinary loss.............................. -- -- 1,536 Depreciation and amortization................... 1,851 3,126 4,311 Changes in operating items (Note 10)............ 2,277 15,955 27,726 -------- -------- --------- Net cash provided by operating activities............................... 7,514 39,466 24,789 -------- -------- --------- Investing activities: Purchases of property, plant and equipment......... (1,065) (2,375) (2,187) Proceeds from sale of assets....................... -- 3,768 -- Acquisition, net of cash acquired.................. -- -- (17,653) -------- -------- --------- Net cash (used for) provided by investing activities................................. (1,065) 1,393 (19,840) -------- -------- --------- Financing activities: Proceeds from issuance of long-term debt........... -- -- 221,825 Payments on long-term debt......................... (313) (17,017) (31,950) Proceeds from sale of preferred units.............. 90 -- 68,429 Proceeds from sale of common units................. 10 -- 7,675 Redemption of equity instruments................... -- (9,461) (232,838) Member tax distribution............................ -- (12,991) (14,427) Increase in deferred financing costs............... -- -- (8,468) -------- -------- --------- Net cash (used for) provided by financing activities............................... (213) (39,469) 10,246 -------- -------- --------- Net increase in cash and cash equivalents.............................. 6,236 1,390 15,195 -------- -------- --------- Formation transactions: Proceeds from sale of equity instruments........... 9,920 -- -- Proceeds from long-term debt....................... 44,689 -- -- Increase in deferred financing costs............... (1,939) -- -- Acquisition of net assets, net of cash acquired.... (47,030) -- -- Receivable from predecessor........................ (2,153) -- -- -------- -------- --------- Cash and cash equivalents from formation transactions....................................... 3,487 -- -- Cash and cash equivalents, beginning of period....... -- 9,723 11,113 -------- -------- --------- Cash and cash equivalents, end of period............. $ 9,723 $ 11,113 $ 26,308 ======== ======== =========
The accompanying notes are an integral part of these consolidated financial statements. F-7 78 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1998 (STUB PERIOD), 1999, 2000 1. BUSINESS AND ORGANIZATION GEEG Holdings, L.L.C. and Subsidiaries (the Company or GEEG) designs, engineers and manufactures heat recovery and auxiliary power equipment. The Company's corporate headquarters are located in Tulsa, Oklahoma, with operating facilities in Plymouth, Minnesota; Tulsa, Oklahoma; Fort Smith, Arkansas; Auburn, Massachusetts; Clinton, South Carolina; Monterrey, Mexico; and Heerlen, Netherlands. On May 13, 1998, the Company was formed for the purpose of purchasing the net assets of the Power Generation Division of Jason Incorporated. On June 5, 1998 (inception), the Company purchased the net assets for $48.9 million in cash. The acquisition was accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to the acquired assets and assumed liabilities based on their respective fair values. The purchase price and related acquisition costs exceeded the fair values assigned to tangible and identifiable intangible assets and liabilities by approximately $32.5 million, which was assigned to goodwill. GEEG Holdings, L.L.C. had no operations from May 13, 1998 to June 5, 1998 and, as such, the accompanying consolidated financial statements reflect the Company's inception date as June 5, 1998. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of GEEG Holdings L.L.C. and its wholly owned subsidiaries: Deltak, L.L.C. (Deltak); Deltak Construction Services, Inc.; Deltak Europe -- BV; Braden Manufacturing, L.L.C. (Braden); Braden Construction Services, Inc.; Braden Europe -- BV; Braden Manufacturing S.A. de C.V.; and Consolidated Fabricators, Inc. (CFI). All intercompany accounts and transactions have been eliminated in consolidation. Fiscal Year End The Company uses a 52-/53-week fiscal year ending on the last Saturday in December. For the purposes of these notes to the consolidated financial statements, the period from June 5, 1998 (inception) through December 26, 1998 and the fiscal years ended December 25, 1999 and December 30, 2000 are referred to as 1998 (stub period), 1999 and 2000, respectively. The 1998 (stub period) includes 29 weeks while 1999 and 2000 include 52 and 53 weeks, respectively. Cash and Cash Equivalents The Company considers all highly liquid investments which are convertible into known amounts of cash and have original maturities of three months or less to be cash equivalents. Cash equivalents consist primarily of investments in commercial paper. Inventories Inventories primarily consist of raw materials and are stated at the lower of first-in, first-out cost or market. Property, Plant and Equipment Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method for financial reporting purposes over the estimated useful lives. F-8 79 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 The Company's property, plant and equipment balances, by significant asset category, are as follows:
DECEMBER 25, DECEMBER 30, 1999 2000 LIVES ------------ ------------ ---------- (IN THOUSANDS) Land.................................. $ 1,694 $ 2,033 -- Buildings and improvements............ 5,676 9,422 5-39 years Machinery and equipment............... 8,080 9,504 5-12 years Furniture and fixtures................ 2,496 3,416 3-10 years ------- ------- 17,946 24,375 Less -- Accumulated depreciation...... (2,875) (4,942) ------- ------- Property, plant and equipment, net.... $15,071 $19,433 ======= =======
Depreciation expense for 1998 (stub period), 1999 and 2000 was $0.9 million, $2.0 million and $2.2 million, respectively. Costs of significant additions, renewals and betterments are capitalized. When an asset is sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and the gain or loss on disposition is reflected in earnings. Maintenance and repairs are charged to operations when incurred. Goodwill Goodwill represents the costs of acquisitions in excess of the fair value of the net assets acquired and is amortized using the straight-line method over 30 years. Accumulated amortization as of December 25, 1999 and December 30, 2000 was $1.6 million and $3.0 million, respectively. Deferred Financing Costs Deferred financing costs are amortized over the terms of the related debt facilities. Total interest expense associated with the amortization of these costs was $0.2 million, $0.3 million and $0.6 million in 1998 (stub period), 1999 and 2000, respectively. Long-Lived Assets Long-lived assets, such as property and equipment and intangible assets, are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows from the use of these assets. When any such impairment exists, the related assets will be written down to fair value. Warranty Costs The Company typically warrants labor and fabrication for 12 to 18 months after shipment. Estimated costs of warranty repairs are accrued and included on the accompanying consolidated balance sheets as accrued warranty. Income Taxes The Company is organized as a limited liability company (LLC) whereby all tax liabilities are the responsibility of individual investors. Deferred tax assets and liabilities become the responsibility of the Company if and when the LLC structure is converted to a C-Corporation. Certain of the Company's subsidiaries are corporations responsible for federal, state and foreign taxes. For those entities, deferred tax assets and liabilities are not significant. F-9 80 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 Pro Forma Information (Unaudited) The unaudited pro forma December 30, 2000 balance sheet amounts give effect to a proposed reorganization from a limited liability company to a C-Corporation and the recording of deferred taxes due to the proposed change in tax status. The unaudited pro forma income tax expense (benefit) shown on the consolidated statements of income (loss) is presented assuming the Company had been a C-Corporation during 1998 (stub period), 1999 and 2000, using effective tax rates of 35 percent, 39 percent and 39 percent, respectively. Revenue Recognition GEEG has two segments: Heat Recovery Equipment and Auxiliary Power Equipment. Heat Recovery Equipment products include heat recovery steam generators, heat recovery boilers, and other types of waste heat products. Auxiliary Power Equipment products include exhaust and inlet systems, filter houses, retrofit activity, diverter dampers, turbine enclosures and other power equipment. Revenues for the Company's Heat Recovery Equipment segment are recognized on the percentage-of-completion method based on the percentage of actual hours incurred to date in relation to total estimated hours (internal and subcontractor) for each contract. Changes in job performance, job conditions, estimated profitability and final contract settlements may result in revisions to costs and income, and the effects of such revisions are recognized in the period that the revisions are determined. Revenues for the Company's Auxiliary Power Equipment segment are recognized on the completed-contract method due to the short-term nature of their product production period. The Company recognizes various types of service revenues as the services are provided. Service revenues are not significant in any period presented. Major Customers The Company has certain customers that represent more than 10 percent of consolidated revenues for 1998 (stub period), 1999 and 2000 as follows:
1998 (STUB PERIOD) 1999 2000 ------------- ---- ---- Customer A............................................... 20% 21% 31% Customer B............................................... 13% -- -- Customer C............................................... -- 15% -- Customer D............................................... -- 14% -- Customer E............................................... -- -- 22%
As of December 25, 1999, customer A made up approximately 29 percent of the consolidated accounts receivable balance. As of December 30, 2000, customer A and customer B made up 15 percent and 14 percent, respectively, of the consolidated accounts receivable balance. Fair Value of Financial Instruments The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and short-term debt approximates fair value due to the short term nature of these instruments. The fair value of the Company's long-term debt is estimated based on the discounted value of the future cash flows expected to be paid on the loans. The discount rate used to estimate the fair value of the loans is the rate currently available to the Company for loans with similar terms and maturities. The fair value at December 25, 1999 and December 30, 2000 approximated the carrying value. F-10 81 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 Income (Loss) Per Common Unit Basic and diluted income (loss) per common unit are calculated as follows:
1998 (STUB PERIOD) 1999 2000 ------------- ----------- ----------- (IN THOUSANDS, EXCEPT UNIT AND PER COMMON UNIT DATA) Basic income (loss) per common unit Numerator: Income (loss) before extraordinary item................. $ 3,386 $ 20,385 $ (7,248) Preferred stock dividend................................ (420) (420) (3,386) ----------- ----------- ----------- Income (loss) available to common unit holders.......... 2,966 19,965 (10,634) Extraordinary item...................................... -- -- (1,536) ----------- ----------- ----------- Net income (loss) available to common unit holders.......................................... $ 2,966 $ 19,965 $ (12,170) =========== =========== =========== Denominator: Weighted average units outstanding...................... 21,319,765 22,525,510 13,814,222 Basic income (loss) per common unit Income (loss) before extraordinary item................... $ 0.14 $ 0.89 $ (0.77) Extraordinary item........................................ -- -- (0.11) ----------- ----------- ----------- Net income (loss) available to common unit holders.......................................... $ 0.14 $ 0.89 $ (0.88) =========== =========== =========== Diluted income (loss) per common unit Numerator: Income (loss) before extraordinary item................. $ 3,386 $ 20,385 $ (7,248) Preferred stock dividend................................ (420) (420) (3,386) ----------- ----------- ----------- Income (loss) available to common unit holders.......... 2,966 19,965 (10,634) Extraordinary item...................................... -- -- (1,536) ----------- ----------- ----------- Net income (loss) available to common unit holders.......................................... $ 2,966 $ 19,965 $ (12,170) =========== =========== =========== Denominator: Weighted average units outstanding...................... 21,319,765 22,525,510 13,814,222 Dilutive effect of options to purchase common units..... 5,064,654 5,503,502 -- ----------- ----------- ----------- Weighted average units outstanding assuming dilution.... 26,384,419 28,029,012 13,814,222 =========== =========== =========== Diluted income (loss) per common unit Income (loss) before extraordinary item................. $ 0.11 $ 0.71 $ (0.77) Extraordinary item...................................... -- -- (0.11) ----------- ----------- ----------- Net income (loss) available to common unit holders.......................................... $ 0.11 $ 0.71 $ (0.88) =========== =========== ===========
Derivative Financial Instruments The Company adopted Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities," (SFAS 133), effective December 31, 2000. This standard establishes accounting and reporting standards requiring that every derivative instrument be recorded on the balance sheet as either an asset or a liability measured at fair value. SFAS 133 requires that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires that a company formally document, designate F-11 82 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 and assess the effectiveness of transactions that receive hedge accounting treatment. The impact of adopting SFAS 133 was not material. Derivative financial instruments are used by the Company in the management of its foreign currency exchange and interest rate exposures. Amounts to be paid or received under agreements are accrued and recognized over the life of the agreements. The Company is exposed to credit risk in the event of nonperformance by the other parties to the agreements. However, the Company does not anticipate nonperformance by its counterparties. On December 29, 2000, the Company entered into a zero-cost interest rate collar whereby it holds an 8% interest rate cap and has written a 5.36% interest rate floor. The Company has designated the interest rate collar as a hedge of the variability of a portion of its floating-rate interest payments attributable to changes in market interest rates. As such, the Company will use the interest rate collar to place both a minimum and maximum limit on the total interest payments the Company must pay on approximately $77.1 million of its floating rate debt. Under SFAS 133, the Company will recognize the fair value of both the floor and the cap in its balance sheet. Additionally, the Company will mark the floor and cap to fair value through other comprehensive income and then recognize such fluctuations in earnings in the same period as the earnings effect of the variable rate debt. The collar will be settled at three-month intervals through December 31, 2003. Depending on the movement in interest rates, the Company will have the right or the obligation to a series of conditional receivables or payables. The Company will account for the interest collar as a net written option and as such will not be subject to the effectiveness tests of SFAS 133. As the interest rate collar was entered into on December 29, 2000, there were no increases or decreases in fair value as of December 30, 2000. At December 25, 1999, the Company had interest rate collars for approximately $15.0 million of its floating rate debt. The fair value of the 1999 interest rate collar was not significant. Notional amounts outstanding under foreign currency option agreements at December 30, 2000, were $3.6 million. No amounts were outstanding under such contracts at December 25, 1999. The fair values of the option agreements were not significant as of December 30, 2000. Foreign Currency Assets and liabilities of the Company's foreign operations are translated at year-end exchange rates, and revenues and expenses are translated at average exchange rates prevailing during the period. Translation adjustments are recorded as a separate component of members' equity and other comprehensive income on the accompanying consolidated financial statements. Gains and losses from foreign currency transactions are included in earnings. Such gains and losses have not been significant in any period. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to projected total costs of projects, including warranty and contingency costs, and the percentage of completion on contract accounting. Ultimate results could differ from those estimates. F-12 83 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 Recent Accounting Pronouncement In December 1999, the Securities and Exchange Commission staff released Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements." The adoption of this statement in the fourth quarter of 2000 did not have a material impact on the Company's financial position or results of operations. 3. RECAPITALIZATION TRANSACTION On August 1, 2000, the Company consummated a recapitalization transaction (the Recapitalization) pursuant to an Agreement and Plan of Merger with GEEG Acquisition Holdings Corp., GEEG Acquisition Holdings, L.L.C. and GEEG Acquisition, L.L.C. (Merger Sub) (collectively, the Control Group). In conjunction with the Recapitalization, the following occurred: - Merger Sub was merged with and into the Company, with the Company continuing as the surviving entity. - The Company borrowed $140 million in the form of senior term loans and $67.5 million in the form of a senior subordinated loan. In connection with the senior subordinated borrowings, the Company issued 77,075 new common units and 69,368 new preferred units to the lenders and recorded the $7.7 million fair value of the units as debt discount. The Company also paid $8.2 million for deferred financing costs. - The Company realized proceeds of $76.1 million from the sale of new common and preferred units. The proceeds were recorded net of $5.9 million of expenses. - The Company converted prior common units owned by certain investors into 183,600 of new preferred units and 204,000 of new common units. - The Company redeemed the remaining prior common units and all outstanding warrants for $232.8 million. - The Company repaid the then outstanding $15.0 million on a senior subordinated loan and recorded a $1.5 million extraordinary loss associated with the write-off of associated unamortized deferred financing costs. - The Company cancelled all common unit options issued and outstanding immediately prior to the Recapitalization for $38.1 million, which has been recorded as a corresponding recapitalization charge on the accompanying consolidated statement of income (loss). After completion of the Recapitalization, continuing investors held approximately 18.5 percent of the voting control of the Company. As such, the Company was not required to push-down the Control Group purchase accounting to the Company. As a part of the Recapitalization and as noted above, the prior common units were converted into new preferred and common units using an approximate 1 to 260 conversion ratio. As a result of the conversion, all prior period common unit related amounts included in these footnotes and on the accompanying consolidated financial statements have been restated based on this conversion ratio. 4. ACQUISITIONS On October 31, 2000, the Company acquired all of the outstanding shares of CFI Holdings, Inc. and Subsidiaries. CFI makes turbine enclosures for the auxiliary power equipment industry. CFI sales are now included as turbine enclosure product revenue within the Company's Auxiliary Power Equipment segment. F-13 84 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 Total purchase consideration of $25.2 million, including contingent consideration of $2.5 million earned in 2000, consisted of $17.7 million of cash, $5.5 million of promissory notes and $2.0 million in equity interests in the Company. Approximately $3.2 million of the cash consideration has been reserved in escrow. To finance a portion of the purchase, the Company utilized the Term C loan (see note 7). The acquisition was accounted for using the purchase method of accounting, and accordingly, the purchase price was allocated to the net assets acquired based on their estimated fair values. This treatment resulted in approximately $15.4 million of cost in excess of the fair value of net identifiable assets acquired, which has been recorded as goodwill in the accompanying consolidated financial statements. The goodwill is being amortized on a straight-line basis over 30 years. The results of operations of CFI from November 1, 2000 to December 30, 2000 have been included in the accompanying consolidated statements of income (loss). Pro forma consolidated statements of income (loss) as if the acquisition had taken place as of December 26, 1998 are shown below:
1999 2000 (UNAUDITED) (UNAUDITED) ----------- ----------- (IN THOUSANDS, EXCEPT FOR PER COMMON UNIT DATA) Revenues...................................... $297,949 $447,843 Net income (loss) before extraordinary item... 18,853 (5,067) Net income (loss) available to common unit holders..................................... 18,433 (9,988) Basic income (loss) per common unit........... 0.82 (0.72) Diluted income (loss) per common unit......... 0.66 (0.72)
5. RELATED-PARTY TRANSACTIONS Certain investors have historically provided consultation services to the Company, for which the Company is charged management fees. Total expenses under these arrangements were $0.1 million, $0.3 million and $0.7 million for 1998 (stub period), 1999 and 2000, respectively. The Company is contractually committed to payments of management fees totaling $1.25 million per year through 2003. 6. UNCOMPLETED CONTRACTS The Heat Recovery Equipment segment enters into contracts that allow for periodic billings over the contract term. At any point in time each project under construction could have either costs and estimated earnings in excess of billings or billings in excess of costs and estimated earnings. The Auxiliary Power Equipment segment typically bills customers only at the completion of contracts. No earnings are recognized until contract completion. Costs, earnings and billings related to uncompleted contracts consist of the following:
DECEMBER 25, DECEMBER 30, 1999 2000 ------------ ------------ (IN THOUSANDS) Costs incurred on uncompleted contracts............ $257,826 $392,257 Earnings recognized on uncompleted contracts....... 61,692 88,232 -------- -------- Total.................................... 319,518 480,489 Less -- Billings to date........................... 356,304 534,339 -------- -------- Net...................................... $(36,786) $(53,850) ======== ========
F-14 85 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 The net amounts are included in the accompanying consolidated balance sheets under the following headings:
DECEMBER 25, DECEMBER 30, 1999 2000 ------------ ------------ (IN THOUSANDS) Costs and estimated earnings in excess of billings......................................... $ 21,845 $ 65,260 Billings in excess of costs and estimated earnings......................................... (58,631) (119,110) -------- --------- Total.................................... $(36,786) $ (53,850) ======== =========
7. LONG-TERM DEBT The Company's long-term debt consisted of the following:
DECEMBER 25, DECEMBER 30, 1999 2000 ------------ ------------ (IN THOUSANDS) Term A senior loan, bearing interest at LIBOR plus 3.25 percent (9.89 percent at December 30, 2000), principal and interest payable quarterly, as defined, through July 2006...................................................... $ -- $ 29,625 Term B senior loan, bearing interest at LIBOR plus 4.00 percent (10.64 percent at December 30, 2000), principal and interest payable quarterly, as defined, through July 2008...................................................... -- 109,725 Term C senior loan, bearing interest at LIBOR margin rate plus 3.25 percent (9.89 percent at December 30, 2000), principal and interest payable quarterly, as defined, through July 2006......................................... -- 14,813 Senior subordinated loan, bearing interest at 13.50 percent, interest payable semi-annually, as defined, through August 2010, net of a $8,214 discount............................ -- 59,286 Note payable to former owners of Consolidated Fabricators, Inc., bearing interest at 10.00 percent, payable quarterly, as defined, 2003 through 2007.................. -- 5,500 Term A note, repaid in 2000................................. 5,934 -- Term B note, repaid in 2000................................. 6,736 -- Senior subordinated loan, repaid in 2000.................... 14,751 -- Other....................................................... -- 145 ------- -------- 27,421 219,094 Less current maturities..................................... (1,158) (3,963) ------- -------- Total long-term debt........................................ $26,263 $215,131 ======= ========
Future maturities of long-term debt as of December 30, 2000 are as follows (in thousands): 2001........................................................ $ 3,963 2002........................................................ 6,205 2003........................................................ 9,540 2004........................................................ 11,777 2005........................................................ 13,461 Thereafter.................................................. 174,148 -------- $219,094 ========
F-15 86 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 Substantially all of the Company's assets have been pledged as collateral for the senior financing arrangements. The Company has a revolving credit facility which allows for borrowings of up to $55.0 million. Borrowings under the line bear interest at a floating rate relative to a base rate or LIBOR, as defined, and the Company pays an unused facility fee of 0.5 percent. As of December 30, 2000, no amounts were outstanding under the revolver. The Company uses letters of credit in its normal course of business. Letters of credit totaling $23.0 million were issued and outstanding as of December 30, 2000. While no amounts had been drawn upon these letters of credit, the letters of credit outstanding reduces amounts available under the revolver. The above-mentioned agreements contain, among other restrictions, various covenants including maximum leverage and capital expenditures levels and minimum interest coverage ratios and EBITDA levels. As of December 30, 2000, the Company was in compliance with all such covenants. 8. MEMBERS' EQUITY Preferred Units The Company has authorized and issued 1,008,968 current preferred units with a $100 par value. The current preferred units are not convertible and have no voting rights. Current preferred unit members are entitled to an eight percent annual preferred dividend computed on the members' aggregate preferred equity balance. Current preferred units have liquidation preference to the common units in the event of a liquidation of the Company and have priority on all equity distributions. The Board of Directors may, at its sole option, redeem all or any part of the current preferred units at a price equal to their aggregate preferred capital contribution plus accrued but not yet paid preferred dividends. On July 31, 1999, the Company redeemed all outstanding prior preferred units issued. The Company had authorized 100,000 prior preferred units that included an eight percent annual preferred dividend, as defined. The units were not convertible to common units and had no voting rights. Common Units The Company has authorized and issued 1,122,280 current common units with a $10 par value. Current common units are entitled to one vote. Prior to the Recapitalization (Note 3), the Company had authorized 52,106,800, 6,513,350 and 2,709,554 of Class A, B and Junior units, respectively. Prior Class A and Junior units had one vote per unit. Class B units were nonvoting. All previously outstanding prior common units were repurchased or converted as part of the Recapitalization discussed in Note 3. Option Plans In August 2000, the Company adopted the 2000 Option Plan (the 2000 Plan). The 2000 Plan provides for granting of up to 122,342 options to purchase common units of the Company. Forty percent of the common units available for grant under the 2000 Plan vest over four years and 60 percent of the common units available for grant under the 2000 Plan vest over the earlier of nine years or when certain performance vesting criteria are met. F-16 87 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 As a part of the Recapitalization, all options outstanding under a previous option plan (whether or not exercisable or vested) were cancelled and holders of the cancelled options were paid an amount equal to the options' fair value, resulting in a recapitalization charge of $38.1 million. Prior to October 31, 2000, the Company granted 98,499 options at $10 per common unit, which equaled fair value at the date of grant. On October 31, 2000, the Company granted 5,390 options at $10 per common unit. At the date of grant, the deemed fair value of the Company's common unit was higher than the $10 exercise price resulting in an approximate $20,000 compensation expense and a $745,000 unearned compensation amount which has been recorded in undistributed earnings (deficit) along with a corresponding $745,000 increase in undistributed earnings (deficit) due to the effect of the October 31, 2000 option grant. A summary of the Company's unit option plans from June 5, 1998 through December 30, 2000 is presented below:
UNIT OPTIONS ------------------------------- WEIGHTED AVERAGE UNITS EXERCISE PRICE ----------- ---------------- Outstanding at June 5, 1998 (inception)........ -- $ -- Granted...................................... 4,350,918 .06 Exercised.................................... (1,094,243) .06 ----------- --------- Outstanding at December 26, 1998............... 3,256,675 .06 Granted...................................... 591,673 .58 Forfeited.................................... (19,540) .06 ----------- --------- Outstanding at December 25, 1999............... 3,828,808 .06 - .58 Repurchased.................................. (3,828,808) .06 - .58 Granted...................................... 103,889 10.00 ----------- --------- Outstanding at December 30, 2000............... 103,889 10.00 Exercisable at December 30, 2000............... -- $ --
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), requires the measurement of the fair value of options to be included in the statement of operations or disclosed in the notes to financial statements. The Company elected the disclosure-only alternative under SFAS 123. In determining compensation cost pursuant to SFAS 123, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants during 1998 (stub period), 1999 and 2000:
1998 (STUB PERIOD) 1999 2000 ------------- -------- -------- Risk free interest rate....................... 5.56% 5.78% 6.26% Expected dividend yield....................... None None None Expected lives................................ 5 years 5 years 5 years Expected volatility........................... 44.92% 64.41% 59.22% Option fair value at grant date............... $0.03 $0.34 $5.68
F-17 88 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 Had compensation cost been determined consistent with SFAS 123, the Company's pro forma net income (loss) would have been as follows:
1998 (STUB PERIOD) 1999 2000 ------------- ------- -------- (IN THOUSANDS, EXCEPT PER COMMON UNIT DATA) Net income (loss) available to common unit holders: As reported................................. $2,966 $19,965 $(12,170) Pro forma................................... 2,919 19,932 (12,211) Basic income (loss) per common unit: As reported................................. $ 0.14 $ 0.89 $ (0.88) Pro forma................................... 0.14 0.88 (0.88) Diluted income (loss) per common unit: As reported................................. $ 0.11 $ 0.71 $ (0.88) Pro forma................................... 0.11 0.71 (0.88)
9. COMMITMENTS AND CONTINGENCIES Employment Agreements The Company has entered into employment agreements with certain members of management which expire on July 31, 2002, with automatic one-year renewal periods at expiration dates. The agreements provide for, among other things, compensation, benefits and severance payments. Litigation The Company is involved in legal actions which arise in the ordinary course of its business. Although the outcomes of any such legal actions cannot be predicted, in the opinion of management, the resolution of any currently pending or threatened actions will not have a material adverse effect upon the consolidated financial position or results of operations of the Company. Leases The Company leases machinery, transportation equipment and office, warehouse and manufacturing facilities, which are noncancelable and expire at various dates. Total rental expense for all operating leases for 1998 (stub period), 1999 and 2000 was $0.9 million, $1.5 million and $2.5 million, respectively. Future minimum annual lease payments under these noncancellable operating leases at December 30, 2000 are as follows (in thousands): 2001........................................................ $2,248 2002........................................................ 1,935 2003........................................................ 1,060 2004........................................................ 494 2005........................................................ 340 Thereafter.................................................. 26 ------ Total............................................. $6,103 ======
None of the leases include contingent rental provisions. F-18 89 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 Employee Benefit Plans Deltak maintains a profit-sharing plan for employees. Deltak's expense for this plan totaled $1.0 million, $1.2 million and $1.3 million for 1998 (stub period), 1999 and 2000, respectively. In addition to the Deltak profit-sharing plan, GEEG maintains a 401(k) plan covering substantially all of Deltak and Braden's employees. Expense for the GEEG 401(k) plan for 1998 (stub period), 1999 and 2000 was $0.5 million, $0.5 million and $0.8 million, respectively. Braden participates in a defined benefit multi-employer union pension fund covering all union employees. As required by labor contracts, Braden made contributions totaling $0.1 million, $0.1 million and $0.2 million for 1998 (stub period), 1999 and 2000, respectively. These contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of hours worked. Braden may be liable for its share of unfunded vested benefits, if any, related to the union pension fund. Information from the union pension fund's administrators indicates there are no unfunded vested benefits. 10. SUPPLEMENTAL CASH FLOW INFORMATION Changes in current operating items, net of working capital acquired, were as follows:
1998 (STUB PERIOD) 1999 2000 ------------- -------- -------- (IN THOUSANDS) Accounts receivable.................................. $(10,885) $(17,066) $(13,661) Inventories.......................................... (106) (2,371) (235) Costs and estimated earnings in excess of billings... (1,786) (8,126) (43,415) Accounts payable..................................... 2,920 3,159 19,179 Accrued expenses and other........................... 3,404 5,050 5,379 Billing in excess of costs and estimated billings.... 8,730 35,309 60,479 -------- -------- -------- $ 2,277 $ 15,955 $ 27,726 ======== ======== ========
Supplemental cash flow disclosures are as follows:
1998 (STUB PERIOD) 1999 2000 ------------- ------ ------- (IN THOUSANDS) Cash paid during the year for: Interest.......................................... $2,388 $3,810 $ 8,811 Income taxes...................................... -- 919 590 Noncash transactions: Recapitalization rollover equity.................. -- -- 20,400 Units issued as debt discount..................... -- -- 7,708 Note issued for CFI net assets.................... -- -- 5,500 Common and preferred units issued for CFI net assets......................................... -- -- 2,000
11. SEGMENT INFORMATION The "management approach" called for by Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131) has been used by GEEG management to present the segment information which follows. GEEG considered the way its management team organizes its operations for making operating decisions and assessing performance and F-19 90 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 considered which components of its enterprise have discrete financial information available. Management makes decisions using a product group focus and its analysis resulted in two operating segments, Heat Recovery Equipment and Auxiliary Power Equipment. The Company evaluates performance based on net income or loss not including certain items as noted below. Accounting policies used by the segments are the same as those described in Note 2. Intersegment sales were not significant. Corporate assets consist primarily of cash and debt issuance costs. Capital expenditures do not include amounts arising from the acquisition of businesses. Expenses associated with the Recapitalization (see Note 3) have not been allocated. Interest income has not been allocated as cash management activities are handled at a corporate level. The following table presents information about segment income (loss) and assets:
HEAT AUXILIARY RECOVERY POWER 1998 (STUB PERIOD) EQUIPMENT EQUIPMENT - ------------------ --------- --------- (IN THOUSANDS) Revenues............................................... $ 63,885 $ 34,478 Interest expense....................................... 1,961 1,041 Depreciation and amortization.......................... 1,060 528 Income tax expense..................................... 79 97 Net income............................................. 2,780 822 Assets................................................. 70,983 31,600 Capital expenditures................................... 621 444
1999 - ---- Revenues............................................... $185,574 $ 89,625 Interest expense....................................... 1,589 2,543 Depreciation and amortization.......................... 1,876 1,080 Income tax expense..................................... 788 299 Net income............................................. 13,551 6,658 Assets................................................. 68,639 53,073 Capital expenditures................................... 1,003 1,372
2000 - ---- Revenues............................................... $258,644 $157,947 Interest expense....................................... 4,953 8,453 Depreciation and amortization.......................... 1,937 1,421 Income tax benefit..................................... (182) (251) Net income............................................. 18,351 12,175 Assets................................................. 128,029 97,025 Capital expenditures................................... 1,046 1,141
F-20 91 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 The following tables present information which reconciles segment information to consolidated totals:
1998 (STUB PERIOD) 1999 2000 ------------- ------------ ------------ (IN THOUSANDS) Income (Loss) From Continuing Operations Total segment income......................... $ 3,602 $ 20,209 $ 30,526 Unallocated recapitalization charge.......... -- -- (38,114) Unallocated interest income.................. 36 722 1,237 Other........................................ (252) (546) (897) -------- -------- -------- Income (loss) before extraordinary item...... $ 3,386 $ 20,385 $ (7,248) ======== ======== ========
DECEMBER 26, DECEMBER 25, DECEMBER 30, 1998 1999 2000 ------------ ------------ ------------ (IN THOUSANDS) Assets Total segment assets.......................... $102,583 $121,712 $225,054 Corporate cash and cash equivalents........... 5,452 8,812 19,084 Other unallocated amounts..................... 1,281 969 1,555 -------- -------- -------- $109,316 $131,493 $245,693 ======== ======== ========
1998 (STUB PERIOD) --------------------------------------------- SEGMENT CONSOLIDATED TOTALS ADJUSTMENTS TOTALS ------------- ------------ ------------ (IN THOUSANDS) Other Significant Items Interest expense............................. $ 3,002 $ -- $ 3,002 Interest income.............................. -- 36 36 Expenditures for assets...................... 1,065 -- 1,065 Depreciation and amortization................ 1,588 81 1,669
1999 --------------------------------------------- SEGMENT CONSOLIDATED TOTALS ADJUSTMENTS TOTALS ------------- ------------ ------------ (IN THOUSANDS) Interest expense............................. $ 4,132 $ -- $ 4,132 Interest income.............................. -- 722 722 Expenditures for assets...................... 2,375 -- 2,375 Depreciation and amortization................ 2,956 110 3,066
2000 --------------------------------------------- SEGMENT CONSOLIDATED TOTALS ADJUSTMENTS TOTALS ------------- ------------ ------------ (IN THOUSANDS) Interest expense............................. $ 13,406 $ 6 $ 13,412 Interest income.............................. -- 1,237 1,237 Expenditures for assets...................... 2,187 -- 2,187 Depreciation and amortization................ 3,358 353 3,711
F-21 92 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 Product Revenues The following table represents revenues by product group:
1998 (STUB PERIOD) 1999 2000 ------------- ------------ ------------ (IN THOUSANDS) Heat Recovery Equipment segment: Heat recovery steam generators............. $47,232 $134,036 $219,649 Specialty boilers.......................... 16,653 51,538 38,995 ------- -------- -------- 63,885 185,574 258,644 ------- -------- -------- Auxiliary Power Equipment segment: Exhaust systems............................ $16,875 $ 54,722 $ 86,228 Inlet systems.............................. 7,313 22,550 52,004 Other...................................... 10,290 12,353 19,715 ------- -------- -------- 34,478 89,625 157,947 ------- -------- -------- $98,363 $275,199 $416,591 ======= ======== ========
Geographic Revenues The following table presents revenues by geographic region:
1998 (STUB PERIOD) 1999 2000 ------------- -------- -------- (IN THOUSANDS) Revenues: United States.................................. $52,771 $208,016 $380,389 Asia........................................... 5,338 37,037 11,835 Europe......................................... 20,125 17,616 11,632 Other.......................................... 20,129 12,530 12,735 ------- -------- -------- $98,363 $275,199 $416,591 ======= ======== ========
Management attributed sales to geographic location based on the customer-determined destination of the delivered product. Substantially all of the Company's assets are located in the United States. F-22 93 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998 (STUB PERIOD), 1999, 2000 12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following is a condensed summary of quarterly results of operations for 1999 and 2000:
NET INCOME BASIC DILUTED (LOSS) INCOME INCOME AVAILABLE TO (LOSS) PER (LOSS) PER GROSS COMMON COMMON COMMON REVENUES PROFIT UNIT HOLDERS UNIT UNIT -------- ------- ------------ ----------- ----------- (IN THOUSANDS, EXCEPT PER COMMON UNIT DATA) 1999 First quarter................... $ 63,971 $11,246 $ 4,099 $ 0.18 $ 0.15 Second quarter.................. 62,378 9,995 2,955 0.13 0.11 Third quarter................... 55,306 10,718 3,177 0.14 0.11 Fourth quarter.................. 93,544 17,189 9,734 0.43 0.34 2000 First quarter................... $111,083 $18,477 $ 11,116 $ 0.49 $ 0.39 Second quarter.................. 92,898 16,848 9,707 0.43 0.34 Third quarter................... 100,217 16,738 (36,524) (3.63) (3.63) Fourth quarter.................. 112,393 18,840 3,531 3.15 3.15
F-23 94 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Jason Incorporated Power Generation Division (Predecessor): We have audited the accompanying consolidated statements of income and comprehensive income, equity and cash flows of Jason Incorporated Power Generation Division (Predecessor) for the period from December 27, 1997 through June 4, 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Jason Incorporated Power Generation Division (Predecessor) for the period from December 27, 1997 through June 4, 1998, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Minneapolis, Minnesota, February 23, 2001 F-24 95 JASON INCORPORATED POWER GENERATION DIVISION (PREDECESSOR) CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME FOR THE PERIOD FROM DECEMBER 27, 1997 THROUGH JUNE 4, 1998 (IN THOUSANDS) Revenues.................................................... $60,881 Cost of sales............................................... 48,529 ------- Gross profit.............................................. 12,352 Selling and administrative expenses......................... 8,787 Amortization expense........................................ 787 ------- Operating income.......................................... 2,778 Interest expense, net....................................... 439 ------- Income before income taxes................................ 2,339 Income tax provision........................................ 996 ------- Net income................................................ 1,343 Foreign currency translation adjustments.................. (568) ------- Comprehensive income...................................... $ 775 =======
The accompanying notes are an integral part of this consolidated financial statement. F-25 96 JASON INCORPORATED POWER GENERATION DIVISION (PREDECESSOR) CONSOLIDATED STATEMENT OF EQUITY FOR THE PERIOD FROM DECEMBER 27, 1997 THROUGH JUNE 4, 1998 (IN THOUSANDS)
ACCUMULATED PARENT OTHER COMPANY RETAINED COMPREHENSIVE EQUITY EARNINGS INCOME TOTAL ------- -------- ------------- ------- Balance, December 27, 1997...................... $50,000 $47,382 $ -- $97,382 Net income.................................... -- 1,343 -- 1,343 Foreign currency translation adjustments...... -- -- (568) (568) ------- ------- ----- ------- Balance, June 4, 1998........................... $50,000 $48,725 $(568) $98,157 ======= ======= ===== =======
The accompanying notes are an integral part of this consolidated financial statement. F-26 97 JASON INCORPORATED POWER GENERATION DIVISION (PREDECESSOR) CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD FROM DECEMBER 27, 1997 THROUGH JUNE 4, 1998 (IN THOUSANDS)
Operating activities: Net income................................................ $ 1,343 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization.......................... 1,517 Deferred income taxes.................................. (458) Changes in operating items: Accounts receivable.................................. (1,203) Due from parent...................................... (3,250) Inventories.......................................... 361 Costs and estimated earnings in excess of billings... (2,386) Accounts payable..................................... 3,454 Accrued expenses and other........................... 1,357 Billings in excess of costs and estimated earnings... 833 ------- Net cash provided by operating activities......... 1,568 ------- Investing activities: Purchases of property, plant and equipment................ (255) ------- Net increase in cash and cash equivalents......... 1,313 Cash and cash equivalents, beginning of period.............. 618 ------- Cash and cash equivalents, end of period.................... $ 1,931 =======
The accompanying notes are an integral part of this consolidated financial statement. F-27 98 JASON INCORPORATED POWER GENERATION DIVISION (PREDECESSOR) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION Jason Incorporated Power Generation Division (the Company), is the predecessor entity to GEEG Holdings, L.L.C. (GEEG). The Company was acquired by GEEG on June 5, 1998. Prior to the acquisition by GEEG, the Company was a division of its parent company, Jason Incorporated. The Company designs, engineers and manufactures heat recovery and auxiliary power equipment. The Company's corporate headquarters are located in Tulsa, Oklahoma, with operating facilities in Plymouth, Minnesota; Tulsa, Oklahoma; Fort Smith, Arkansas; and Heerlen, Netherlands. The Company uses a 52-/53-week fiscal year ending on the last Saturday in December. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company, including those of Deltak, L.L.C. (Deltak); Deltak Construction Services, Inc.; Braden Manufacturing, L.L.C. (Braden); Braden Construction Services, Inc.; and Braden Europe -- BV. Significant intercompany balances and transactions have been eliminated in consolidation. Cash and Cash Equivalents The Company considers all highly liquid investments which are convertible into known amounts of cash and have original maturities of three months or less to be cash equivalents. Cash equivalents consist primarily of investments in commercial paper. The fair value of cash and cash equivalents is based on quoted market prices. The fair value at June 4, 1998 approximated the carrying value. Due from Parent The Company's parent company, Jason Incorporated, receives the cash generated from the operations of the business and, in return, pays all operating, selling, general and administrative expenses on the Company's behalf. As of June 4, 1998, the Company's cash provided to Jason Incorporated exceeded expenses paid by Jason Incorporated by approximately $69.8 million. Inventories Inventories primarily consist of raw materials and are stated at the lower of first-in, first-out cost or market. Property, Plant and Equipment Depreciation is calculated using the straight-line method for financial reporting purposes over the estimated useful lives. Depreciation expense for the period from December 27, 1997 through June 4, 1998 was $0.7 million. Goodwill Goodwill is being amortized over an estimated useful life of 30 years. Amortization expense for the period from December 27, 1997 through June 4, 1998 was $0.8 million. F-28 99 JASON INCORPORATED POWER GENERATION DIVISION (PREDECESSOR) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Warranty Costs The Company typically warrants labor and fabrication for 12 to 18 months after shipment. Estimated costs of warranty repairs are accrued for each project and adjusted when specific claims are made or when warranty periods expire. Income Taxes For U.S. tax purposes, the Company is reflected as a member of Jason Incorporated's consolidated group and is included in Jason Incorporated's consolidated federal income tax return. However, the accompanying tax provision included in the financial statements has been prepared on a separate return basis. The components of the provision for income taxes are as follows (in thousands):
Current taxes payable Federal................................................... $1,108 State..................................................... 171 Foreign................................................... 175 Deferred.................................................... (458) ------ Total provision................................... $ 996 ======
A reconciliation of the statutory tax rate to the Company's effective tax rate is as follows:
Federal statutory rate...................................... 34% State income taxes, net of federal benefit.................. 5 Other....................................................... 4 --- Effective income tax rate......................... 43% ===
Revenue Recognition The Company recognizes revenues for projects under long-term contracts on the percentage-of-completion method based on the percentage of actual hours incurred to date in relation to total estimated hours (internal and subcontractor) for each contract. Changes in job performance, job conditions, estimated profitability and final contract settlements may result in revisions to costs and income, and the effects of such revisions are recognized in the period the revisions are determined. The Company recognizes revenues for projects which are not under long-term contracts on the completed-contract method due to the short-term nature of the product production period. The Company recognizes service revenue as services are provided. Service revenues were not significant for the period from December 27, 1997 to June 4, 1998. Customer Sales For the period from December 27, 1997 through June 4, 1998, two customers in aggregate accounted for approximately 26 percent of consolidated revenues. Foreign Currency Assets and liabilities of the Company's foreign operations are translated at year-end exchange rates, and revenues and expenses are translated at average exchange rates prevailing during the period. F-29 100 JASON INCORPORATED POWER GENERATION DIVISION (PREDECESSOR) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Translation adjustments are recorded as a separate component of equity and other comprehensive income in the accompanying consolidated financial statements. Gains and losses from foreign currency transactions are included in earnings. Such gains and losses were not significant during the period. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to projected total costs of projects, including warranty and contingency costs, and the percentage of completion on contract accounting. Ultimate results could differ from those estimates. 3. PARENT COMPANY ALLOCATIONS The Company's financial statements reflect all of its costs of doing business. These costs include certain expenses that have been incurred by the parent on the Company's behalf, such as incentive compensation, accounting and legal services, depreciation and interest. Incentive compensation expenses were allocated specifically by employee of the Company. All other expenses were allocated to all segments of the parent company in a manner which management believes to be a reasonable approximation of actual costs that would have been incurred if the Company were a stand alone entity. Interest expense of $0.4 million was allocated to the Company based upon capital employed. 4. EQUITY As part of its purchase, Jason Incorporated capitalized the Company with an investment of $50.0 million in the Jason Incorporated Power Generation Division. As of June 4, 1998, no other equity instruments have been issued. 5. COMMITMENTS AND CONTINGENCIES Litigation The Company is involved in legal actions which arise in the ordinary course of its business. Although the outcomes of any such legal actions cannot be predicted, in the opinion of management, the resolution of any currently pending or threatened actions will not have a material adverse effect upon the consolidated financial position or results of operations of the Company. Leases The Company leases machinery, transportation equipment, and office, warehouse and manufacturing facilities which are noncancelable and expire at various dates. Total rental expense for all operating leases for the period from December 27, 1997 through June 4, 1998 was $0.8 million. F-30 101 JASON INCORPORATED POWER GENERATION DIVISION (PREDECESSOR) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Future minimum annual lease payments under these noncancellable operating leases at June 4, 1998 are as follows (in thousands): 1998........................................................ $ 745 1999........................................................ 1,292 2000........................................................ 1,231 2001........................................................ 867 2002 and thereafter......................................... 725 ------ Total............................................. $4,860 ======
Employee Benefit Plans Deltak maintains a profit-sharing plan for employees. Expenses for this plan recorded by Deltak totaled $0.5 million for the period from December 27, 1997 through June 4, 1998. In addition to the Deltak profit-sharing plan, Deltak and Braden each participate in the parent company's 401(k) plan covering substantially all of Deltak and Braden's employees. Expense for the parent company's 401(k) plan for the period from December 27, 1997 through June 4, 1998 was $0.1 million. Braden participates in a defined benefit multi-employer union pension fund covering all union employees. As required by labor contracts, Braden made contributions totaling $0.1 million for the period from December 27, 1997 through June 4, 1998. These contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of hours worked. Braden may be liable for its share of unfunded vested benefits, if any, related to the union pension fund. Information from the union pension fund's administrators indicates there are no unfunded vested benefits. 6. SEGMENT INFORMATION The "management approach" called for by Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131) has been used by Company management to present the segment information which follows. The Company considered the way its management team organizes its operations for making operating decisions and assessing performance and considered which components of its enterprise have discrete financial information available. Management makes decisions using a product group focus and its analysis resulted in two operating segments, Heat Recovery Equipment and Auxiliary Power Equipment. The Company evaluates performance based on net income or loss not including certain nonrecurring items. Accounting policies used by the segments are the same as those described in Note 2. Intersegment sales were not significant. Capital expenditures do not include amounts arising from the acquisition of businesses. Interest expense has been allocated consistent with the policies described in Note 3. F-31 102 JASON INCORPORATED POWER GENERATION DIVISION (PREDECESSOR) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents information about segment income and assets for the period from December 27, 1997 through June 4, 1998:
HEAT RECOVERY AUXILIARY POWER EQUIPMENT EQUIPMENT ------------- --------------- (IN THOUSANDS) Revenues............................................... $38,664 $22,217 Interest expense....................................... 236 203 Depreciation and amortization.......................... 660 857 Income tax expense..................................... 547 449 Net income............................................. 895 448 Assets................................................. 84,182 52,304 Capital expenditures (disposals)....................... 285 --
Product Revenues The following table represents revenues by product group for the period from December 27, 1997 through June 4, 1998 (in thousands):
Heat Recovery Equipment segment: Heat recovery steam generators............................ $25,022 Specialty boilers......................................... 13,642 ------- 38,664 ------- Auxiliary Power Equipment segment: Exhaust systems........................................... $11,288 Inlet systems............................................. 8,832 Other..................................................... 2,097 ------- 22,217 ------- $60,881 =======
Geographic Revenues The following table presents revenues by geographic region for the period from December 27, 1997 through June 4, 1998 (in thousands):
Revenues: United States............................................. $33,383 Europe.................................................... 10,904 Asia...................................................... 5,458 Other..................................................... 11,136 ------- $60,881 =======
Management attributed sales to geographic location based on the customer-determined destination of the delivered product. Substantially all of the Company's assets are located in the United States. F-32 103 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 7,350,000 Shares GLOBAL POWER EQUIPMENT GROUP INC. Common Stock PROSPECTUS , 2001 Joint Book-Running Managers CREDIT SUISSE FIRST BOSTON SALOMON SMITH BARNEY ------------------ DEUTSCHE BANC ALEX. BROWN RAYMOND JAMES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 104 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The expenses payable in connection with the issuance and distribution of the common stock being registered (other than underwriting discount) are as follows:*
SEC registration fee........................................ $ 38,036.25 National Association of Securities Dealers fee.............. 15,710.50 New York Stock Exchange listing fee......................... 160,000.00 Printing and engraving expenses............................. 275,000.00 Accounting fees and expenses................................ 1,500,000.00 Legal fees and expenses..................................... 900,000.00 Transfer agent's fees and expenses.......................... 5,000.00 Miscellaneous expenses...................................... 6,253.25 ------------- Total expenses.............................................. $2,900,000.00 =============
- --------------- * The foregoing items, except for the Securities and Exchange Commission and National Association of Securities Dealers fees, are estimated. All expenses will be borne by Global Power Equipment Group Inc. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The information below briefly outlines the provisions of Sections 102(b)(7) and 145 of the General Corporation Law of the State of Delaware, Article IX of our Certificate of Incorporation and Article IV of our By-Laws. For more information, you may review the provisions of our Certificate of Incorporation and By-Laws that we filed with the SEC. ELIMINATION OF LIABILITY Section 102(b)(7) of Delaware's corporation law gives each Delaware corporation the power to eliminate or limit its directors' personal liability to the corporation or its stockholders for monetary damages for certain breaches of fiduciary duty as a director, except: - for any breach of the director's duty of loyalty to the corporation or its stockholders; - for acts or omissions not in good faith, or which involve intentional misconduct or a knowing violation of the law; - under Section 174 of Delaware's corporation law (providing for liability of directors for the unlawful payment of dividends or unlawful stock purchases or redemptions); or - for any transaction from which a director derived an improper personal benefit. You should know that our Certificate of Incorporation eliminates the personal liability of our directors to the fullest extent permitted by Section 102(b)(7) of Delaware's corporation law. INDEMNIFICATION Section 145 of Delaware's corporation law grants each Delaware corporation the power to indemnify its directors and officers against liability for certain of their acts. Article IV of our By-Laws provides that we shall, to the full extent permitted by law, indemnify each person who is or was a director, officer, employee or agent of our company and may indemnify each person II-1 105 who is or was serving at our request as a director, officer, employee or agent of or participant in another corporation or of a partnership, joint venture, trust or other enterprise. As permitted by Section 102(b)(7) of Delaware's corporation law, Article IX of our certificate of incorporation provides that a director of our company will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for (i) for any breach of the director's duty of loyalty to us or our stockholders, (ii) for act or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of Delaware's corporation law or (iv) for any transaction from which the director derived an improper personal benefit. Article IX also provides that we will indemnify officers, directors, employees and agents of our company to the fullest extent permitted under Delaware's corporation law and advance expenses incurred by such directors, officers, employees and agents in relation to any action, suit or proceeding. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. During the past three years, we have issued the securities set forth below which were not registered under the Securities Act. Where appropriate, the issuances described below relate to membership units issued by GEEG Holdings, L.L.C., our predecessor, and have not been adjusted for the reorganization transaction. In connection with its initial capitalization and its acquisition of the power generation division of Jason Incorporated, GEEG Holdings, L.L.C. issued preferred units and senior and junior common units to SMC Power Holdings LLC, WB Holding Corp., Paribas Principal Incorporated, Indosuez GEEG Partners and certain members of its management. GEEG Holdings, L.L.C. received $9.0 million in exchange for 90,000 preferred units, $1.18 million in exchange for 71,253.34 senior common units and $10,400 in exchange for 10,400 junior units. All of the above sales of equity interests were made in reliance on the exemption from registration under Section 4(2) of the Securities Act as transactions not involving a public offering. The recipients of the securities were accredited investors. In addition, GEEG Holdings, L.L.C. issued warrants to purchase 3,133.33 senior units to Credit Agricole Indosuez and warrants to purchase 5,013.33 senior units to Paribas Capital Funding in connection with its 1998 Senior Subordinated Loan Agreement, which was paid off as part of the August 2000 recapitalization. The issuance of the warrants was made in reliance on the exemption from registration under Section 4(2) of the Securities Act as transactions not involving a public offering. The recipients of the securities were accredited investors. The GEEG Holdings, L.L.C. preferred units outstanding prior to the August 2000 recapitalization were redeemed for $9.93 million in 1999. GEEG Holdings, L.L.C. repurchased certain of its outstanding senior and junior common units, as well as all of its warrants, in connection with its August 2000 recapitalization. The remaining common units were retained and converted into 183,600 preferred units and 204,000.0 common units, having an aggregate value of $18.4 million and $2.0 million respectively after the August 2000 recapitalization. These transactions were made in reliance on the exemption from registration under Section 4(2) of the Securities Act as transactions not involving a public offering. The recipients of the securities were accredited investors. Also in connection with the August 2000 recapitalization, GEEG Holdings, L.L.C. issued 558,517.74 preferred units to GEEG Acquisition Holdings Corp. and 248,850.00 preferred units to GEEG Acquisition Holdings L.L.C. In addition, GEEG Holdings, L.L.C. also issued 620,575.3 class A common units to GEEG Acquisition Holdings Corp. and 276,500.0 class A common units to GEEG Acquisition Holdings L.L.C. All of the above issuances of equity interests were made in reliance on the exemption from registration under Section 4(2) of the Securities Act as transactions not involving a public offering. The recipients of the securities were accredited investors. In October 2000, in connection with the acquisition of CFI Holdings, Inc., GEEG Holdings, L.L.C. issued 18,000 preferred units and 2,000 common units, representing $1.8 million and $200,000 of the II-2 106 purchase price, respectively, to the two stockholders of CFI Holdings, Inc. All of the above issuances of equity interests were made in reliance on the exemption from registration under Section 4(2) of the Securities Act as transactions not involving a public offering. The recipients of the securities were accredited investors. From time to time, GEEG Holdings, L.L.C. granted options to purchase equity interests in GEEG Holdings, L.L.C. through (1) its 1998 option plan and 1998 non-employee director option plans, both of which were terminated and all options issued pursuant thereto were redeemed as part of the August 2000 recapitalization, and (2) its 2000 option plan, which will be assumed upon completion of the reorganization transaction and the common units available for option grants under the 2000 option plan will be replaced by shares of our common stock with the same economic value as of the completion of the reorganization transaction. As of March 31, 2001, there were outstanding options to purchase an aggregate of 103,889.3 common units of GEEG Holdings, L.L.C., at an exercise price of $10.00 per unit. We will assume these options upon completion of the reorganization transaction and convert them into economically equivalent options to purchase our common stock. These issuances of options to directors, officers and employees were made pursuant to Rule 701 of the Securities Act. Immediately prior to the closing of this offering, we will issue: - 16,757,485 shares of our common stock to the holders of the outstanding preferred and common units of GEEG Holdings, L.L.C. in exchange for those units; and - 20,735,779 shares of our common stock to GEEG Acquisition Holdings Corp., a member of GEEG Holdings, L.L.C., in exchange for its contribution to us of substantially all of its assets. In the aggregate, we will issue approximately 37,493,264 shares of common stock in connection with this reorganization transaction. The issuance of our common stock upon contribution by the members of GEEG Holdings, L.L.C. of the equity interests, or of GEEG Acquisition Holdings Corp.'s assets and liabilities, as the case may be, will be made in reliance on the exemption from registration under Section 4(2) of the Securities Act of 1933 as a transaction not involving a public offering and the recipients of the securities will be accredited investors. II-3 107 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits:
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 1.1* Form of Underwriting Agreement. 2.1** Purchase Agreement, dated as of June 5, 1998, by and between Global Energy Equipment Group, L.L.C., GEEG, Inc., Jason Incorporated, Braden Nevada, Inc., Deltak Nevada, Inc., Jason Nevada, Inc., Deltak, L.L.C. and Braden Manufacturing L.L.C. 2.2** Agreement and Plan of Merger, dated as of July 14, 2000, among Saw Mill Investments LLC, GEEG Holdings, L.L.C., GEEG Acquisition Holdings Corp. and GEEG Acquisition, L.L.C. 2.3** First Amendment to the Agreement and Plan of Merger, dated as August 1, 2000, among Saw Mill Investments LLC, GEEG Holdings, L.L.C., GEEG Acquisition Holdings Corp. and GEEG Acquisition, L.L.C. 3.1(a)** Certificate of Incorporation of Global Power Equipment Group Inc. filed with the Secretary of State of the State of Delaware, as amended (to be replaced by exhibit 3.1(b) upon the closing of this offering). 3.1(b)*** Form of Amended and Restated Certificate of Incorporation of Global Power Equipment Group Inc. (to be effective upon the closing of this offering). 3.2(a)** By-Laws of Global Power Equipment Group Inc. (to be replaced by exhibit 3.2(b) upon the closing of this offering). 3.2(b)*** Form of Amended and Restated By-Laws of Global Power Equipment Group Inc. (to be effective upon the closing of this offering). 4.1* Form of specimen stock certificate. 5.1* Opinion of White & Case LLP regarding the legality of the offering. 10.1** Acquisition Agreement, dated as of October 31, 2000, by and among GEEG Holdings, L.L.C., CFI Holdings, Inc., John L. McSweeney and Truman W. Bassett. 10.2** Management Agreement, dated as of August 1, 2000, by and between Harvest Partners, Inc. and Global Energy Equipment Group, L.L.C. 10.3*** Form of Amendment to Management Agreement by and between Harvest Partners, Inc. and Global Energy Equipment Group, L.L.C., to be entered into in connection with the reorganization transaction. 10.4** Indemnity Escrow Agreement, dated as of October 31, 2000, among GEEG Holdings, L.L.C., John L. McSweeney, Truman W. Bassett and United States Trust Company of New York. 10.5** Purchase Price Escrow Agreement, dated as of October 31, 2000, among GEEG Holdings, L.L.C., John L. McSweeney, Truman W. Bassett and United States Trust Company of New York. 10.6** Employment Agreement, dated August 1, 2000, by and among GEEG Holdings, L.L.C., Braden Manufacturing, L.L.C. and Larry D. Edwards. 10.7** Employment Agreement, dated August 1, 2000, by and among GEEG Holdings, L.L.C., Deltak, L.L.C., and Michael H. Hackner. 10.8** Employment Agreement, dated August 1, 2000, by and among GEEG Holdings L.L.C., Deltak, L.L.C. and Gary Obermiller. 10.9** Employment Agreement dated August 1, 2000, by and among GEEG Holdings, L.L.C., Braden Manufacturing, L.L.C. and Gene F. Schockemoehl.
II-4 108
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 10.10** Employment Agreement, dated August 1, 2000, by and among GEEG Holdings, L.L.C., Braden Manufacturing, L.L.C. and James P. Wilson. 10.11** Form of 2001 Management Incentive Compensation Plan. 10.12** GEEG Holdings, L.L.C. 2000 Option Plan. 10.13** Promissory Note dated October 31, 2000 from CFI Holdings, Inc. to John L. McSweeney in a stated amount of $2,750,000. 10.14** Promissory Note dated October 31, 2000 from CFI Holdings, Inc. to Truman W. Bassett in a stated amount of $2,750,000. 10.15*** Form of Exchange Agreement by and among the members of GEEG Holdings, L.L.C. and Global Power Equipment Group Inc. to be entered into in connection with the reorganization transaction. 10.16* Global Power Equipment Group Inc. 2001 Stock Option Plan. 10.17*** Form of Registration Rights Agreement among Global Power Equipment Group Inc. and its shareholders to be entered into in connection with the reorganization transaction. 10.18* Form of Amended and Restated Credit Facility to be entered into in connection with the reorganization transaction. 10.19** Senior Subordinated Loan Agreement, dated as of August 1, 2000 among Global Energy Equipment Group, L.L.C. and the lenders party thereto. 21.1** List of Subsidiaries (upon the closing of this offering). 23.1*** Consent of Arthur Andersen LLP 23.2* Consent of White & Case LLP (included in Exhibit 5.1 hereto). 24.1** Power of Attorney
- --------------- * To be filed by amendment. ** Previously filed. *** Filed herewith. (b) Consolidated Financial Statement Schedules Report of Independent Public Accountants Schedule I -- GEEG Holdings, L.L.C. and Subsidiaries -- Schedules of Valuation and Qualifying Accounts Schedule II -- Jason Incorporated Power Generation Division (Predecessor) -- Schedule of Valuation and Qualifying Accounts ITEM 17. UNDERTAKINGS. The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the Underwriting Agreements certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of II-5 109 the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the Registration Statement as of the time it was declared effective. (2) For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-6 110 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Tulsa, Oklahoma on April 24, 2001. GLOBAL POWER EQUIPMENT GROUP INC. By: /s/ LARRY EDWARDS ------------------------------------ Larry Edwards President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed by the following persons (who include a majority of the Board of Directors) in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ LARRY EDWARDS President, Chief Executive April 24, 2001 - --------------------------------------------------- Officer and Director (Principal Larry Edwards Executive Officer) /s/ MICHAEL HACKNER Treasurer (Principal Financial April 24, 2001 - --------------------------------------------------- and Accounting Officer) Michael Hackner /s/ STEPHEN EISENSTEIN Director April 24, 2001 - --------------------------------------------------- Stephen Eisenstein
II-7 111 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To GEEG Holdings, L.L.C.: We have audited, in accordance with auditing standards generally accepted in the United States, the consolidated financial statements of GEEG Holdings, L.L.C. included in this registration statement and have issued our report dated February 16, 2001. Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The schedules of valuation and qualifying accounts are the responsibility of GEEG Holdings, L.L.C. management and is presented for purposes of complying with the Securities and Exchange Commission rules and is not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN LLP Minneapolis, Minnesota, February 16, 2001 S-1 112 GEEG HOLDINGS, L.L.C. AND SUBSIDIARIES SCHEDULES OF VALUATION AND QUALIFYING ACCOUNTS 1988 (STUB PERIOD), 1999, 2000
BALANCE CHARGES TO BALANCE AT BEGINNING COSTS AND AT END DESCRIPTION OF PERIOD EXPENSES(A) WRITE-OFFS(B) OF PERIOD - ----------- ------------ ----------- ------------- --------- (IN THOUSANDS) For the period from June 5, 1998 (inception) through December 26, 1998: Allowance for doubtful accounts............ $1,710 $ (96) $ 165 $1,779 For the year ended December 25, 1999: Allowance for doubtful accounts............ 1,779 (202) (592) 985 For the year ended December 30, 2000: Allowance for doubtful accounts............ 985 806 50 1,841
- --------------- (a) No amounts were charged to other accounts in any period. (b) Amounts are net of recoveries of $206, $270 and $64 for 1998 (stub period), 1999 and 2000, respectively. S-2 113 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Jason Incorporated Power Generation Division (Predecessor): We have audited, in accordance with auditing standards generally accepted in the United States, the consolidated financial statements of Jason Incorporated Power Generation Division (Predecessor) included in this registration statement and have issued our report dated February 23, 2001. Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The schedule of valuation and qualifying accounts is the responsibility of the Jason Incorporated Power Generation Division (Predecessor) management and is presented for purposes of complying with the Securities and Exchange Commission rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN LLP Minneapolis, Minnesota, February 23, 2001 S-3 114 JASON INCORPORATED POWER GENERATION DIVISION (PREDECESSOR) SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
BALANCE CHARGES TO BALANCE AT BEGINNING COSTS AND AT END DESCRIPTION OF PERIOD EXPENSES(A) WRITE-OFFS(B) OF PERIOD - ----------- ------------ ----------- ------------- --------- (IN THOUSANDS) For the period from December 27, 1997 through June 4, 1998: Allowance for doubtful accounts............ $1,105 $649 $(44) $1,710
- --------------- (a) No amounts were charged to other accounts. (b) Amount is net of recoveries of $19 for the period from December 27, 1997 through June 4, 1998. S-4 115 EXHIBIT INDEX (a) Exhibits:
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 1.1* Form of Underwriting Agreement. 2.1** Purchase Agreement, dated as of June 5, 1998, by and between Global Energy Equipment Group, L.L.C., GEEG, Inc., Jason Incorporated, Braden Nevada, Inc., Deltak Nevada, Inc., Jason Nevada, Inc., Deltak, L.L.C. and Braden Manufacturing L.L.C. 2.2** Agreement and Plan of Merger, dated as of July 14, 2000, among Saw Mill Investments LLC, GEEG Holdings, L.L.C., GEEG Acquisition Holdings Corp. and GEEG Acquisition, L.L.C. 2.3** First Amendment to the Agreement and Plan of Merger, dated as August 1, 2000, among Saw Mill Investments LLC, GEEG Holdings, L.L.C., GEEG Acquisition Holdings Corp. and GEEG Acquisition, L.L.C. 3.1(a)** Certificate of Incorporation of Global Power Equipment Group Inc. filed with the Secretary of State of the State of Delaware, as amended (to be replaced by exhibit 3.1(b) upon the closing of this offering). 3.1(b)*** Form of Amended and Restated Certificate of Incorporation of Global Power Equipment Group Inc. (to be effective upon the closing of this offering). 3.2(a)** By-Laws of Global Power Equipment Group Inc. (to be replaced by exhibit 3.2(b) upon the closing of this offering). 3.2(b)*** Form of Amended and Restated By-Laws of Global Power Equipment Group Inc. (to be effective upon the closing of this offering). 4.1* Form of Specimen Stock Certificate 5.1* Opinion of White & Case LLP regarding the legality of the offering. 10.1** Acquisition Agreement, dated as of October 31, 2000, by and among GEEG Holdings, L.L.C., CFI Holdings, Inc., John L. McSweeney and Truman W. Bassett. 10.2** Management Agreement by and between Harvest Partners, Inc. and Global Energy Equipment Group, L.L.C. 10.3*** Form of Amendment to Management Agreement by and between Harvest Partners, Inc. and Global Energy Equipment Group, L.L.C. to be entered into in connection with the reorganization transaction. 10.4** Indemnity Escrow Agreement, dated as of October 31, 2000, among GEEG Holdings, L.L.C., John L. McSweeney, Truman W. Bassett and United States Trust Company of New York. 10.5** Purchase Price Escrow Agreement, dated as of October 31, 2000, among GEEG Holdings, L.L.C., John L. McSweeney, Truman W. Bassett and United States Trust Company of New York. 10.6** Employment Agreement, dated August 1, 2000, by and among GEEG Holdings, L.L.C., Braden Manufacturing, L.L.C. and Larry D. Edwards. 10.7** Employment Agreement, dated August 1, 2000, by and among GEEG Holdings, L.L.C., Deltak, L.L.C., and Michael H. Hackner. 10.8** Employment Agreement, dated August 1, 2000, by and among GEEG Holdings L.L.C., Deltak, L.L.C. and Gary Obermiller. 10.9** Employment Agreement dated August 1, 2000, by and among GEEG Holdings, L.L.C., Braden Manufacturing, L.L.C. and Gene F. Schockemoehl.
116
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 10.10** Employment Agreement, dated August 1, 2000, by and among GEEG Holdings, L.L.C., Braden Manufacturing, L.L.C. and James P. Wilson. 10.11** Form of 2001 Management Incentive Compensation Plan. 10.12** GEEG Holdings, L.L.C. 2000 Option Plan. 10.13** Promissory Note dated October 31, 2000 from CFI Holdings, Inc. to John L. McSweeney in a stated amount of $2,750,000. 10.14** Promissory Note dated October 31, 2000 from CFI Holdings, Inc. to Truman W. Bassett in a stated amount of $2,750,000. 10.15*** Form of Exchange Agreement by and among the members of GEEG Holdings, L.L.C. and Global Power Equipment Group Inc. to be entered into in connection with the reorganization transaction. 10.16* Global Power Equipment Group Inc. 2001 Stock Option Plan. 10.17*** Form of Registration Rights Agreement among Global Power Equipment Group Inc. and its shareholders to be entered into in connection with the reorganization transaction. 10.18* Form of Amended and Restated Credit Senior Facility to be entered into in connection with the reorganization transaction. 10.19** Senior Subordinated Loan Agreement, dated as of August 1, 2000 among Global Energy Equipment Group, L.L.C. and the lenders party thereto. 21.1** List of Subsidiaries (upon closing of this offering). 23.1*** Consent of Arthur Andersen LLP 23.2* Consent of White & Case LLP (included in Exhibit 5.1 hereto). 24.1** Power of Attorney
- --------------- * To be filed by amendment. ** Previously filed ***Filed herewith. (b) Consolidated Financial Statement Schedules: Report of Independent Public Accountants Schedule I -- GEEG Holdings, L.L.C. and Subsidiaries -- Schedules of Valuation and Qualifying Accounts Schedule II -- Jason Incorporated Power Generation Division (Predecessor) -- Schedule of Valuation and Qualifying Accounts EX-3.1.B 2 y45366a2ex3-1_b.txt FORM OF AMENDED & RESTATED CERT. OF INCORPORATION 1 Exhibit 3.1(b) AMENDED AND RESTATED CERTIFICATE OF INCORPORATION FOR GLOBAL POWER EQUIPMENT GROUP INC. Global Power Equipment Group Inc. (the "Corporation"), a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the corporation is Global Power Equipment Group Inc. Global Equipment Power Group Inc. was originally incorporated under the name GEEG, Inc. and the original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on May 13, 1998. 2. Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, this Amended and Restated Certificate of Incorporation has been duly adopted in accordance therewith, and restates and integrates and further amends the provisions of the Certificate of Incorporation of the Corporation. 3. The text of the Amended and Restated Certificate of Incorporation as heretofore amended or supplemented is hereby restated and further amended to read in its entirety as follows: ARTICLE ONE: The name of the Corporation is GLOBAL POWER EQUIPMENT GROUP INC. ARTICLE TWO: The registered office of the Corporation in the State of Delaware is located at 1013 Centre Road, City of Wilmington, County of New Castle. The name of its registered agent in the State of Delaware at such address is Corporation Services Company. 2 ARTICLE THREE: The purpose of the Corporation is to engage, directly or indirectly, in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware as from time to time in effect. ARTICLE FOUR: The total authorized capital stock of the Corporation shall be 110,000,000 shares consisting of 100,000,000 shares of Common Stock, par value $0.01 per share, and 10,000,000 shares of Series Preferred Stock, par value $0.01 per share. The preferences, relative, participating, optional or other special rights, qualifications, limitations, restrictions, voting powers and privileges of each class of the Corporation's capital stock shall be as follows: I. Series Preferred Stock The Series Preferred Stock may be issued in one or more series as shall from time to time be created and authorized to be issued by the Board of Directors as hereinafter provided. (a) The Board of Directors is hereby expressly authorized, by resolution or resolutions from time to time adopted providing for the issuance of any series of the Series Preferred Stock, to the extent not fixed by the provisions hereinafter set forth or otherwise provided by law, to determine that any series of the Series Preferred Stock shall be without voting powers and to fix and state the voting powers, full or limited, if any, the designations, powers, preferences and relative, participating, optional and other special rights, if any, of the shares of each series of the Series Preferred Stock, and the qualifications, limitations and restrictions thereof, including (but without limiting the generality of the foregoing) any of the following: (1) the number of shares to constitute such series and the distinctive name and serial designation thereof; -2- 3 (2) the annual dividend rate or rates and the date on which the first dividend on shares of such series shall be payable and all subsequent dividend payment dates; (3) whether dividends are to be cumulative or non-cumulative, the participating or other special rights, if any, with respect to the payment of dividends and the date from which dividends on all shares of such series issued prior to the record date for the first dividend shall be cumulative; (4) whether any series shall be subject to redemption and, if so, the manner of redemption and the redemption price or prices for such series, which may consist of a redemption price or prices applicable only to redemption for a sinking fund (which term as used in this clause shall include any fund or provisions for the periodic purchase or retirement of shares), and a different redemption price or scale of redemption prices applicable to any other redemption; (5) whether or not the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund, and, if so, whether such purchase, retirement or sinking fund shall be cumulative or non-cumulative, the extent to and the manner in which such fund shall be applied to the purchase or redemption of the shares of such series for retirement or for other corporate purposes and the terms and provisions relative to the operation thereof; (6) the terms, if any, upon which shares of such series shall be convertible into, or exchangeable for, or shall have rights to purchase or other privileges to acquire shares of stock of any other class or of any other series of the same or any other class, including the price or prices or the rate or rates of conversion, exchange, purchase or acquisition and the terms of adjustment, if any; (7) the limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payment of dividends or making of other distributions on, and -3- 4 upon the purchase, redemption, or other acquisition of, the Common Stock or any other series or class of stock of the Corporation ranking junior to the shares of such series, either as to dividends or upon liquidation; and (8) the conditions or restrictions, if any, upon the creation of indebtedness of the Corporation or upon the issue of any additional stock of any class (including additional shares of such series or of any other series of the Series Preferred Stock) ranking on a parity with or senior to the shares of such series either as to dividends or upon liquidation. (b) Each share of each series of the Series Preferred Stock shall have the same relative rights and be identical in all respects with all the other shares of the same series, except that shares of any one series issued at different times may differ as to the dates, if any, from which dividends thereon shall be cumulative. Except as otherwise provided by law or specified in this Article Four, any series of the Series Preferred Stock may differ from any other series with respect to any one or more of the voting powers, designations, powers, preferences and relative, participating, optional and other special rights, if any, and the qualifications, limitations and restrictions thereof. (c) Before any dividends on any class of stock of the Corporation ranking junior to the Series Preferred Stock (other than dividends payable in shares of any class of stock of the Corporation ranking junior to the Series Preferred Stock) shall be declared or paid or set apart for payment, the holders of shares of each series of the Series Preferred Stock shall be entitled to such dividends, but only when and as declared by the Board of Directors out of funds legally available therefor, as they may be entitled to in accordance with the resolution or resolutions adopted by the Board of Directors providing for the issuance of such series, payable on such dates as may be fixed in such resolution or resolutions. -4- 5 (d) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation shall be made to or set apart for the holders of shares of any class of stock of the Corporation ranking junior to the Series Preferred Stock, the holders of the shares of each series of the Series Preferred Stock shall be entitled to receive payment of the amount per share fixed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of the shares of such series, plus an amount equal to all dividends accrued thereon to the date of final distribution to such holders. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the shares of the Series Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid, then such assets, or the proceeds thereof, shall be distributed among such holders ratably in accordance with the respective amounts which would be payable on such shares if all amounts payable thereon were paid in full. For the purposes of this paragraph (d), the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation or a consolidation or merger of the Corporation with one or more corporations shall not be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary. (e) The term "junior stock", as used in relation to the Series Preferred Stock, shall mean the Common Stock and any other class of stock of the Corporation hereafter authorized which by its terms shall rank junior to the Series Preferred Stock as to dividends and as to the distribution of assets on liquidation; the term "senior stock", as used in relation to the Series Preferred Stock, shall mean any class of stock of the Corporation hereafter authorized -5- 6 which by its terms shall rank senior to the Series Preferred Stock as to dividends and as to the distribution of assets on liquidation. (f) Before the Corporation shall issue any shares of the Series Preferred Stock of any series authorized as hereinbefore provided, a certificate setting forth a copy of the resolution or resolutions with respect to such series adopted by the Board of Directors of the Corporation pursuant to the foregoing authority vested in said Board of Directors shall be made, filed and recorded in accordance with the then applicable requirements, if any, of the laws of the State of Delaware, or, if no certificate is then so required, such certificate shall be signed and acknowledged on behalf of the Corporation by its President or a Vice-President and its corporate seal shall be affixed thereto and attested by its Secretary or an Assistant Secretary and such certificate shall be filed and kept on file at the registered office of the Corporation in the State of Delaware and in such other place or places as the Board of Directors shall designate. (g) Shares of any series of the Series Preferred Stock which shall be issued and thereafter acquired by the Corporation through purchase, redemption, conversion or otherwise shall return to the status of authorized but unissued shares of the Series Preferred Stock of the same series unless otherwise provided in the resolution or resolutions of the Board of Directors. Unless otherwise provided in the resolution or resolutions of the Board of Directors providing for the issuance thereof, the number of authorized shares of stock of any such series may be increased or decreased (but not below the number of shares thereof then outstanding) by resolution or resolutions of the Board of Directors and the filing of a certificate complying with the requirements referred to in subparagraph (f) above. In case the authorized number of shares of any such series of the Series Preferred Stock shall be decreased, the shares representing such decrease shall, unless otherwise provided in the resolution or resolutions of the Board of -6- 7 Directors providing for the issuance thereof, resume the status of authorized but unissued shares of the Series Preferred Stock, undesignated as to series. II. Common Stock Subject to the requirements of law, this Certificate of Incorporation, as amended from time to time, and the resolution or resolutions of the Board of Directors creating or modifying any series of the Series Preferred Stock, the holders of Common Stock shall (i) in the event of any liquidation, dissolution or other winding up of the Corporation, whether voluntary or involuntary, and after all holders of the Series Preferred Stock shall have been paid in full the amounts to which they respectively shall be entitled, be entitled to receive all the remaining assets of the Corporation of whatever kind, such assets to be distributed pro rata to the holders of the Common Stock; and (ii) after payment in full of all dividends to which holders of the Series Preferred Stock shall be entitled, be entitled to receive such dividends as and when the same may be declared from time to time by the Board of Directors of the Corporation out of funds legally available therefor. Except as otherwise required by law and the provisions of this Certificate of Incorporation and except as provided by the resolution or resolutions of the Board of Directors creating or amending any series of the Series Preferred Stock, the holders of the Common Stock of the Corporation possess full voting power for the election of directors and for all other purposes, and each holder thereof shall be entitled to one vote for each share held by such holder. ARTICLE FIVE: The business of the Corporation shall be managed under the direction of the Board of Directors except as otherwise provided by law. Except as otherwise provided by law, the number of directors which shall constitute the Board of Directors shall be as set forth in the Corporation's By-Laws, and in any event shall not be less than three (3). -7- 8 Following the closing of the initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock to the public (the "Initial Public Offering"), the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors as constituted immediately prior to the IPO. At the first annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class I directors shall expire and Class I directors shall be elected for a term ending at the third annual meeting succeeding such first annual meeting. At the second annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class II directors shall expire and Class II directors shall be elected for a term ending at the third annual meeting succeeding such second annual meeting. At the third annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class III directors shall expire and Class III directors shall be elected for a term ending at the third annual meeting succeeding such third annual meeting. At each succeeding annual meeting of stockholders, directors shall be elected for a term ending at the third annual meeting succeeding such annual meeting to succeed the directors of the class whose terms expire at such annual meeting. Notwithstanding the foregoing provisions of this Article Five, each director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. -8- 9 The Board of Directors or any individual director may be removed from office at any time with cause by the affirmative vote of the holders of a majority of the voting power of all of the then outstanding stock of the Corporation entitled to vote at an election of directors. Any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause and any newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders, except as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors, and not by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director's successor shall have been elected and qualified. Anything herein to the contrary notwithstanding, the provisions of this Article V shall apply only to directors elected by holders of Common Stock together with holders of all other classes of the Corporation's capital stock voting as a single class therewith on the election of directors. If holders of any class of the Corporation's capital stock have the right to elect directors voting as a separate class and such right be then in effect, the maximum number of directors of the Corporation shall be increased by the number of directors which such holders may so elect and upon termination of such right the number shall be reduced to the extent it was previously so increased. Notwithstanding any other provisions of this Certificate of Incorporation of the By-Laws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Certificate of Incorporation or the By-Laws of the Corporation), the -9- 10 affirmative vote of the holders of 66-2/3% or more of the outstanding shares of capital stock of the Corporation entitled to vote on such amendment, alteration, change or repeal (considered for this purpose as one class) shall be required to amend, alter, change or repeal this Article V. ARTICLE SIX: The Board of Directors may make, alter or repeal the By-Laws of the Corporation except as otherwise provided in the By-Laws adopted by the Corporation's stockholders. ARTICLE SEVEN: The Corporation expressly elects to be governed by Section 203 of the General Corporation Law of the State of Delaware as from time to time in effect. ARTICLE EIGHT: No action shall be taken by the stockholders of the Corporation except at an annual or special meeting called in accordance with the By-Laws of the Corporation or by written consent of the stockholders in accordance with the By-Laws of the Corporation prior to the closing of the Initial Public Offering and following the closing of the Initial Public Offering no action shall be taken by the stockholders by written consent. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the By-Laws of the Corporation. ARTICLE NINE: The directors of the Corporation shall be protected from personal liability, through indemnification or otherwise, to the fullest extent permitted under the General Corporation Law of the State of Delaware as from time to time in effect. 1. A director of the Corporation shall under no circumstances have any personal liability to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve -10- 11 intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, as the same exists or hereafter may be amended, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware hereafter is amended to authorize the further elimination or limitation of the liability of directors shall be eliminated or limited to the fullest extent permitted by the amended General Corporation Law of the State of Delaware. Neither the modification or repeal of this paragraph 1 of Article NINE nor any amendment to said General Corporation Law of Delaware that does not have retroactive application shall limit the right of directors of the Corporation to exculpation from personal liability for any act or omission occurring prior to such amendment, modification or repeal. 2. The Corporation shall, to the fullest extent permitted by law (i) indemnify each director, officer, employee and agent of the Corporation, except as may be otherwise provided in the By-Laws of the Corporation, and in furtherance hereof the Board of Directors is expressly authorized to amend the By-Laws of the Corporation from time to time to give full effect hereto, notwithstanding possible self interest of the directors in the action being taken and (ii) advance expenses incurred by such officers, directors, employees or agents in relation to any action, suit or proceeding. Neither the modification nor the repeal of this paragraph 2 of Article NINE nor any amendment to the General Corporation Law of the State of Delaware that does not have retroactive application shall limit the right of directors, officers of the Corporation, employees and agents to indemnification hereunder with respect to any act or omission occurring prior to such modification, amendment or repeal. -11- 12 ARTICLE TEN: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by law, and all rights conferred upon stockholders herein are granted subject to this reservation. -12- 13 IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been signed by [_________], its authorized officer this [__] day of [_____], 2001. GLOBAL POWER EQUIPMENT GROUP INC. By: ----------------------------------- Name: Title: -13- EX-3.2.B 3 y45366a2ex3-2_b.txt FORM OF AMENDED & RESTATED BY-LAWS 1 Exhibit 3.2(b) AMENDED AND RESTATED BY-LAWS OF GLOBAL POWER EQUIPMENT GROUP INC. ARTICLE I STOCKHOLDERS Section 1. Annual Meeting. (a) An annual meeting of the stockholders shall be held each year for the purpose of electing directors and conducting such other business as may lawfully come before the meeting. The date, time and place (within or outside Delaware) of the annual meeting shall be determined by resolution of the Board of Directors. (b) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be: (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (B) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (C) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, (i) the stockholder must have given timely notice thereof in writing to an Assistant Secretary of the Corporation, (ii) such business must be a proper matter for stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the Corporation with a Solicitation Notice (as defined in this Section 1(b)), such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporation's voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the Corporation's voting shares reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 1. To be timely, a stockholder's notice shall be delivered to an Assistant Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day and not earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced more than 2 thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year's annual meeting, notice by the stockholder, to be timely, must be so delivered not later than the later of the close of business on the ninetieth (90th) day prior to such annual meeting and the tenth (10th) day following the day on which public announcement of the date of such meeting is first made, and not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth: (A) as to each person whom the stockholder proposed to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934 Act") and Rule 14a-11 thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner, (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the Corporation's voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporation's voting shares to elect such nominee or nominees (an affirmative statement of such intent, a "Solicitation Notice"). (c) Notwithstanding anything in the third sentence of Section 1(b) of these By-Laws to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least one hundred (100) days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section 1 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to an Assistant Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation. (d) Only such persons who are nominated in accordance with the procedures set forth in this Section 1 shall be eligible to serve as directors and only such business shall be conducted at an annual meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1. Except as otherwise provided by law, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in these By-Laws and, if any proposed nomination -2- 3 or business is not in compliance with these By-Laws, to declare that such proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded. (e) Notwithstanding the foregoing provisions of this Section 1, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholder's meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. Nothing in these By-Laws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation proxy statement pursuant to Rule 14a-8 under the 1934 Act. (f) For purposes of this Section 1, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant Section 13, 14 or 15(d) of the 1934 Act. Section 2. Special Meetings. (a) Special meetings of the stockholders may be called by the Board of Directors and shall be called by the President of the Corporation or by an Assistant Secretary of the Corporation upon the written request of the holders of record of at least thirty-five per cent (35%) of the shares of stock of the Corporation, issued and outstanding and entitled to vote, at such times and at such place either within or without the State of Delaware as may be stated in the call or in a waiver of notice thereof. (b) If a special meeting is properly called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the President of the Corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The Board of Directors shall determine the time and place of such special meeting, which shall be held not less than thirty-five (35) days and not more than one hundred twenty (120) days after the date of the receipt of the request. Upon determination of the time and place of the meeting, the officer receiving the request shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Section 3 of these By-Laws. If the notice is not given within one hundred (100) days after the receipt of the request, the person or persons properly requesting the meeting may set the time and place of the meeting and give the notice. Nothing contained in this paragraph (b) shall be construed as limiting, fixing or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held. (c) Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who is a stockholder of record at the time of giving notice provided for in these By-Laws who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2(c). In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation's notice of meeting, if the stockholder's -3- 4 notice required by Section 1(b) of these By-Laws shall be delivered to an Assistant Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting and the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting, and not earlier than the close of business on the later of the one hundred twentieth (120th) day prior to such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder's notice as described above. Section 3. Notice of Meetings. Notice of the time, place and purpose of every meeting of stockholders shall be delivered personally or mailed not less than ten (10) days nor more than sixty (60) days previous thereto to each stockholder of record entitled to vote, at such stock-holder's post office address appearing upon the records of the Corporation or at such other address as shall be furnished in writing by him or her to the Corporation for such purpose. Such further notice shall be given as may be required by law or by these By-Laws. Section 4. Quorum. The holders of record of at least a majority of the shares of the stock of the Corporation, issued and outstanding and entitled to vote, present in person or by proxy, shall, except as otherwise provided by law, by the Certificate of Incorporation or by these By-Laws, constitute a quorum at all meetings of the stockholders. If there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time until a quorum shall have been obtained. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum and the votes present may continue to transact business until adjournment. Section 5. Organization of Meetings. Meetings of the stockholders shall be presided over by the Chairman of the Board of Directors of the Corporation or, if the Chairman of the Board is not present by the President of the Corporation, or if the President of the Corporation is not present, by a chairman to be chosen at the meeting. An Assistant Secretary of Corporation shall act as secretary of the meeting. Section 6. Voting. At the meeting of stockholders, each stockholder having the right to vote may vote in person or may authorize another person or persons to act for him by proxy appointed by an instrument in writing executed by such stockholder and bearing a date not more than one (1) year prior to said meeting, unless said instrument provides for a longer period. All proxies must be filed with an Assistant Secretary of the Corporation at the beginning of each meeting in order to be counted in any vote at the meeting. At each meeting of stockholders, except as otherwise provided by law or the Certificate of Incorporation, every holder of record of stock entitled to vote shall be entitled to one vote in person or by proxy for each share of such stock standing in his or her name on the records of the Corporation. Elections of directors shall be determined by a plurality of the votes cast and, except as otherwise provided by law, the Certificate of Incorporation, or these By-Laws, all other action shall be determined by a majority of the votes cast at such meeting. Each proxy to vote shall be in writing and signed by the stockholder or by such stockholder's duly authorized attorney. -4- 5 At all elections of directors, the voting shall be by ballot or in such other manner as may be determined by the stockholders present in person or by proxy entitled to vote at such election. With respect to any other matter presented to the stockholders for their consideration at a meeting, any stockholder entitled to vote may, on any question, demand a vote by ballot. A complete list of the stockholders entitled to vote at each such meeting, arranged in alphabetical order, with the address of each, and the number of shares registered in the name of each stockholder, shall be prepared by an Assistant Secretary of the Corporation and shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 7. Inspectors of Election. The Board of Directors in advance of any meeting of stockholders may appoint one or more Inspectors of Election to act at the meeting or any adjournment thereof. If Inspectors of Election are not so appointed, the chairman of the meeting may, and on the request of any stockholder entitled to vote shall, appoint one or more Inspectors of Election. Each Inspector of Election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of Inspector of Election at such meeting with strict impartiality and according to the best of his or her ability. If appointed, Inspectors of Election shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by law. Section 8. Action by Consent. (a) Any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if, prior to such action, a written consent or consents thereto, setting forth such action, is signed by the holders of record of shares of the stock of the Corporation, issued and outstanding and entitled to vote thereon, having not less than the minimum number of votes that would be required by law, the Certificate of Incorporation of these By-laws to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. (b) Notwithstanding the foregoing, no such action by written consent may be taken following the closing of the initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock of the Corporation (the "Initial Public Offering"). ARTICLE II DIRECTORS Section 1. Number, Quorum, Term, Vacancies, Removal. The Board of Directors of the Corporation shall consist of a minimum of three (3) directors. The number of directors shall be fixed or changed by a resolution passed by a majority of the members of the Board of Directors. The number of directors which shall constitute the initial board shall be seven. The -5- 6 directors need not be stockholders. Following the closing of the Initial Public Offering, the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors as constituted immediately prior to the Initial Public Offering. At the first annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class I directors shall expire and Class I directors shall be elected for a term ending at the third annual meeting succeeding such first annual meeting. At the second annual meeting of stockholders following the Initial Public Offering, the term of office of the Class II directors shall expire and Class II directors shall be elected for a term ending at the third annual meeting succeeding such second annual meeting. At the third annual meeting of stockholders following the Initial Public Offering, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term ending at the third annual meeting succeeding such third annual meeting. At each succeeding annual meeting of stockholders, directors shall be elected for a term ending at the third annual meeting succeeding such annual meeting to succeed the directors of the class whose terms expire at such annual meeting. Notwithstanding any other provisions of these By-laws or the Certificate of Incorporation (and notwithstanding the fact that some lesser percentage may be specified by law or by these By-laws), the affirmative vote of the holders of sixty-six and two thirds percent (66-2/3%) or more of the outstanding shares of capital stock of the Corporation entitled to vote on any amendment, alteration, change or repeal the first paragraph of this Section !(considered for this purpose as one class) shall be required to so amend, alter, change or repeal the preceeding paragraph of this Section 1. Anything herein to the contrary notwithstanding, the first paragraph of this Section 1 shall apply only to directors elected by holders of Common Stock together with holders of all other classes of the Corporation's capital stock voting as a single class therewith on the election of directors. If holders of any class of the Corporation's capital stock have the right to elect directors voting as a separate class and such right be then in effect, the maximum number of directors of the Corporation shall be increased by the number of directors which such holders may so elect and upon termination of such right the number shall be reduced to the extent it was previously so increased. A majority of the members of the Board of Directors then holding office shall constitute a quorum for the transaction of business, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum shall have been obtained. The vote of a majority of the directors present at any meting at which there is a quorum shall be the act of the Board of Directors, except as otherwise specifically provided by law, by the Certificate of Incorporation or by these By-Laws Notwithstanding the foregoing provisions of this section, each director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. -6- 7 Unless otherwise provided in the Certificate of Incorporation, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders and except as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was recreated or occurred and until such director's successor shall have been elected and qualified. Any director may resign at any time by delivering his written resignation to an Assistant Secretary of the Corporation, such resignation to specify whether it will be effective at a particular time, upon receipt by such Assistant Secretary of the Corporation or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office for the unexpired portion of the term of the Director whose place shall be vacated and until his successor shall have been duly elected and qualified. The Board of Directors or any individual director may be removed from office as provided in Section 141(k) of the DGCL. Section 2. Meetings, Notice. Meetings of the Board of Directors shall be held at such place either within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the call or in a waiver of notice thereof. Regular meetings of the Board of Directors shall be held at such times as may from time to time be fixed by resolution of the Board of Directors, and special meetings may be held at any time upon the call of two directors, the Chairman of the Board of Directors, if one be elected, or the President of the Corporation, by oral or written notice, duly served on or sent or mailed to each director not less than two days before such meeting. A meeting of the Board of Directors may be held without notice immediately after the annual meeting of stockholders at the same place at which such meeting was held. Notice need not be given of regular meetings of the Board of Directors. Any meeting may be held without notice, if all directors are present, or if notice is waived in writing, either before or after the meeting, by those not present. Section 3. Committees. The Board of Directors may, in its discretion, by resolution passed by a majority of the whole Board, designate from among its members one or more committees which shall consist of one or more directors. The Board may designate one or more directors as alternate members of any such committee, who may replace any absent or disqualified member at any meeting of the committee. Such committees shall have and may exercise such powers as shall be conferred or authorized by the resolution appointing them; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or -7- 8 resolutions providing for the issuance of shares of stock adopted by the Board of Directors, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending these By-laws; and, unless the resolution, these By-laws, or the Certificate of Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a Certificate of Ownership and Merger. A majority of any such committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board shall have power at any time to change the membership of any such committee, to fill vacancies in it, or to dissolve it. Section 4. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if prior to such action a written consent or consents thereto is signed by all members of the Board, or of such committee as the case may be, and such written consent or consents is filed with the minutes of proceedings of the Board or committee. Section 5. Compensation. The Board of Directors may determine, from time to time, the amount of compensation which shall be paid to its members. The Board of Directors shall also have power, in its discretion, to allow a fixed sum and expenses for attendance at each regular or special meeting of the Board, or of any committee of the Board. In addition, the Board of Directors shall also have power, in its discretion, to provide for and pay to directors rendering services to the Corporation not ordinarily rendered by directors, as such, special compensation appropriate to the value of such services, as determined by the Board from time to time. Section 6. Telephone Meetings. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. ARTICLE III OFFICERS Section 1. Titles and Election. The officers of the Corporation, who shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders, shall be a President and Chief Executive Officer and a Chief Financial Officer. The Board of Directors from time to time may elect a Chairman of the Board, one or more Vice Presidents, -8- 9 Assistant Secretaries and such other officers and agents as it shall deem necessary, and may define their powers and duties. Any number of offices may be held by the same person. Section 2. Terms of Office. Officers shall hold office until their successors are chosen and qualify. Section 3. Removal. Any officer may be removed, either with or without cause, at any time, by the affirmative vote of a majority of the Board of Directors. Section 4. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors or to an Assistant Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5. Vacancies. If the office of any officer or agent becomes vacant by reason of death, resignation, retirement, disqualification, removal from office or otherwise, the directors may choose a successor, who shall hold office for the unexpired term in respect of which such vacancy occurred. Section 6. Chairman of the Board. The Chairman of the Board of Directors, if one be elected, shall preside at all meetings of the Board of Directors and of the stockholders, and the Chairman shall have and perform such other duties as from time to time may be assigned to the Chairman by the Board of Directors. Section 7. President and Chief Executive Officer. The President shall be the Chief Executive Officer of the Corporation and, in the absence of the Chairman of the Board of Directors, shall preside at all meetings of the Board of Directors, and of the stockholders. The President shall exercise the powers and perform the duties usual to the Chief Executive Officer and, subject to the control of the Board of Directors, shall have general management and control of the affairs and business of the Corporation; the President shall appoint and discharge employees and agents of the Corporation (other than officers elected by the Board of Directors) and fix their compensation; and the President shall see that all orders and resolutions of the Board of Directors are carried into effect. The President shall have the power to execute bonds, mortgages and other contracts, agreements and instruments of the Corporation, and shall do and perform such other duties as from time to time may be assigned to the President by the Board of Directors. Section 8. Vice Presidents. If chosen, the Vice Presidents, in the order of their seniority, shall, in the absence or disability of the President, exercise all of the powers and duties of the President. Such Vice Presidents shall have the power to execute bonds, notes, mortgages and other contracts, agreements and instruments of the Corporation, and shall do and perform such other duties incident to the office of Vice President and as the Board of Directors, or the President shall direct. Section 9. Assistant Secretary. The Assistant Secretary, or any of the Assistant Secretaries if there be more than one, shall give, or cause to be given, notice of all meetings of the Board of Directors and the stockholders of the Corporation and all other notices required by law -9- 10 or by these By-Laws, and in the case of his or her absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the President of the Corporation, any directors of the Corporation or any stockholder of the Corporation upon whose request the meeting is called as provided in these By-Laws. The Assistant Secretary, or any of the Assistant Secretaries if there be more than one, shall record all the proceedings of the meetings of the Board of Directors, any committee thereof and the stockholders of the Corporation in a book to be kept for that purpose. Each Assistant Secretary shall perform any other duties as may be assigned by these By-Laws, the Board of Directors or the President of the Corporation. Section 10. Chief Financial Officer. The Chief Financial Officer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys, and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors. The Chief Financial Officer shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the directors whenever they may require it, an account of all his or her transactions as Chief Financial Officer and of the financial condition of the Corporation. ARTICLE IV INDEMNIFICATION Section 1. Actions by Others. The Corporation (1) shall, to the fullest extent permitted by law, indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was a director or an officer of the Corporation and (2) except as otherwise required by Section 3 of this Article, may, to the fullest extent permitted by law, indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, agent of or participant in another Corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts actually and reasonably incurred by such person in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, in and of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. -10- 11 Section 2. Actions by or in the Right of the Corporation. The Corporation shall, to the fullest extent permitted by law, indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, agent of or participant in another Corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Section 3. Successful Defense. To the extent that a person who is or was a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 or Section 2 of this Article, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith. Section 4. Specific Authorization. Any indemnification under Section 1 or Section 2 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in said Sections 1 and 2. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. Section 5. Advance of Expenses. Expenses incurred by any person who may have a right of indemnification under this Article in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he or she is entitled to be indemnified by the Corporation pursuant to this Article. Section 6. Right of Indemnity Not Exclusive. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of stockholders or disinterested directors -11- 12 or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 7. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of or participant in another Corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article, Section 145 of the General Corporation Law of the State of Delaware or otherwise. Section 8. Invalidity of Any Provisions of This Article. The invalidity or unenforceability of any provision of this Article shall not affect the validity or enforceability of the remaining provisions of this Article. ARTICLE V CAPITAL STOCK Section 1. Certificates. The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock in such form as the Board of Directors may from time to time prescribe. The certificates of stock shall be signed by the President or a Vice President and by an Assistant Secretary, sealed with the seal of the Corporation or a facsimile thereof, and countersigned and registered in such manner, if any, as the Board of Directors may by resolution prescribe. Where any such certificate is countersigned by a transfer agent other than the Corporation or its employee, or registered by a registrar other than the Corporation or its employee, the signature of any such officer may be a facsimile signature. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers of the Corporation. Section 2. Transfer. The shares of stock of the Corporation shall be transferred only upon the books of the Corporation by the holder thereof in person or by his or her attorney, upon surrender to the Corporation or the stock transfer agent of the Corporation for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof of the authenticity of the signature as the Corporation or the stock transfer agent of the Corporation may reasonably require. -12- 13 Section 3. Record Dates. The Board of Directors may fix in advance a date, not less than ten nor more than sixty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the distribution or allotment of any rights, or the date when any change, conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend, or to receive any distribution or allotment of such rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, and in such case only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, or to receive payment of such dividend, or to receive such distribution or allotment or rights or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. Section 4. Lost Certificates. In the event that any certificate of stock is lost, stolen, destroyed or mutilated, the Board of Directors may authorize the issuance of a new certificate of the same tenor and for the same number of shares in lieu thereof. The Board may in its discretion, before the issuance of such new certificate, require the owner of the lost, stolen, destroyed or mutilated certificate, or the legal representative of the owner to make an affidavit or affirmation setting forth such facts as to the loss, destruction or mutilation as it deems necessary, and to give the Corporation a bond in such reasonable sum as it directs to indemnify the Corporation. ARTICLE VI CHECKS, NOTES, ETC. Section 1. Checks, Notes, Etc. All checks and drafts on the Corporation's bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, may be signed by the President, any Vice President or the Chief Financial Officer and may also be signed by such other officer or officers, agent or agents, as shall be thereunto authorized from time to time by the Board of Directors. ARTICLE VII MISCELLANEOUS PROVISIONS Section 1. Offices. The registered office of the Corporation shall be located at 1013 Centre Road, in the City of Wilmington, County of New Castle, in the State of Delaware and said Corporation shall be the registered agent of this Corporation in charge thereof. The Corporation may have other offices either within or without the State of Delaware at such places as shall be determined from time to time by the Board of Directors or the business of the Corporation may require. Section 2. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors. -13- 14 Section 3. Corporate Seal. The seal of the Corporation shall be circular in form and contain the name of the Corporation, and the year and state of its incorporation. Such seal may be altered from time to time at the discretion of the Board of Directors. Section 4. Books. There shall be kept at such office of the Corporation as the Board of Directors shall determine, within or without the State of Delaware, correct books and records of account of all its business and transactions, minutes of the proceedings of its stockholders, Board of Directors and committees, and the stock book, containing the names and addresses of the stockholders, the number of shares held by them, respectively, and the dates when they respectively became the owners of record thereof, and in which the transfer of stock shall be registered, and such other books and records as the Board of Directors may from time to time determine. Section 5. Voting of Stock. Unless otherwise specifically authorized by the Board of Directors, all stock owned by the Corporation, other than stock of the Corporation, shall be voted, in person or by proxy, by the President or any Vice President of the Corporation on behalf of the Corporation. ARTICLE VIII AMENDMENTS Section 1. Amendments. The vote of the holders of at least a majority of the shares of stock of the Corporation, issued and outstanding and entitled to vote, shall be necessary at any meeting of stockholders to amend or repeal these By-Laws or to adopt new by-laws. These By-Laws may also be amended or repealed, or new by-laws adopted, at any meeting of the Board of Directors by the vote of at least a majority of the members of the Board of Directors; provided that any by-law adopted by the Board may be amended or repealed by the stockholders in the manner set forth above. Any proposal by the Board of Directors to amend or repeal these By-Laws or to adopt new by-laws shall be stated in the notice of the meeting of the Board of Directors or in the waiver of notice thereof, as the case may be, unless all of the directors are present at such meeting. -14- EX-10.3 4 y45366a2ex10-3.txt FORM OF AMENDMENT TO MANAGEMENT AGREEMENT 1 Exhibit 10.3 FIRST AMENDMENT TO MANAGEMENT AGREEMENT This First Amendment (this "Amendment"), dated as of April __, 2001, by and between Harvest Partners, Inc., a New York corporation ("Harvest"), and Global Energy Equipment Group, L.L.C., a Delaware limited liability company (the "Company"). W I T N E S S E T H: WHEREAS, the Company and Harvest entered into a Management Agreement (the "Agreement"), dated August 1, 2000, whereby Harvest agreed to provide the Company and/or its subsidiaries and affiliates with financial advisory and strategic planning services in exchange for good and valuable consideration; and WHEREAS, the parties hereto desire, and deem it in their own best interests, to amend the Agreement as provided herein. NOW THEREFORE, in consideration of the mutual agreements herein contained and of the mutual benefits hereby provided, the parties hereto hereby agree as follows: 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the respective meaning assigned to such term in the Agreement. 2. Amendments to the Agreement. (a) Section 3(a) of the Agreement is hereby amended by deleting the reference to "...equal to the sum of $750,000" and inserting in lieu thereof "...equal to the sum of $1,250,000". (b) Section 3(b) of the Agreement is hereby deleted in its entirety. (c) Section 7 of the Agreement is hereby amended by adding the following new sentence to the end of Section 7: "The indemnification obligations of this Section 7 shall survive the termination of this Agreement." 3. Status of the Agreement; Effectiveness. This Amendment is limited solely for the purposes and to the extent expressly set forth herein, and, except as expressly modified hereby, the terms, provisions and conditions of the Agreement shall continue in full force and effect and are hereby ratified and confirmed in all respects. In the event of any conflict between the terms of this Amendment and the terms of the Agreement, the terms of this Amendment shall govern. This Amendment shall be effective as of the date on which the initial public offering of shares of common stock of Global Power Equipment Group Inc. (the "IPO") is consummated. 2 4. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one agreement binding upon all of the parties hereto. 5. Amendment and Restatement. The parties agree that, for convenience of reference, the Agreement and this Amendment shall be restated upon consummation of the IPO. 6. Governing Law. This Amendment shall be construed in accordance with, and be governed by, the laws of the State of New York, without giving effect to the conflicts of law principles thereof. ***** IN WITNESS WHEREOF, each of the parties hereto have executed this Amendment effective as of the date first written above. HARVEST PARTNERS, INC., a New York Company By: --------------------------------------- Name: Title: GLOBAL ENERGY EQUIPMENT GROUP, L.L.C., a Delaware limited liability company By: --------------------------------------- Name: Title: -2- 3 EXHIBIT 10.15 EXCHANGE AGREEMENT This EXCHANGE AGREEMENT (this "Agreement") is entered into as of May 1, 2001, by and among Global Power Equipment Group Inc. (the "Company"), a Delaware corporation, and each of the Persons named on Schedule I attached hereto (each such Person, a "Purchaser" and, collectively, the "Purchasers"). Capitalized terms used and not otherwise defined herein shall have the respective meaning given such term in the Limited Liability Company Agreement of GEEG Holdings, L.L.C. ("GHLLC"), a Delaware limited liability company, dated as of August 1, 2000. W I T N E S S E T H: WHEREAS, each Purchaser owns the number of Preferred Units and Class A Common Units (collectively, with respect to such Purchaser, "Units") in GHLLC set forth opposite such Purchaser's name on Schedule I attached hereto; WHEREAS, each Purchaser desires to contribute such Purchaser's Units to the Company in exchange for shares of common stock (the "Common Stock"), par value $0.01 per share, of the Company; WHEREAS, the Company desires to issue shares of Common Stock to each such Purchaser in exchange for all of such Purchaser's Units; and WHEREAS, with respect to each Purchaser other than GEEG Acquisition Holdings Corp., the parties hereto intend for the transactions contemplated hereby to qualify as a tax free contribution under Section 351(d) of the Internal Revenue Code of 1986, as amended (the "Code") and, with respect to GEEG Acquisition Holdings Corp., the parties hereto intend for the transactions contemplated hereby to qualify as a tax free reorganization under Section 368(a)(1) of the Code. NOW, THEREFORE, in consideration of the mutual agreements herein contained and the mutual benefits hereby provided, the Company and the Purchasers, intending to be bound legally, hereby agree as follows: Section 1. Exchanges of Units for Common Stock. 1.1. Exchanges. Subject to the terms and conditions hereinafter set forth, each Purchaser hereby agrees to transfer to the Company such Purchaser's Units and the Company hereby agrees to issue to such Purchaser shares of Common Stock as follows: (a) Each Common Unit shall be exchanged for a number of shares of Common Stock equal to the amount obtained when one (1) is multiplied by the quotient resulting from dividing (i) the value of the Company (as determined by the underwriters in connection with the initial public offering (the "IPO") of shares of Common Stock), less the aggregate of the net cash proceeds received by the Company in the IPO and the aggregate capital contribution with respect to the Preferred Units, divided by the 4 aggregate amount of issued and outstanding Common Units and Common Units into which employee stock options granted pursuant to the 2000 Option Plan are exercisable on the date of consummation of the IPO (the "Effective Date") by (ii) the price per share at which shares of Common Stock will be offered in the IPO; and (b) Each Preferred Unit shall be exchanged for the number of shares of Common Stock equal to the amount obtained when one hundred (100) is divided by the price per share at which shares of Common Stock will be offered in the IPO. 1.2. No Fractional Shares. No fractional shares of Common Stock of the Company shall be issued under this Agreement and any fractional share interests will not entitle the owner thereof to vote or to have any rights of a holder of Common Stock of the Company. In lieu of any such fractional shares, each holder of shares of Common Stock of the Company who would otherwise have been entitled to a fraction of a share of Common Stock of the Company shall be paid an amount in cash (without interest) equal to the product of (i) such fractional part of a share of Common Stock of the Company multiplied by (ii) the price per share at which shares of Common Stock will be offered in the IPO. As promptly as practicable after the determination of the amount of cash, if any, to be paid to holders of fractional interests, the Company will forward payments to such holders of fractional interests subject to and in accordance with the terms hereof. 1.3. Closing. The exchanges referred to in Section 1.1 (the "Closing") shall take place at the offices of White & Case LLP, 1155 Avenue of the Americas, New York, New York 10036, or such other place as shall be mutually agreed to by the parties hereto, on such date and time as shall be mutually agreed to by the parties hereto. Such date is herein referred to as the "Closing Date." Section 2. Representations of the Purchasers Each Purchaser represents and warrants to the Company as follows: 2.1. Such Purchaser represents that such Purchaser is not acquiring the Common Stock with a view to, or for resale in connection with, any distribution of the Common Stock in violation of the Securities Act of 1933 (the "Securities Act"). Such Purchaser understands that the Common Stock has not been registered under the Securities Act or the securities laws of any state and that the Common Stock has been issued to such Purchaser by reason of specific exemptions under the provisions thereof which depend in part upon the investment intent of such Purchaser and upon the other representations made by such Purchaser in this Agreement. Such Purchaser understands that the Company is relying upon the representations and agreements made by such Purchaser in this Agreement. 2.2. Such Purchaser understands that such Purchaser may not sell or transfer the Common Stock purchased pursuant to this Agreement unless the Common Stock is registered pursuant to the requirements of the Securities Act and of any applicable state or "blue sky" securities laws or regulations, or, if required by the Company, such Purchaser furnishes an opinion of counsel, in form and substance satisfactory to the Company, to the effect that registration is not then required under the Securities Act or under any applicable state or "blue sky" securities laws -2- 5 or regulations. Such Purchaser further understand that the Company has no obligation or present intention of so registering the Common Stock, and that there is no assurance that any exemption from registration under the Securities Act will be available or, if available, that such exemption will allow such Purchaser to dispose of or otherwise transfer any or all of the shares of Common Stock in the amounts or at the times that such Purchaser may propose. 2.3. Such Purchaser (i) has such knowledge, sophistication and experience in business and financial matters that such Purchaser is capable of evaluating the merits and risks of the exchange referred to in Section 1.1 hereof, (ii) fully understands the nature, scope and duration of the limitations applicable to the Common Stock, (iii) is able to bear the economic risk of the exchange referred to in Section 1.1 hereof, and (iv) is an "Accredited Investor" as defined in Regulation D under the Securities Act. Section 3. Miscellaneous 3.1. Effectiveness. This Agreement shall be effective as of 12:01 AM on the Effective Date. 3.2. Legend. So long as applicable, each certificate representing any portion of the shares of Common Stock shall be stamped or otherwise imprinted with a legend in the following form: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and such securities may not be offered, sold, pledged or otherwise transferred except (1) pursuant to an exemption from, or in a transaction not subject to, the registration requirements under the Securities Act or (2) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any State of the United States." After the above requirement for a legend is no longer applicable because the shares of Common Stock are freely transferable under the Securities Act, the Company shall remove such legend upon request from a holder of such shares of Common Stock, if outside counsel for such holder reasonably determines that the transfer of such shares of Common Stock is no longer restricted by the Securities Act and the general counsel of the Company reasonably concurs in such determination. 3.3. Termination, Waiver, Amendment. Neither this Agreement nor any provisions hereof shall be waived, modified, changed, discharged or terminated except by an instrument in writing signed by the party against whom such waiver, modification, change, discharge or termination is sought; provided, however, that if the transactions contemplated by this Agreement are not consummated by August 31, 2001, this Agreement shall terminate. 3.4. Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by either the Company or any Purchaser, without the prior written consent of the other parties hereto (in the case of a proposed assignment by the Company) or the Company (in the case of a proposed assignment by such Purchaser). -3- 6 3.5. Power of Attorney. (a) Each Purchaser, by its execution hereof, hereby irrevocably makes, constitutes and appoints the Board of Directors as its true and lawful agent and attorney-in-fact, with full power of substitution and full power and authority in its name, place and stead to make, execute, sign, acknowledge, swear to, record and register all certificates and other instruments deemed advisable by the Board of Directors to carry out the provisions of this Agreement. (b) The foregoing power of attorney: (i) is coupled with an interest, shall be irrevocable and shall survive the death, incapacity or bankruptcy of each Purchaser; and (ii) may be exercised by the Board of Directors either by authorizing a Person to sign separately as attorney-in-fact for each Purchaser or, after listing all of the Purchasers executing an instrument, by a single signature of a Person authorized by the Board of Directors acting as attorney-in-fact for all of them. 3.6. Severability. If any provision of this Agreement or the application of any such provision to any Person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof. 3.7. Section and Other Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 3.8. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior arrangements or understandings (whether written or oral) with respect thereto. 3.9. Counterparts. For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties hereto and each such executed counterpart shall be deemed to be an original instrument. 3.10. Notices. All notices and other communications provided for herein and all legal process in regard hereto shall be validly given, made or served, if in writing and delivered by personal delivery, overnight courier, telecopier or registered or certified mail, return-receipt requested and postage prepaid addressed as follows: -4- 7 If to a Purchaser, to: The address set forth under such Purchaser's name on Schedule I attached hereto If to the Company, to: Global Power Energy Group Inc. c/o Harvest Partners, Inc. 280 Park Avenue, 33rd Floor New York, NY 10017 Attention: Stephen Eisenstein Any such communication shall be deemed given, made or served as of the date so delivered or, in the case of any communication delivered by mail, as of the date so received. 3.11. GOVERNING LAW. THE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO SUCH STATE'S CHOICE OF LAW PROVISIONS. * * * * * -5- 8 IN WITNESS WHEREOF, the Company and each Purchaser has executed this Agreement as of the date first written above. GEEG ACQUISITION HOLDINGS CORP. By: ---------------------------- Name: Title: 9 [Signature page for this Exchange Agreement] GEEG ACQUISITION HOLDINGS LLC By: ---------------------------- Name: Title: 10 [Signature page for this Exchange Agreement] GLOBAL POWER EQUIPMENT GROUP INC. By: ----------------------------- Name: Title: 11 [Signature page for this Exchange Agreement] SMC POWER HOLDINGS, L.L.C. By: ----------------------------- Name: Title: 12 [Signature page for this Exchange Agreement] SAW MILL INVESTMENTS, L.L.C. By: ----------------------------- Name: Title: 13 [Signature page for this Exchange Agreement] CASCADE INVESTMENT PARTNERS, L.L.C. By: ----------------------------- Name: Title: 14 [Signature page for this Exchange Agreement] PARIBAS PRINCIPAL INCORPORATED By: ----------------------------- Name: Title: 15 [Signature page for this Exchange Agreement] INDOSUEZ GEEG PARTNERS By: ----------------------------- Name: Title: 16 [Signature page for this Exchange Agreement] By: ----------------------------- William M. Gerstner 17 [Signature page for this Exchange Agreement] By: ----------------------------- Larry Edwards 18 [Signature page for this Exchange Agreement] By: ----------------------------- Gary Obermiller 19 [Signature page for this Exchange Agreement] By: ----------------------------- Gene Schockemoehl 20 [Signature page for this Exchange Agreement] By: ----------------------------- Michael Hackner 21 [Signature page for this Exchange Agreement] By: ----------------------------- James Wilson 22 [Signature page for this Exchange Agreement] By: ----------------------------- Jack Silver 23 [Signature page for this Exchange Agreement] By: ----------------------------- Albert Breuer 24 [Signature page for this Exchange Agreement] By: ----------------------------- Tike Wong 25 [Signature page for this Exchange Agreement] By: ----------------------------- John Rieckman 26 [Signature page for this Exchange Agreement] By: ----------------------------- Monte Ness 27 [Signature page for this Exchange Agreement] By: ----------------------------- Kevin Zahler 28 [Signature page for this Exchange Agreement] By: ----------------------------- Jack McSweeney 29 [Signature page for this Exchange Agreement] By: ----------------------------- Bengt Sohlen 30 SCHEDULE I
Preferred Units Class A Common Purchaser Exchanged Units Exchanged --------- --------- --------------- GEEG Acquisition Holdings Corp. [Address] 558,517.44 620,575.3 GEEG Acquisition Holdings LLC [Address] 248,850.00 276,500.0 SMC Power Holdings, L.L.C. [Address] 24,423.81 27,137.5 Saw Mill Investments, L.L.C. [Address] 26,263.32 29,181.5 Cascade Investment Partners, L.L.C. [Address] 8,100.00 9,000.0 Paribas Principal Incorporated [Address] 15,157.63 16,841.8 Indosuez GEEG Partners [Address] 13,137.09 14,596.8 William M. Gerstner [Address] 2,918.15 3,242.4 Larry Edwards [Address] 20,120.06 22,355.6 Gary Obermiller [Address] 15,638.32 17,375.9 Gene Schockemoehl [Address] 14,916.36 16,573.7
31 Schedule I Page 2 Michael Hackner [Adress] 8,130.44 9.033.8 James Wilson [Address] 6,965.30 7,739.2 Jack Silver [Address] 4,626.12 5,140.2 Albert Breuer [Address] 4,515.06 5,016.7 Tike Wong [Address] 4,415.65 4,906.3 John Rieckman [Address] 4,570.59 5,078.5 Monte Ness [Address] 4,920.47 5,467.2 Kevin Zahler [Address] 4,781.63 5,312.9 Jack McSweeney [Address] 18,000.00 20,000.0 Bengt Sohlen [Address] 0 1,205.0
EX-10.15 5 y45366a2ex10-15.txt FORM OF CONTRIBUTION AGREEMENT 1 EXHIBIT 10.15 PURCHASE AGREEMENT This Purchase Agreement (the "Agreement") is entered into as of December21, 2000 by and among Cemex, S.A. de C.V., a Mexican corporation ("CEMEX"), F.L. SMIDTH - -& Co. A/Sa Danish corporation ("FLS"), Fabricacion de Maquinaria Pesada, S.A. de C.V. ("FAMAPE"), Braden Manufacturing, L.L.C., a Delaware limited liability company ("Braden") and Braden Manufacturing, S.A. de C.V., a Mexican corporation and subsidiary of Braden ("Buyer"). (Buyer, Braden, FAMAPE, FLS, and CEMEX are sometimes herein referred to individually as a "Party" and collectively as the "Parties"). RECITALS WHEREAS, CEMEX and FLS own the entirety of the capital stock of FAMAPE; WHEREAS, CEMEX and FLS, as shareholders of FAMAPE, are engaged in the business of manufacture and sale of heavy equipment and parts in Mexico (the "Business"). WHEREAS, FAMAPE is in the process of terminating the manufacturing and sale of several units to CEMEX and other third parties under certain purchase orders, for the purpose of slowing-down and closing FAMAPE's operations and terminating its relationship with its workers and employees as of the 22nd. of December and subcontractors as of the Closing (the "Termination Process"). WHEREAS, in connection with the Termination Process, FAMAPE will transfer all of its assets related to the Business as described in Exhibit A attached hereto (the "FAMAPE's Assets") to Buyer on or prior to the Closing Date; WHEREAS, pursuant to the terms and conditions and subject to the limitations and exclusion as contained in this Agreement, FAMAPE desires to sell and Buyer desires to purchase, FAMAPE's Assets; NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, the Parties agree as follows intending to be legally bound: 1. DEFINITIONS. For purposes of this Agreement, the terms listed on Exhibit B attached hereto, forming a part hereof and used herein, have the meanings specified or referred to in Exhibit B. 2. PURCHASE AND SALE. 2.1 AGREEMENT TO PURCHASE AND SELL. Subject to the terms and conditions contained herein, FAMAPE agrees to sell, transfer, assign and deliver to Buyer all its right, title and interest in and to FAMAPE's Assets, free and clear of any Encumbrances or Security Interests, and Buyer hereby agrees to buy and acquire FAMAPE's Assets from FAMAPE. 2 2.2 FAMAPE'S ASSETS. "FAMAPE's Assets" are any and all of the assets of FAMAPE described in Exhibit A and all Tangible and Intangible Property related to FAMAPE's Assets with respect to which FAMAPE has any rights , which ownership, possession and title shall, on or before the Closing Date, be transferred to Buyer in accordance with the terms and conditions contained herein, including the Garcia Property. 2.3 CLOSING. The purchase and sale of the FAMAPE's Assets (the "Closing") provided for in this Agreement will take place, subject to the satisfaction of the terms and conditions of this Agreement, at Ave. Constitucion No. 444, Monterrey, N.L. (the "Closing Date"), commencing at 10:00 a.m. local time on or before (i) January the 12th.., 2001, or (ii) such later time and place as the Parties may agree to in writing. 2.4 PURCHASE PRICE. In consideration for the sale, purchase and transfer of the ownership, possession and title of the Garcia Property, Buyer shall pay to FAMAPE (i) the amount of US$ 3'321,500.00 (THREE MILLION THREE HUNDRED TWENTY ONE THOUSAND AND FIVE HUNDRED U.S. dollars) (the "Property Purchase Price"), plus the corresponding Value Added Tax ("impuesto al valor agregado") applicable on the building. The proper allocation of the Property Purchase Price between the land and the building and thereon any other improvements of the Garcia Property, will be set prior to Closing as Buyer deems appropriate, and (ii) for the rest of FAMAPE's Assets (the Garcia Property not included), the amount of US$_ 3'178,500.00 (THREE MILLION ONE HUNDRED AND SEVENTY EIGHT THOUSAND AND FIVE HUNDREDU.S. dollars), plus Value Added Tax (the "Assets Purchase Price"). The total sum of the Property Purchase Price and the FAMAPE's Assets Purchase Price shall be U.S$6'500,000.00 (SIX MILLION FIVE HUNDRED THOUSAND UNITED STATES DOLLARS) and constitute the entire consideration for the purchase of FAMAPE's Assets (the "Purchase Price"). 2.5 TRANSACTIONS AT THE CLOSING. The following actions and transactions shall take place prior to or at the Closing, as applicable: (a) FAMAPE shall enter into (as applicable) and deliver to Buyer or perform the following actions and/or non actions: (i) not accept additional purchase orders from any third parties from October 20, 2000 (hereinafter "Purchase Orders"), (ii) Accept purchase orders from Braden and/or Buyer under terms and conditions mutually acceptable to FAMAPE and Braden and/or Buyer (iii) produce evidence satisfactory to Buyer of the inscription of a pre-preventive notice ("aviso pre-preventivo") of the purchase of the Garcia Property by Buyer and its corresponding certification of freedom from Encumbrances and -2- 3 Security Interests, (iv) terminate its labor relationship with all its employees and workers on or before December 22, 2000, (v) maintain and keep in full force at Closing Date any and all insurance contracted during the year prior the execution of this Agreement and applicable to FAMAPE's Assets, including but not limited to, the vehicles and the Garcia Property, (vi) deliver to Buyer all invoices and payments of any applicable tax concerning FAMAPE's Assets, including, but not limited to, the endorsement and delivery of the invoices of the vehicles included in FAMAPE's Assets and all the payments of the property tax ("tenencia" and "refrendo"), as applicable, (vii) produce evidence satisfactory to Buyer of the release and termination of all Security Interests and Encumbrances on FAMAPE's Assets, (viii) provide any document or contract as may be required or appropriate by the law of the State of Nuevo Leon granting to Buyer good title to the Garcia Property (ix) provide the Assignment Agreement and Request Letter addressed to the National Commission of Water for the assignment of the concession title authorizing the extraction of underground water in the well(s) located in the Garcia Property), (x) perform any and all other actions and documents needed to evidence and perfect the sale, assignment and conveyance to Buyer of good title to, and possession and use of, all of FAMAPE's Assets in accordance with this Agreement (including but not limited to the execution of the Public Deed to transfer the Garcia Property before a Notary Public chosen by the Buyer) and (xi) perform or provide any and all other actions, agreements, instruments, opinions, certificates, and other documents referred to or contemplated in this Agreement, including but not limited to the execution of the Escrow Agreement by the Companies. (b) CEMEX shall enter into (as applicable) and deliver to Buyer or perform the following actions: (i) take and induce FAMAPE to take any action needed for the execution and performance of this Agreement, and (ii) any and all other actions, agreements, instruments, opinions, certificates, and other documents referred to or contemplated in this Agreement. (c) FLS shall enter into (as applicable) and deliver to Buyer or perform the following actions: (i) take and induce FAMAPE to take any action needed for the execution and performance of this Agreement and (ii) any and all other actions, agreements, instruments, opinions, certificates, and other documents referred to or contemplated in this Agreement. (d) On Closing, Buyer or Braden shall deposit in escrow the amount of US$ 650,000.00 (Six Hundred and Fifty Thousand U.S. dollars) (the "Escrowed Amount") with the Escrow Agent mutually appointed by the Parties (the "Escrow Agent"), subject to the terms and conditions contained in the escrow agreement annexed hereto as Exhibit D. The Escrowed Amount shall be deducted from the Purchase Price. The Escrowed Amount shall serve to guarantee the Companies' representations and warranties provided in this Agreement and shall be effective for the term provided in the Escrow -3- 4 Agreement.. At the expiration of such term the Escrowed Amount minus any applicable deductions made under the Escrow Agreement shall be delivered to FAMAPE as full payment of the Purchase Price. (e) Buyer shall enter into (as applicable) and deliver to FAMAPE or perform the following actions: (i) Once all the conditions for Closing are met under this Agreement, transfer funds to the account designated by FAMAPE in an amount equivalent to the Purchase Price, plus the value added tax applicable, minus the Escrowed Amount,, (ii) must pay the taxes applicable and fees derived as a result of this Agreement (except the income tax which shall be born by FAMAPE, (iii) execute the Escrow Agreement and (iv) any and all other actions, agreements, instruments, opinions, certificates, and other documents referred to or contemplated in this Agreement. (f) Braden shall enter into (as applicable) and deliver to FAMAPE or perform the following actions: (i) take and induce Buyer to take any action needed for the execution and performance of this Agreement and (ii) any and all other actions, agreements, instruments, opinion, certificates, and other documents referred to or contemplated in this Agreement. 3. REPRESENTATIONS AND WARRANTIES OF FAMAPE AND THE COMPANIES, AS THE CASE MAY BE. The Companies, represent and warrant as the case may be to Buyer and Braden as follows: 3.1 ORGANIZATION AND GOOD STANDING. The Companies represent and warrant that each of the Companies is a corporation duly organized, validly existing and in good standing under the Mexican laws, with full power and authority to conduct their Business as it is now being conducted and to perform its obligations. FAMAPE represents and warrants to own and use FAMAPE's Assets. FAMAPE has delivered to Buyer true and complete copies of FAMAPE's articles of incorporation and bylaws, as currently in effect. 3.2 AUTHORITY NO CONFLICT. (a) The Companies represent and warrant that this Agreement has been duly executed and delivered by the Companies and constitutes the legal, valid, and binding obligations of the Companies, enforceable against each in accordance with its terms. Upon the execution of this Agreement and delivery by the Companies of any Closing Documents to be executed by them at Closing pursuant to this Agreement, such Closing Documents shall constitute the legal, valid and binding obligations of the Companies, enforceable against each in accordance with their respective terms. The Companies have the absolute and unrestricted right, power and authority to execute and deliver this Agreement and the Closing Documents to which -4- 5 each is a Party and to perform their respective obligations hereunder and thereunder. The execution, delivery and performance of this Agreement, to the extent required under any law pursuant to each of the Companies' Organizational Documents, has been specifically authorized by the shareholders and/or directors of the Companies. (b) The Companies represent and warrant that, except as set forth in Part 3.2(b) of the Disclosure Schedule, neither the execution and delivery by the Companies of this Agreement nor the consummation or performance by the Companies of any of the Contemplated Transactions will: (i) Conflict with, violate or result in a breach of (A) any provision of the Organizational Documents of the Companies; (B) any Legal Requirement or any Order to which the Companies or any of their respective assets may be subject; or (ii) (A) Contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise and remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any Contract to which any of the Companies is a party or any interest or rights of the Companies; or (B) result in the imposition or creation of any Security Interest upon or with respect to any of FAMAPE's Assets. (c) The Companies represent and warrant that. except as set forth in Part 3.2(c) of the Disclosure Schedule, none of the Companies is, nor will be required to give, any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or consummation or performance of any of the Contemplated Transactions. 3.3 FINANCIAL STATEMENTS. FAMAPE represent and warrant that attached hereto as Part 3.3 of the Disclosure Schedule are the following financial statements of FAMAPE (collectively, the "Financial Statements") audited balance sheet and statement of income as of and for the fiscal year ended December 31, 1999. The Financial Statement (including the notes thereto) have been prepared in accordance with Mexican GAAP applied on a consistent basis through the periods covered thereby and present fairly the financial condition of FAMAPE as of such dates and the results of operations of FAMAPE for such periods; provided, however, that the Most Recent Financial Statement are subject to normal year-end adjustments and lack footnotes and other presentation items. 3.4 FAMAPE'S ASSETS. Famape represents and warrants that, except as set forth in Part 3.4 of the Disclosure Schedule, FAMAPE's Assets (i) are located entirely on the Garcia Property and (ii) comply in all material respect with the terms of -5- 6 the applicable Permits pertaining to them, except for the use of water which is authorized only for services and not for industrial uses. 3.5 PERMITS. FAMAPE represent and warrant that: Part 3.5 of the Disclosure Schedule lists all of the Permits. All of the Permits are held by FAMAPE. The Permits constitute all material licenses, permits, registrations and approvals necessary to operate FAMAPE's Assets. FAMAPE is in material compliance with the terms of the Permits. Except as set forth on such schedule, the Companies have not received written notice that any Governmental Body issuing any Permit intends to cancel, terminate, modify or amend any Permit. 3.6 ABSENCE OFUNDISCLOSED LIABILITIES. FAMAPE represents and warrants that except for liabilities, obligations, Encumbrance or Security Interests disclosed in Part 3.6 of the Disclosure Scheduleor specifically identified as an undisclosed liability, obligation, Encumbrance or Security Interests on any othersection of the Disclosure Schedule, FAMAPE does not have any liabilities, obligations, Encumbrance or Security Interests of any kind whatsoever upon, related to or affecting FAMAPE's Assets (whether direct, indirect, accrued or contingent) and there is no existing condition or situation which could reasonably be expected to result in any such liabilities ,obligations, Encumbrance or Security Interests(hereinafter "Undisclosed Liabilities"). 3.7 GARCIA PROPERTY. FAMAPE represents and warrants that FAMAPE has acquired and paid the entire purchase price for the Garcia Property. Except as set forth in Part 3.7 of the Disclosure Schedule, FAMAPE has neither received nor has any knowledge of any other Person having received any notice of pending or Threatened claims, Proceedings, planned public improvements, annexations, special assessments,re-zonings or other adverse claims affecting the Garcia Property and all improvements on the Garcia Property are in material compliance with all applicable Legal Requirements. 3.8 TITLE. ENCUMBRANCES. FAMAPE represents and warrants that except as set forth on Part 3.8 of the Disclosure Schedule, FAMAPE owns all FAMAPE's Assets, which shall be free and clear of any and all Encumbrances or Security Interests. 3.9 TAXES. The Companies represent and warrant that: (a) Except as set forth on Part 3.9 (a) of the Disclosure Schedule, FAMAPE has (i) correctly prepared and timely filed all Tax Returns required to be filed by it in respect of any Taxes, (ii) timely and properly paid all Taxes that are due and payable, and no claim for unpaid Taxes has become a lien against FAMAPE's Assets, and (iii) complied in all respects with applicable -6- 7 laws, rules and regulations relating to the payment and withholding of Taxes. (b) Except as set forth on Part 3.9 (b) of the Disclosure Schedule, no deficiency for any Taxes has been proposed, asserted or assessed against FAMAPE which has not been resolved and paid in full; FAMAPE has not waived any statute of limitations in respect to Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency; and FAMAPE is not currently under audit for Taxes by any Government Body, nor is it aware of any pending or threatened audit. (c) No Tax Returns with respect to FAMAPE for taxable periods ended on or after December 31, 1995, have been audited, and no Tax Returns of FAMAPE are currently the subject of audit by the Mexican Government or any representative. FAMAPE has filed all Tax Returns since December 31,1995. (d) FAMAPE is not a party to any Tax allocation or sharing agreement and is not liable for the Taxes of any other person. 3.10 COMPLIANCE WITH LEGAL REQUIREMENTS. The Companies represent and warrant that: FAMAPE has complied in all material respects with all Legal Requirements that are applicable to FAMAPE's Assets. Except as disclosed in Part 3.10 of the Disclosure Schedule, FAMAPE has not been Threatened to be charged with or given notice of any violation (which has not been cured); nor, to the Companies' Knowledge, FAMAPE is under investigation with respect to any violation of Legal Requirements applicable to the Business or FAMAPE's Assets. 3.11 LEGAL PROCEEDINGS; ORDERS. The Companies represent and warrant that, except as set forth in Part 3.11 of the Disclosure Schedule, there is no Proceeding pending or, to the Knowledge of the Companies, Threatened against FAMAPE, including any that challenges or may have the effect of preventing or otherwise interfering with, any of the Contemplated Transactions, and there is no Order to which any of the FAMAPE is subject. 3.12 OTHER CONTRACTS. The Companies represent and warrant that, except as disclosed in Part 3.12 (a) of the Disclosure Schedule, FAMAPE is not a Party to or bound by (i) any agreement evidencing Indebtedness; (ii) any joint venture, partnership or Other Contract involving a Sharing of liabilities by FAMAPE with any other Person; (iii) any Other Contract containing convenants that in any way purport to prevent or affect this Agreement; 3.13 INSURANCE. FAMAPE represents and warrants that it maintains in full force and effect polices of fire and other casualty, liability, title and other forms of insurance covering FAMAPE's Assets, and the operation thereof, of the types -7- 8 and with the amounts of coverage as are consistent with industry standard for comparable businesses. All such polices are in full force and effect, all premiums with respect thereto have been paid, and no notice of cancellation or termination has been received by FAMAPE. Part 3.13 of the Disclosure Schedule lists all claims pending or for which coverage is disputed under any such insurance policy. 3.14 ENVIRONMENTAL MATTERS. The Companies represent and warrant that except as set forth in Part 3.14 of the Disclosure Schedule: (a) FAMAPE is, and at all times has been, in material compliance with applicable Environmental Laws. There are no pending or, to the Knowledge of the Companies, Threatened claims or Encumbrances arising under or pursuant to any Enviromnental Law. (b) The Companies have no Knowledge of, nor have they received, any citation, directive, inquiry, notice, Order, summons, warning, or other communication that relates to any alleged actual or potential liability with respect to Hazardous Materials. (c) The Companies have delivered to Buyer true and complete copies and results of any reports, studies, analyses, tests, or monitoring possessed or initiated by any of the Companies pertaining to Hazardous Materials or Hazardous Activities in, on, or under the Garcia Property. 3.15 INTANGIBLE AND TANGIBLE PROPERTY. FAMAPE represents and warrants that: (a) Except as set forth Part 3.15 of the Disclosure Schedule, FAMAPE uses no Intangible Property in connection with the operation of the Business conducted in the Garcia Property and related to FAMAPE's Assets, except for the Permits, the Books and Records, and software programs listed as part of FAMAPE's Assets. All Intangible Property is owned by FAMAPE, and on or before the Closing will be owned by FAMAPE in order to be able to transfer such property to the Buyer. (b) The Tangible Personal Property includes, without limitation, the assets referred in Exhibit A hereto. All Tangible Personal Property is owned by FAMAPE and on or before the Closing will be owned by FAMAPE, in order to be able to transfer such property to the Buyer. 3.16 RELATIONSHIPS WITH AFFILIATES. The Companies represent and warrant that except as set forth on Part 3.16 of the Disclosure Schedule, neither CEMEX nor FLS, nor any other Related Person of the Companies has any claim or right -8- 9 against FAMAPE's Assets. Part 3.16 of the Disclosure Schedule sets forth all arrangements or agreements between FAMAPE, on the one hand, and CEMEX, FLS or any Related Person of the Companies, on the other hand. 3.17 BROKERS OR FINDERS. The Companies represent and warrant that they have not incurred in any obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement that will not be paid by the Companies at Closing. 3.18 LABOR MATTERS. The Companies represent and warrant that: (a) Except as set forth in Part 3.18 (a) of the Disclosure Schedule, (i) FAMAPE is not a party to or bound by, and its employees are not covered by any labor or collective bargaining agreement; (ii) the Companies have no Knowledge of any pening or threatened strikes, work stoppages, slowdowns, lockouts, unfair labor practice charges or complaints, or arbitration arising out of a collective bargaining agreement, or other labor disputes against FAMAPE; since December 1, 1998, there has not been any such action or proceeding; (iii) the Companies have no Knowledge of any pending or Threatened complaints, charges or claims against FAMAPE with any Governmental Authority regarding the employment or termination of employment by FAMAPE of any individual; (iv) no Knowledge of any union organization campaign is presently in progress. (b) Part 3.18 (b) of the Disclosure Schedule lists the names of all present employees of FAMAPE, the total compensation payable to each which compensation has not increased since October 20, 2000, and vacation days for each (or pay in lieu thereof). 3.19 BOOKS AND RECORDS. FAMAPE represents and warrants that the books of account, and other Books and records of the Business are complete and correct in all material respects and have been maintained in accordance with the Mexican accounting principles. 3.20 ABSENCE OF CHANGES. FAMAPE represents and warrants that since December 31,1999, and except as set forth on Part 3.20 of the Disclosure Schedule, there has not been: (i) Any Material Adverse Effect; or (ii) Any transaction by FAMAPE outside the Ordinary Course of Business, exception made for the Permitted Transactions. -9- 10 3.21 ASSETS NECESSARY FOR CONDUCT OF BUSINESS. FAMAPE's Assets are all of the assets and rights needed to conduct the Business as presently conducted. 3.22 EQUIPMENT UNDER MAQUILA OR PITEX PROGRAM. Except as set forth in Schedule 3.22, FAMAPE represents and warrants that the Famape Assets arenot subject to or under any Maquila, Pitex or similar exportation program. 3.23 INDEMNIFICATION IN CASE OF DISPOSSESSION. FAMAPE in this act informs and discloses to the Buyer and to Braden about the existence of a project for the construction of a thoroughfare service parallel to the main highway that, if performed, could affect the Garcia Property. Buyer and Braden waive the indemnification from the Companies in case of dispossession for such action since each has full knowledge of the risks that it implies, expressly accepting to submit to its consequences and to assume the responsibility over them, and consequently releases the Companies and its shareholders, representatives, and affiliates of all responsibility and obligation that could correspond to it after Closing. Other than the above project, the Companies have no knowledge of any action to be taken by any Governmental authority with respect to the Garcia Property. 3.24 FAMAPE represents and warrants that FAMAPE is the legal owner of the Concession Title No. 2NVL104048/24ELGE97, issued on August 12, 1997 by the National Commission of Water ("CNA"), with an authorized annual consumption volume of 14,900.00 m3 for services purposes ("Water Concession Title") and of the Concession Title No. 2NVL102987/24EMGE96 issued on June 17, 1997 by the CNA for the discharge of residual water (the "Water Discharge Title") (jointly the "Concession Titles"), and further, FAMAPE represents and warrants that such Concession Titles can be assigned to Buyer with their authorized volumes and changed their uses for industrial purposes. 4. REPRESENTATIONS AND WARRANTIES OF BRADEN AND BUYER. Braden and Buyer, jointly and severally, represent and warrant to the Companies as follows: 4.1 ORGANIZATION AND GOOD STANDING. Buyer and Braden are corporations duly organized, validly existing, and in good standing under the laws of Mexico and State of Delaware. Buyer and Braden have delivered to FAMAPE true and complete copies of Buyer's articles of incorporation and bylaws, as currently in effect. 4.2 AUTHORITY; NO CONFLICT. -10- 11 (a) This Agreement has been duly and validly executed and delivery by Braden and Buyer and constitutes the legal, valid, and binding obligation of Braden and Buyer, enforceable against each in accordance with its terms except to the extent that their enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and to general equitable principles. Upon the execution and delivery by Braden and Buyer of the Closing Documents to which each is a party, such Closing Documents will constitute the legal, valid, and binding obligations of Braden and Buyer, enforceable against each in accordance with their respectiveterms, except to the extent that their enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and to general equitable principles. Braden and Buyer have the power, and authority to execute and deliver this Agreement to each party and to perform their respective obligations thereunder. The execution and delivery of this Agreement have been authorized by the Board of Directors of Braden. (b) Neither the execution and delivery of this Agreement by Braden or Buyer nor the consummation or performance of any of the Contemplated Transactions by Braden or Buyer will conflict with, violate or result in a breach of (i) any provision of Braden or Buyer's Organizational Documents, (ii) any Legal Requirement or Order to which Braden or Buyer may be bound. Braden and Buyer are not and will not be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions. 4.3 SOURCE OF FUNDS. The payment of the Purchase Price will be made by Buyer from funds obtained by Buyer in compliance with all applicable laws. 4.4 CERTAIN PROCEEDINGS. There are no Proceedings pending, or to Braden's or Buyer's Knowledge, Threatened against the Buyer or Braden that challenges, or may have the effect of preventing, or otherwise interfering with any of the Contemplated Transactions. 4.5 BROKERS OR FINDERS. Braden and Buyers have not incurred any obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payments in connection with this Agreement that will not be paid by Buyer or Braden. 5. COVENANTS OF FAMAPE OR THE COMPANIES AS THE CASE MAY BE. -11- 12 5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and until the Closing Date, FAMAPE will and CEMEX and FLS will cause FAMAPE and its Representatives to afford Buyer and its Representatives, reasonable access during normal business hours to FAMAPE's Assets and FAMAPE's Books and Records, and other documents and data, and furnish Buyer and its Representatives with copies of the same, upon Braden or Buyer written request. Without limiting the generality of the foregoing, one day prior to Closing Date, Braden, Buyer and their Representatives shall have access to the Garcia Property in order to inspect and verify the conditions of FAMAPE's Assets and the accuracy of the Companies' representations and warranties concerning FAMAPE's Assets. Such verification and inspection shall not release the Companies from their obligations under this Agreement. 5.2 OPERATION OF FAMAPE. Between the date of this Agreement and the Closing Date, FAMAPE shall,: (a) operate only the Permitted Transactions; (b) use their Best Efforts to maintain FAMAPE's Assets in the conditions as they are as of the execution of this Agreement and maintain the relations and good will with suppliers and others, associated with the operation of the Business in the Garcia Property, in the understanding that FAMAPE will not be responsible for the damages caused to the FAMAPE's Assets as a result of an act or omission of Buyer's employees; (c) confer on a regular and frequent basis with Buyer and its Representatives to discuss operational matters and the general status of ongoing operations; (d) promptly notify Buyer of any material changes in the Business or FAMAPE's Assets; and (e) perform the transactions contemplated by Section 2.5 hereof. 5.3 NEGATIVE COVENANTS. Except as otherwise provided herein between the date of this Agreement and the Closing Date, FAMAPE shall not: (a) operate the Business, except for the Permitted Transactions; (b) acquire, or publicly propose to acquire, all or any substantial part of the business and properties or capital stock of any Person, whether by merger, purchase of assets, tender offer or otherwise related with the Business; (c) Adopt, enter into or amend any bonus, profit sharing, compensation, stock option, pension, retirement, deferred compensation, health care, employment or other employee benefit plan, agreement, trust, fund or arrangement for the benefit or welfare of any employee or retiree of FAMAPE, except as authorized by Buyer; -12- 13 (d) Incur any indebtedness for money borrowed or guarantee any such indebtedness or issue or sell any debt securities or make any loans or advances, or make any capital expenditures; (e) Sell, lease or dispose or any of FAMAPE's Assets. (f) Agree in writing, or otherwise, to take any of the foregoing actions or any other actions which would make any representations or warranties of the Companies contained in this Agreement untrue or incorrect in any material respect as of the Closing Date. 5.4 REQUIRED FILINGS AND CONSENTS. As promptly as practicable after the date of this Agreement, FAMAPE shall make all filings required by Legal Requirements to be made by FAMAPE in order to consummate the Contemplated Transactions and will obtain those certain Consents specifically identified on Disclosure Schedule 5.4 hereof (the "Required Filings and Consents"). In addition, the Companies shall obtain before the expiration of the Escrow Agreement, the authorization from the CNA for the assignment of the Concessions Titles mentioned in Section 3.24 of this Agreement and shall obtain the change of use to be for industrial purposes, keeping the authorized consumption volume stated in Section 3.24. The Companies agree to hold Buyer harmless from any fines or cancellation of right to exploit the water under the Concession stated in 3.24 as a result of any action of any governmental authority or for any industrial use. In such cases, the Companies shall assume the responsibility to supply the Buyer's water requirements in the best possible way. 5.5 NOTIFICATION. Between the date of this Agreement and the Closing Date, the Companies will promptly notify Buyer and Braden in writing if any of the Companies become aware of any fact or condition that causes or constitutes a materia breach of any of their representations and warranties as of the date of this Agreement, or if any of the Companies becomes aware of the occurrence after the date of this Agreement of any fact or condition that would (except as expressly contemplated by this Agreement) cause or constitute a material breach of any such representation or warranty had such representation or warranty been made as the time of occurrence or discovery of such fact or condition. During the same period, the Companies will promptly notify Buyer and Braden of the occurrence of any material breach of any covenant of the Companies in this Section 5 or of the occurrence of any event that may make the satisfaction of the conditions in Section 7 impossible or unlikely. 5.6 NO NEGOTIATION. Until the earlier of the Closing or such time, if any, as this Agreement is terminated pursuant to Section 9, the Companies agree that neither of them, nor any of their Affiliates, will, nor will they permit respective -13- 14 Representatives to, directly or indirectly solicit, initiate, or encourage any inquiries or proposals from, discuss or negotiate with, provide any non-public information to, or consider the merits of any unsolicited inquiries, or proposals from, any Person (other than Buyer, Braden or their Representatives) relating to or affecting any transaction involving the sale of FAMAPE's Assets. 5.7 ENCUMBRANCES AND SECURITY INTERESTS. The Companies agree to pay, and cause FAMAPE to pay, all Indebtedness of FAMAPE which imposes any Encumbrances or Security Interest on FAMAPE's Assets and to obtain at or prior to the Closing and deliver to Buyer at the Closing, releases of any Encumbrances and Security Interest on FAMAPE's Assets. 5.8 NON-COMPETITION. The Companies shall not compete with or assist others to compete with Braden and the Buyer directly or indirectly in the manufacturing of equipment and parts for in the electrical and power generation industries in Mexico for a term of five years after Closing. Buyer and Braden shall not compete with or assist others to compete with the Companies directly or indirectly in Mexico in the manufacturing of equipment and parts for use in the cement and mining industries for a term of five years after Closing. 5.9 GARCIA PROPERTY. FAMAPE shall deliver to Buyer the Garcia Deed and all other instruments of transfer and all other related documents, if any, as may be necessary to evidence or perfect the sale, assignment and conveyance to Buyer of good title to the Garcia Property. 5.10 FAMAPE'S EMPLOYEES. FAMAPE shall terminate in compliance with the applicable Labor Law, prior to December 22 2000 its labor relationship with all FAMAPE's employees and workers. 6. COVENANTS OF BUYER AND BRADEN. 6.1 REQUIRED APPROVALS. As promptly as practicable after the date this Agreement, Buyer and Braden will make all filings required by Legal Requirements to be made by them to consummate the Contemplated Transactions. 6.2 NOTIFICATION. Between the date of this Agreement and the Closing Date. Buyer will promptly notify the Companies in writing if Buyer or Braden becomes aware of any fact that causes or constitutes a breach of any of Buyer or Braden's representations and warranties as of the date of this Agreement, or if Buyer or Braden become aware of the occurrence after the date of this Agreement of any -14- 15 fact or condition that would (except as expressly contemplated by this Agreement) cause or constitute a breach of any such representation or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. During the same period, Buyer will promptly notify of the occurrence of any breach of any covenant of Buyer in this Section 6 or of occurrence of any event that makes the satisfaction of the conditions in Section 8 impossible or unlikely. 6.3 NO NEGOTIATION. Until the earlier of the Closing or such time, if any, as this Agreement is terminated pursuant to Section 9, Buyer and Braden agree that neither of them, nor any of their Affiliates, will, nor will they permit respective Representatives to, directly or indirectly solicit, initiate, or encourage any inquiries or proposals from, discuss or negotiate with, provide any non-public information to, or consider the merits of any unsolicited inquiries, or proposals from, any Person (other than the Companies or their Representatives) relating to or affecting any transaction involving the sale of FAMAPE's Assets. 7. CONDITIONS PRECEDENT TO BUYER'S AND BRADEN'S OBLIGATIONS TO CLOSE. Buyer's obligation to purchase FAMAPE's Assets and Buyer and Braden's obligations to take any other actions required to be taken by Buyer and/or Braden under this Agreement at the Closing is subject to satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer and Braden, in whole or in part): 7.1 ACCURACY OF REPRESENTATIONS. Each of the Companies' representations and warranties in this Agreement must have been accurate in all material respects as of the date of this Agreement, and subject to the changes needed by the Permitted Transactions, must be accurate in all material respects as of the Closing Date, and Buyer shall have received a certificate by the Companies, dated as of the Closing Date, as to such accuracy. 7.2 THE COMPANIES' PERFORMANCE. The covenants and obligations that FAMAPE or the Companies are required to perform or to comply with pursuant to this Agreement at or Prior to the Closing must have been performed and complied with in all material respects, including, without limitation, the delivery of possession of FAMAPE's Assets, the release of any Security interest or Encumbrances on FAMAPE's Assets, the obtaining of the Required Filings and Consents, and Buyer shall have received a certificate of the Companies, dated as of the Closing Date, as to such compliance. -15- 16 7.3 ADDITIONAL DOCUMENTS. Each of the following documents must have been delivered to Buyer: (a) a favorable opinion of counsel to the Companies dated on the Closing Date, to the effect set forth on Exhibit E; (b) , the delivery by FAMAPE of FAMAPE's external auditors statement establishing that there is no Material Adverse Effect in the course of the Business of FAMAPE as of and for the ten months ended October 2000 (the "Most Recent Fiscal Month End"); (c) the deliveries required from each of the Companies in Section 2.5; and (d) such other documents as Buyer or Braden may reasonably request (including but not limited to the issuance of invoices) for the purpose of (i) evidencing the satisfaction of any condition referred to this Section 7, or (ii) otherwise facilitating the consummation of performance of any of the Contemplated Transactions. 7.4 NO PROCEEDING. Since the date of this Agreement, there must not have been commenced, pending or Threatened any Proceeding (i) involving any challenge to, or seeking damages or other relief in connection with, any of the Contemplated Transactions or FAMAPE's Assets, (ii) that prevents, makes illegal, or otherwise materially interferes with any of the Contemplated Transactions or seeks to do any of the foregoing, or (iii) that involves any material claim against the Companies or FAMAPE's Assets. 7.5 NO PROHIBITION. There must not be in effect any Legal Requirement or any injunction or Order that prohibits or restricts the consummation of the Contemplated Transactions. 7.6 ABSENCE OF MATERIAL ADVERSE EFFECT. Since the date hereof, there will not have been any Material_Adverse Effect. 7.7 COMPLETION OF THE TERMINATION PROCESS. On or before the Closing Date, the Termination Process shall have been completed and the FAMAPE shall be the owner of all FAMAPE's Assets, free and clear of all Security Interests and Encumbrances, in order to be able to transfer all FAMAPE's Assets to the Buyer. 7.8 DUE DILIGENCE. On or before the Closing Date, the due diligence process has been completed to Braden and Buyer's satisfaction. 7.9 EXISTANCE OF FAMAPE'S ASSETS. That FAMAPE's Assets do not have any Encumbrance or Security Interests of any kind, do effectively exist and have their -16- 17 corresponding invoice issued on behalf of FAMAPE and that all FAMAPE's Assets have their proper documentation and all applicable importation taxes have been paid, as the case may be. 7.10 FINANCING. That adequate financing from a bank is obtained. 7.11 BOARD OF DIRECTORS' APPROVAL. That the execution of the Closing Documents t be approved by Braden's Board of Directors. 8. CONDITONS PRECEDENT TO THE COMPANIES' OBLIGATIONS TO CLOSE. FAMAPE's obligations to sell FAMAPE's Assets and the Companies' obligations to take the actions required to be taken by such Parties at the Closing are subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by the Companies in whole or in part). 8.1 ACCURACY OF REPRESENTATIONS. Braden and Buyer's representations and warranties in this Agreement must have been accurate in all material respects as of the date of this Agreement and must be accurate in all material respects as of the Closing date as if made on the Closing Date, and FAMAPE shall have received a certificate of an executive officer of Buyer and Braden, dated as of the Closing Date, as to such accuracy. 8.2 BUYER'S PERFORMANCE. The covenants and obligations that Buyer and Braden are required to perform or to comply with pursuant to this Agreement at or prior to the Closing must have been performed and complied with in all material respects, and FAMAPE shall have received a certificate of an executive officer of Buyer and Braden, dated as of the Closing date, as to such compliance. 8.3 ADDITIONAL DOCUMENTS. Buyer must have caused the following documents to be delivered to FAMAPE or the Companies, as applicable: (a) a favorable opinion of counsel to Buyer dated on the Closing Date, to the effect set forth in Exhibit F; (b) the deliveries required from Buyer in Section 2.5; and (c) such other documents as Companies may reasonably request for the purpose of (i) evidencing the satisfaction of any condition referred to this -17- 18 Section 8, or (ii) otherwise facilitating the consummation of performance of any of the Contemplated Transactions. 8.4 PURCHASE PRICE. Buyer shall have paid the Purchase Price minus the Escrowed Amount. 8.5 ESCROWED AMOUNT. FAMAPE shall have received in escrow the Escrowed Amount on the Closing Date. 9. TERMINATION 9.1 TERMINATION WITH NOTICE, This Agreement may, by notice given prior to or at the Closing, be terminated by mutual written consent of all the Parties. 9.2 AUTOMATIC TERMINATION, Without any responsibility of the parties herein, this Agreement shall automatically terminate as of midnight, January 31, 2001, if the Closing has not occurred, unless otherwise agreed by the parties in writing. 9.3 EFFECT OF TERMINATION. Buyer or Brader's right of termination under Section 9.1 is in addition to any other rights it may have under this Agreement. If this Agreement is terminated pursuant to Section 9.1 and 9.2, all further obligations of the Parties under this Agreement will terminate, except that the obligations in Sections 11.1 and 11.2 will survive. 10. INDEMNIFICATION; REMEDIES. 10.1 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE COMPANIES. The Companies will, jointly and severally, indemnify and hold harmless Buyer and Braden, their stockholders, controlling Persons, and Affiliates (collectively, the "Seller Indemnified Persons") for, and will pay to the Seller Indemnified Persons the amount of, any loss, liability, claim, damage, expenses (including reasonable costs of investigation and defense and reasonable attorneys' fees), whether or not involving a third-party claim (collectively, "Damage"), arising from : (a) any breach of any representation or warranty made by the Companies or in any of them in this Agreement, the Exhibits, the Disclosure Schedule, or any other certificate or document delivered by any of them, pursuant to this Agreement;. (b) any breach by the Companies or any of them, of any covenant or obligation in this Agreement or in any certificate or document delivered by any of them, pursuant to this Agreement; and -18- 19 (c) Any liabilities with respect to the FAMAPE Assets or operation of the Business derived as a result of an act or omission occurred on or before the Closing Date including, without limitations, the following: (i) any liabilities for or with respect to any FAMAPE employees and workers, including without limitation, employee salaries, benefits, severance payments and any matter relating to the operation or ownership of the Business derived as a result of an act, event or omission occurred on or before the Closing Date; (ii) any liabilities concerning the Environment and Environmental matters derived as a result of an act, event or omission occurred on or before the Closing Date, with respect to the Garcia Property and the rest of FAMAPE's Assets; and (iii) any liabilities concerning Tax matters derived as a result of an act, event or omission occurred in connection with the Business conducted in the Garcia Property and with FAMAPE's Assets, occurred on or before the Closing Date. (d) any liabilities concerning any Material Adverse Effect that affects the possession of the FAMAPE's Assets, as a result a claim by a third party provided such claim is based upon a right or title acquired prior to the Closing. 10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BRADEN AND BUYER. Braden and Buyer will, jointly and severally, indemnify and hold harmless the Companies and their stockholders, controlling Persons and Affiliates (collectively, the "Buyer Indemnified Persons") for, and will pay to the Buyer Indemnified Persons the amount of, any loss, liability, claim, damage and expenses (including reasonable costs of investigation and defense and reasonable attorneys' fees), whether or not involving a third-party claim (Contract: (a) any breach of any representation or warranty made by Buyer in this Agreement or in any certificate or document delivered by Buyer pursuant to this Agreement; and (b) any breach by Buyer of any covenant or obligation of Buyer in this Agreement. 10.3 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS. (a) Promptly after receipt by an Indemnified Person under Section 10.1 or 10.2, of notice of any claim against it, such Indemnified Person will, if a claim is to be made against an Indemnifying Party under such Section, -19- 20 give notice to the Indemnifying Party of the commencement of such claim, but the failure to notify the Indemnifying Party will not relieve the Indemnifying Party of any liability that it may have to any Indemnified Person, except to the extent that the Indemnifying Party demonstrates that the defense of such action is prejudiced by the Indemnified Party's failure to give such notice. (b) If any claim referred to in Section 10.3 (a) is brought against an Indemnified Person and such Indemnified Person gives notice to the Indemnifying Party of the commencement of a proceeding with respect to such claim (a "Proceeding"), the Indemnifying Party will be entitled to participate in such Proceeding and, to the extent that it wishes (unless (i) the Indemnifying Party is also a party to such Proceeding and the Indemnified Person determines in good faith that joint representation would be inappropriate or (ii) the Indemnifying Party fails to provide reasonable assurance to the Indemnified Person of its financial capacity to defend such Proceeding and provide indemnification with respect to such Proceeding), to assume the defense of such Proceeding with counsel satisfactory to the Indemnified Person and, after notice from the Indemnifying Party to the Indemnified Person of its election to assume the defense of such Proceeding, the Indemnifying Party will not, as long as it diligently conducts such defense, be liable to the Indemnified Person under this Section 10 for any fees of other counsel (other than in the circumstances provided above) or any other expenses with respect to the defense of such Proceeding. If the Indemnifying Party assumes the defense of a claim, (i) no compromise or settlement of any such claim may be effected by the Indemnifying Party without the Indemnified Person's consent unless (A) there is no finding or admission of any violation of Legal Requirements or any violation of the rights of any Indemnified Person, and (B) the sole relief provided is monetary damages that are paid in full by the Indemnifying Party; and (ii) the Indemnified Person will have no liability with respect to any compromise or settlement of such claims effected without its consent. Subject to Section 10.3 (c), if notice is given to an Indemnifying Party of any claim and the Indemnifying Party does not, within ten (10) days after the Indemnified Person's notice is given, give notice to the Indemnified Person of its election to assume the defense of such claim, the Indemnifying Party will be bound by any determination made in such Proceeding or any compromise or settlement effected by the Indemnified Person and will be liable for all expenses if it wrongfully failed to assume such defense. (c) Notwithstanding the foregoing, if an Indemnified Person determines in good faith that there is a reasonable probability that a claim may adversely affect it or its affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the Indemnified Person may, by notice to the Indemnifying -20- 21 Party, assume the exclusive right to defend, compromise, or settle such claim, but the Indemnifying Party will not be bound by any determination of a claim so defended or any compromise or settlement effected without its consent (which may not be unreasonably withheld) or delayed. 10.4 PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS. A claim for indemnification for any matter not involving a third-party claim shall be asserted by written notice to the Indemnifying Party from whom indemnification is sought. 10.5 SURVIVAL/LIMITATIONS. The Parties hereto agree that the representations, warranties and covenants contained herein shall survive to the extent of the statute of limitations provided under Mexican Law. In no event shall the obligation to indemnify the Seller Indemnified Persons and the Buyer Indemnified Persons for Damages pursuant to Section 10.1 (a) or (b) and 10.2 (a) or (b) hereof exceed the Purchase Price. 10.6 EXCLUSIVE REMEDY. After the Closing indemnification provisions in this Section 10 are the exclusive remedies of the Parties for any breach of a representation warranty or covenant contained herein. 11. GENERAL PROVISIONS 11.1 EXPENSES. Except as otherwise expressly provided in this Agreement, each Party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the Contemplated Transactions, including all fees and expenses of agents, representatives, brokers or finders, counsel, and accountants. In the event of termination of this Agreement, the obligation of each Party to pay its own expenses will be subject to any rights of such Party arising from a breach of this Agreement by another Party. 11.2 PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Any public announcement or similar publicity with respect to this Agreement of the Contemplated Transactions will be issued, if at all, only if and after the Parties agree in writing, provided that nothing contained herein shall prevent any Party from at any time furnishing information required by a Governmental Body or making any disclosures required by applicable Legal Requirements. Unless consented to by Buyer and Braden in advance or required by Legal Requirements, prior to the Closing, each Party shall, and shall cause their respective Representatives to, keep this Agreement strictly confidential and may not make any disclosure of this Agreement to any Person. -21- 22 11.3 NOTICES. All notices, consents, waivers, and other communication under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers, as a Party may designate by notice to the other Parties): If to the Braden and/or Buyer: Braden Manufacturing L.L.C. 5199 N. Mingo Road Tulsa, Ok. 74117 Attn: Jack Silver Telephone No.: (918) 272-53-71 Facsmile No.: (918) 274-23-78 With a copy to: Santos, Elizondo, Cantu, Rivera , Gonzalez, De la Garza, S.C. Edificio Losoles Desp. B-33 Av. Lazaro Cardenas 2400 Pte. Apartado Postal 497 San Pedro Garza Garcia, N.L. 66220 Attention: Carlos de la Garza Santos, Esq. Telephone No.: (528) 363-3340 Facsimile No.: (528) 363-3684 If to CEMEX, to: Cemex, S.A. de C.V. Ave. Constituci6n 444 Pte. Monterrey, N.L. CP 64,000 att: Ing. Roberto Herrera Ritte With a copy to: Lic. Raul Salinas Tijerina: Cemex, S.A. de C.V. Ave. Constitucion 444 Pte. Monterrey, N.L. CP 64,000 If to FLS, to: -22- 23 to F.L.Smidth & Co A/S Vigerslev Alle 77, DK-2500 Valby Copenhagen, Denmark att: S -- ren Iversen Telephone No.: (45) 36 18 10 00 Facsmile No.: (45) 36 30 18 20 With copy to: F.L.Smidth-Fuller Mecxico S.A. de C.V. San Alberto 406 Residencial Santa Barbara Garza Garcia, N.L. 66260 Mexico att: Mr. Andreas Asmussen Telephone No.: (52) 83 63 31 50 Facsmile No.: (52) 83 63 34 21 11.4 FURTHER ASSURANCES. The Parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other Parties may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement, all at the sole cost and expense of the requesting Parties (unless the requesting Parties are entitled to indemnification therefor under Section 10). 11.5 WAIVER. Neither the failure nor any delay by any Party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege. 11.6 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all prior agreements between the parties with respect to its subject matter and constitutes (along with the documents referred to in, or executed in connection with, this Agreement) a complete and exclusive statement of the terms of the agreement between the Parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the Party to be charged with the amendment. 11.7 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Except as otherwise expressly provided for herein, no Party may assign any of its rights under this -23- 24 Agreement without the prior written consent of the other Party; provided, however, that Buyer may assign its rights and obligations hereunder to an Affiliate of Braden or Buyer or their financing sources by way of security to any person appointed to enforce such security or any person in connection with such enforcement. This Agreement will apply to, be binding in all respects upon, and inure to the benefit of the Parties, their successors, and their permitted assigns. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the Parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. 11.8 SEVERABILITY. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 11.9 POST-CLOSING ACCESS. Buyer agrees that all Books and Records delivered to Buyer pursuant to this Agreement shall be maintained open for inspection by the same at any time during regular business hours upon reasonable notice for a period of one (1) months (or for such longer period as may be required by applicable Legal Requirements) following the Closing and that, during such period, the Companies, at their expense, may make such copies thereof as it may reasonably be required (subject in each case to the Companies' obligations to maintain the confidentiality of such Books and Records). Nothing contained in this Section 11.09 shall obligate any Party hereto to make available any books and records if to do so would violate the terms of any Contract or Legal Requirement to which it is a Party or to which it or its assets are subject. 11.10 HEADINGS: CONSTRUCTION. The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. 11.11 APPLICABLE LAW. This Agreement shall be governed and controlled as to validity, enforcement, interpretations, construction, effect and in all other respects by the applicable laws of the State of Nuevo Leon, Mexico. The Parties hereto agree to submit exclusively to the jurisdiction of the courts residing in the Municipality of Monterrey, Nuevo Leon, Mexico, any dispute or controversy arising out of or relating to this Agreement. -24- 25 11.12 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. 11.13 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 11.14 LANGUAGE. This Agreement will be signed in English and Spanish. In case of any controversy or any dispute, the Spanish version shall prevail. IN WITNESS WHEREOF, the Parties have executed, sealed and delivered this Agreement as of the date first written above. Cemex, S.A. de C.V. By: /s/Ing. Armando J. Garcia Segovia Title: Director of General Development F.L. SMIDTH & Co. A/S. By: /s/Richart Fangel Title: Attorney in fact Fabricacion de Maquinaria Pesada, S.A. de C.V. By: /s/Ing. Roberto Herrera Ritte Title: Apoderado Braden Manufacturing, L.L.C. By: /s/Jack Silver Title: Vice President of Administration Braden Manufacturing, S.A. de C.V. -25- 26 By: /s/Jack Silver Title: Attorney in Fact -26- EX-10.17 6 y45366a2ex10-17.txt FORM OF REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 10.17 ================================================================================ REGISTRATION RIGHTS AGREEMENT Dated as of May 1, 2001 By and Among GLOBAL POWER EQUIPMENT GROUP INC., and THE OTHER PERSONS SIGNATORY HERETO ================================================================================ 2 TABLE OF CONTENTS ARTICLE I CERTAIN DEFINITIONS.....................................................................2 Section 1.1 Certain Definitions....................................................................2 ARTICLE II REGISTRATION RIGHTS........................................................................6 Section 2.1 Required Registration..................................................................6 Section 2.2 Incidental Registration................................................................8 Section 2.3 Registration Procedures................................................................9 Section 2.4 Preparation; Reasonable Investigation.................................................12 Section 2.5 Rights of Requesting Holders..........................................................12 Section 2.6 Registration Expenses.................................................................12 Section 2.7 Indemnification; Contribution.........................................................12 Section 2.8 Holdback Agreements...................................................................14 Section 2.9 Availability of Information...........................................................15 Section 2.10 Additional Registration Rights.......................................................15 ARTICLE III COVENANTS.................................................................................15 Section 3.1 Transactions with Affiliates..........................................................15 ARTICLE IV MISCELLANEOUS.............................................................................16 Section 4.1 Binding Effect; Specific Performance..................................................16 Section 4.2 Notices...............................................................................16 Section 4.3 Entire Agreement; Amendment and Waivers...............................................16 Section 4.4 Section Headings......................................................................17 Section 4.5 Counterparts..........................................................................17 Section 4.6. Severability.........................................................................17 Section 4.7. Governing Law........................................................................17 Section 4.8. Incorporation by Reference...........................................................17 Section 4.9. Limitation on Liability..............................................................18 Section 4.10. Variation of Pronouns................................................................18 Section 4.11. Further Action.......................................................................18 Section 4.12. Termination..........................................................................18 Section 4.13. Benefits Only to Parties.............................................................18 Section 4.14. Saw Mill Ownership...................................................................18 Section 4.15. Termination of the Equityholders Agreement...........................................18
(i) 3
Exhibits -------- Exhibit A Original Financial Stockholders Exhibit B Management Stockholders Exhibit C Former Holdings I Stockholders Exhibit D Former Holdings II Members
(ii) 4 REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is dated as of May 1, 2001, by and among Global Power Equipment Group Inc., a Delaware corporation (the "Company"), Harvest Partners III, L.P., a Delaware limited partnership ("Harvest"), SMC Power Holdings LLC, a Delaware limited liability company ("Saw Mill"), each of the other stockholders of the Company listed on Exhibit A hereto (collectively with Saw Mill, the "Original Financial Stockholders"), Cascade Investment Partners, L.L.C., a Delaware limited liability company ("Cascade"), each of the management stockholders identified as such on Exhibit B hereto (the "Management Stockholders"), Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and each of the other stockholders of GEEG Acquisition Holdings Corp., a Delaware corporation ("Holdings I"), identified as such on Exhibit C hereto, and each of the former members of GEEG Acquisition Holdings L.L.C., a Delaware limited liability company ("Holdings II"), identified as such on Exhibit D hereto. W I T N E S S E T H : WHEREAS, each party to this Agreement, other than the Company, is a party to an equityholders agreement (the "Equityholders Agreement"), dated as of August 1, 2000, which regulated certain of their rights relating to their respective direct or indirect equity investment in GEEG Holdings, L.L.C., a Delaware limited liability company (the "Original Company"); WHEREAS, it is anticipated that the Original Company will be converted, pursuant to a reorganization, into the Company on date hereof (the "Conversion"); WHEREAS, as part of the Conversion, Holdings I will (i) exchange all of its membership interests in the Original Company, which represented substantially all of the assets of Holdings I, for shares of common stock of the Company and (ii) immediately after such exchange distribute to its stockholders all of the common stock of the Company received by it in the conversion pursuant to a plan of dissolution, with each stockholder receiving its pro rata share of such common stock; WHEREAS, as part of the Conversion, Holdings II will (i) exchange all of its membership interests in the Original Company for shares of common stock of the Company and (ii) immediately after such exchange distribute to its members all of the common stock of the Company received by it in the Conversion, in complete liquidation, with each member receiving its pro rata share of such common stock; WHEREAS, as part of the Conversion, each of the Original Financial Stockholders, Cascade, and the Management Stockholders (collectively, the "Rollover Investors") will exchange all of their respective membership interests in the Original Company for shares of common stock of the Company; 5 WHEREAS, upon the consummation of the transactions described in the foregoing recitals, each former member of the Original Company (other than Holdings I and Holdings II), each former stockholder of Holdings I and each former member of Holdings II will become a stockholder of the Company (collectively, the "Stockholders"); and WHEREAS, the parties hereto desire to enter into this Agreement to, inter alia, regulate certain rights relating to their respective equity investments in the Company. NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I CERTAIN DEFINITIONS Section 1.1 Certain Definitions. For purposes of this Agreement, the following terms shall have the following meanings: "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. "Agreement" shall have the meaning set forth in the preamble to this Agreement. "Applicable Law" shall mean, with respect to any Person, all provisions of laws, statutes, ordinances, rules, regulations, permits or certificates of any Governmental Authority applicable to such Person or any of its assets or property, and all judgments, injunctions, orders and decrees of all courts, arbitrators or Governmental Authorities in proceedings or actions in which such Person is a party or by which any of its assets or properties are bound. "Affiliate Restriction Termination Date" shall mean the later of (i) the date on which no employee, director or officer of any Harvest Entity is a member of the Board of Directors and (ii) the date on which the Harvest Entities collectively hold less than 10% of the outstanding Common Stock. "Board of Directors" shall mean the board of directors of the Company. "Business Day" shall mean any day except a Saturday, a Sunday or any other day on which commercial banks are required or authorized to close in New York, New York. "Common Stock" shall mean all of the issued and outstanding common stock of the Company, $0.01 par value per share. "Company" shall have the meaning set forth in the preamble to this Agreement. -2- 6 "Company Equity Securities" shall mean all Common Stock, all securities convertible into or exchangeable for Common Stock, and all vested Options, warrants, and other rights to purchase or otherwise acquire Common Stock from the Company. "Conversion" shall have the meaning set forth in the second recital of this Agreement. "Common Stock Equivalents" shall mean, at any time (i) with respect to each outstanding share of Common Stock, one (1) and (ii) with respect to any other outstanding Company Equity Securities, an amount equal to the result obtained when the number of shares of Common Stock into or for which such Company Equity Securities may be converted or exercised at such time, multiplied by one (1). "Demand Notice" shall have the meaning set forth in Section 2.1(b) of this Agreement. "Demand Request" shall have the meaning set forth in Section 2.1(a) of this Agreement. "DLJ" shall have the meaning set forth in the preamble to this Agreement. "Exchange" shall mean, collectively, the transactions described in the third, fourth and fifth recitals hereto. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. "Governmental Authority" shall mean any federal, state, municipal or other governmental department, board, bureau, agency or instrumentality, or any court, in each case whether of the United States of America or foreign. "Harvest" shall have the meaning set forth in the preamble to this Agreement and shall include, for purposes of Article II hereof, a Qualified Harvest Transferee. "Harvest Entity" shall mean any of HPI, Harvest, any other fund controlled by HPI, Holdings I, and any of their respective Affiliates (other than the Company or any of its Subsidiaries). "Harvest Letter" shall mean that certain letter agreement, dated as of the date hereof, between the Company (as successor in interest to the Global Energy Equipment Group LLC) and HPI. "Holders' Counsel" shall have the meaning set forth in the definition of "Registration Expenses". "Holdings I" shall have the meaning set forth in the preamble to this Agreement. "HPI" shall mean Harvest Partners, Inc., a New York corporation. "Incentive Securities" shall mean (i) any Options granted to directors, officers or employees of the Company or any of its Subsidiaries so long as such persons are not employed by, or are a consultant to, any Harvest Entity and (ii) all Common Stock issued upon the exercise of any such Options. -3- 7 "Incidental Registration" shall have the meaning set forth in Section 2.2(a) of this Agreement. "Management Stockholder" shall have the meaning set forth in the preamble to this Agreement. "NASDAQ" shall mean The Nasdaq Stock Market, Inc. "Notices" shall have the meaning set forth in Section 4.2 of this Agreement. "Options" shall mean any rights, options or warrants to purchase any Common Stock from the Company. "Original Financial Stockholders" shall have the meaning set forth in the preamble to this Agreement. "Person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, a limited liability company, a limited liability partnership, any unincorporated organization and a government or other department or agency thereof. "Public Offering" shall mean a sale of Common Stock pursuant to an underwritten public offering pursuant to an effective registration statement filed with the SEC. "Qualified Harvest Transferee" shall mean, at any time, any Person to whom Harvest or any other Qualified Harvest Transferee Transfers at least ten percent (10%) of the Common Stock held by Harvest on the date hereof and, at such time, such Person holds at least ten percent (10%) of the Common Stock held by Harvest on the date hereof, provided that such Person agrees in writing to become a party to this Agreement and be bound by its provisions. "Registrable Securities" shall mean, at any time, any outstanding Common Stock or Common Stock issued or issuable upon exercise or conversion of any Incentive Securities. As to any particular Registrable Securities once issued, such Registrable Securities shall cease to be Registrable Securities: (i) when a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement; (ii) when such securities have been distributed by the holder thereof to the public pursuant to Rule 144 under the Securities Act (or any successor provision); or (iii) when such securities shall have ceased to be outstanding. "Registration" shall mean each Required Registration and each Incidental Registration. "Registration Expenses" shall mean, with respect to the Company, all expenses incident to the Company's performance of or compliance with Article III including, without limitation, all registration and filing fees, fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of -4- 8 the Registrable Securities), expenses of printing certificates for the Registrable Securities in a form eligible for deposit with the Depository Trust Company, messenger and delivery expenses, internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), and fees and disbursements of counsel for the Company and its independent certified public accountants (including the expenses of any management review, cold comfort letters or any special audits required by or incident to such performance and compliance), securities acts liability insurance (if the Company elects to obtain such insurance), the reasonable fees and expenses of any special experts retained by the Company in connection with such registration, fees and expenses of other Persons retained by the Company, the reasonable fees and expenses of one (1) counsel (the "Holders' Counsel") for the holders of Registrable Securities to be included in the relevant Registration, selected by the holders of a majority of the Registrable Securities to be included in such Registration (except that, where a Registration is a Required Registration, such selection may only be made by Members holding a majority of the Registrable Securities set forth in the relevant Demand Request); but not including any underwriting fees, discounts or commissions attributable to the sale of securities or fees and expenses of counsel representing the holders of Registrable Securities included in such Registration (other than the Holders' Counsel) incurred in connection with the sale of Registrable Securities. "Required Registration" shall have the meaning set forth in Section 3.1(a) of this Agreement. "Saw Mill" shall have the meaning set forth in the preamble to this Agreement. "SEC" shall mean, at any time, the U.S. Securities and Exchange Commission or any other federal agency at such time administrating the Securities Act. "Securities Act" shall mean the Securities Act of 1933, as amended. "Senior Subordinated Loans" shall mean the loans incurred under the Senior Subordinated Loan Agreement dated as of August 1, 2000 among Global Energy Equipment Group LLC and the other parties thereto. "Stockholders" shall mean each party to this Agreement from time to time other than the Company. "Subordinated Loan Holders" shall mean, from time to time, holders of Company Equity Securities initially issued in connection with the Subordinated Loan Agreement, solely in their capacity as such. "Subsidiary" shall mean, with respect to any Person, any corporation, partnership, business trust, joint stock company, association, limited liability company or other business entity of which (i) if a corporation, a majority of the total voting power of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, limited liability company, business trust, joint stock company, association or other business entity other than a corporation, a majority of the partnership, membership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination -5- 9 thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership, limited liability company, business trust, joint stock company, association or other business entity other than a corporation if such Person or Persons shall be allocated a majority of the partnership, association or other business entity gains or losses or shall be or control the managing director, manager, a general partner or the trustee of such partnership, limited liability company, business trust, joint stock company, association or other business entity. "Transfer" means any transfer, sale, assignment, exchange, charge, pledge, gift, hypothecation, conveyance, encumbrance, security interest or other disposition (including any contract therefore), whether direct or indirect, voluntary or involuntary, by operation of law or otherwise, and, with respect to Common Stock, the entering into any voting trust or other arrangement with respect to voting rights of such Common Stock or the transfer of any other beneficial interest in such Common Stock. ARTICLE II REGISTRATION RIGHTS Section 2.1 Required Registration. (a) If the Company shall be requested in writing, which writing shall specify the Registrable Securities to be sold and the intended method of disposition thereof (a "Demand Request"), (x) at any time by Harvest, (y) at any one time after the date which is 18 months after the date of the Company's initial Public Offering and provided that, at such time, the Company is eligible to file a registration statement on Form S-3, by holders of 25% of the Common Stock Equivalents represented by the Company Equity Securities which were distributed on the date hereof by Holdings I to its shareholders who are a party to the Senior Subordinated Loans, or (z) at any one time after the date which is 18 months after the date hereof and provided that, at such time, the Company is eligible to file a registration statement on Form S-3, by Saw Mill, to effect a registration (which, in the case of a Demand Request pursuant to clause (y) or (z) shall be a registration statement on Form S-3) under the Securities Act of Registrable Securities held by such Stockholders (each, a "Required Registration"), then the Company shall promptly use its reasonable efforts to effect such Required Registration. (b) Piggyback Rights. At any time upon receipt by the Company of a Demand Request, the Company shall deliver a written notice to each other Stockholder (a "Demand Notice") stating that the Company intends to comply with a Demand Request and informing each such Stockholder of its right to include Registrable Securities in such Required Registration. Within ten (10) Business Days after receipt of a Demand Notice, each Stockholder entitled to a Demand Notice shall have the right to request in writing that the Company include all or a specific portion of the Registrable Securities held by such Stockholder in such Required Registration. (c) Postponement. The Company may postpone any Required Registration for a reasonable period of time, not to exceed one hundred eighty (180) days, if the Board of Directors determines in good faith that such Required Registration would (A) require the disclosure of a material transaction or other comparable matter and such disclosure would be disadvantageous to the Company, (B) adversely affect a material financing, acquisition, disposition of assets or stock, merger or other comparable transaction or (C) otherwise be materially detrimental to the Company. -6- 10 (d) Time for Filing and Effectiveness. As promptly as practicable after a Demand Request but in no event later than the day which is sixty (60) days after such Demand Request the Company shall file with the SEC the Required Registration with respect to all Registrable Securities to be so registered, and shall use its reasonable efforts to cause such Required Registration to become effective as promptly as practicable after the filing thereof. The Company will use its reasonable efforts to keep any Required Registration filed pursuant to this Section 2.1 effective for the period beginning on the date on which the Required Registration is declared effective and ending on the earlier of (i) the date of full distribution of the Registrable Securities included in such Required Registration and (ii) the date that is one hundred eighty (180) days from the date of first effectiveness. (e) Selection of Underwriters. In the event that the Registrable Securities to be registered pursuant to a Required Registration are to be disposed of in an underwritten Public Offering, the underwriters of such Public Offering shall be one or more underwriting firms of nationally recognized standing selected by the Board of Directors and reasonably acceptable to holders making the Demand Request who hold a majority of the Registrable Securities to be included in such Required Registration by all holders making the Demand Request. (f) Priority on Required Registrations. In the event that, in the case of any Required Registration, the managing underwriter for the Public Offering contemplated by Section 2.1(a) shall advise the Company (with a copy to each holder of Registrable Securities requesting sale) that, in such underwriter's opinion, the amount of securities requested to be included in such Required Registration would adversely affect the Public Offering and sale (including pricing) of such Registrable Securities, the Company will include in such Required Registration the number of Registrable Securities that the Company is so advised can be sold in such Public Offering in the following amounts: (i) first, all Registrable Securities requested to be sold by holders of Registrable Securities on the basis of the number of Registrable Securities requested to be registered by such holders; provided, however, that if such managing underwriter shall advise the Company that, in such underwriter's opinion, the inclusion of Registrable Securities held by Management Stockholders would adversely affect the offering and sale (including pricing) of such securities, then the number of Registrable Securities held by such Management Stockholders to be included in such Public Offering may be disproportionately reduced to avoid such adverse result; provided, further, however, that with respect to Registrable Securities held by Management Stockholders on the date hereof, such Registrable Securities shall only be disproportionately reduced up to 50% of such Registrable Securities; and (ii) second, securities proposed to be sold by the Company for its own account. (g) Additional Demand Requests. In the event that (i) the Company postpones any Required Registration to be made in accordance with a Demand Request pursuant to Section 2.1(a) by more than one hundred twenty (120) days, (ii) the Required Registration does not become effective, or (iii) less than a majority of the Registrable Securities requested by the Stockholders making such Demand Request is included in such Required Registration, then the Demand Request pursuant to which such Required Registration was to have been made shall be deemed not to have been a Demand Request. -7- 11 Section 2.2 Incidental Registration. (a) Filing of Registration Statement. If the Company at any time proposes to register, for its own account or the account of another Person, any of its Common Stock (an "Incidental Registration") under the Securities Act (other than pursuant to a registration statement on Form S-4 or Form S-8 or any successor forms thereto or Section 2.1 hereof and other than pursuant to a Demand Request), for sale to the public in a Public Offering, it will at each such time give prompt written notice to all Stockholders of its intention to do so, which notice shall be given at least thirty (30) days prior to the date that a registration statement relating to such registration is proposed to be filed with the SEC. Upon the written request of any Stockholder entitled to receive such notice to include Registrable Securities held by it under such registration statement (which request shall (i) be made within fifteen (15) days after the receipt of any such notice, and (ii) specify the Registrable Securities intended to be included by such holder), the Company will use its reasonable efforts to effect the registration of all Registrable Securities that the Company has been so requested to register by such Stockholder; provided, however, that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason to terminate such registration statement and not to register such securities, the Company may, at its election, give written notice of such determination to each such holder and, thereupon, shall be relieved of its obligation to register any Registrable Securities of such Persons in connection with such registration. (b) Selection of Underwriters. Notice of the Company's intention to register such securities shall designate the proposed underwriters of such Public Offering (which shall be one or more underwriting firms of nationally recognized standing) and shall contain the Company's agreement to use its reasonable efforts, if requested to do so, to arrange for such underwriters to include in such underwriting the Registrable Securities that the Company has been so requested to sell pursuant to this Section 2.2, it being understood that the holders of Registrable Securities shall have no right to select different underwriters for the disposition of their Registrable Securities. (c) Priority on Incidental Registrations. If the managing underwriter for the Public Offering contemplated by this Section 2.2 shall advise the Company that, in such underwriter's opinion, the number of securities requested to be included in such Incidental Registration would adversely affect the Public Offering and sale (including pricing) of such securities, the Company shall include in such Incidental Registration the number of securities that the Company is so advised can be sold in such Public Offering, in the following amounts and order of priority: (i) first, Registrable Securities proposed to be sold by the Company for its own account or, if the other Person is neither a Stockholder nor an Affiliate of such Stockholder, the account of any other Person referred to in Section 2.2(a); (ii) second, the Registrable Securities requested to be registered by Stockholders and, if the other Person is a Stockholder, the Registrable Securities proposed to be sold by the Company for the account of such Person pro rata among such Stockholders and such Person on the basis of the number of Registrable Securities requested to be sold by such Stockholders pursuant to this Section 2.2; provided, however, that if such managing underwriter shall advise the Company that, in such underwriter's opinion, the inclusion of Registrable Securities held by the Management -8- 12 Stockholders would adversely affect the Public Offering and sale (including pricing) of such securities, then the number of Registrable Securities held by the Management Stockholders to be included in such Public Offering may be disproportionately reduced to avoid such adverse result; provided, further, however, that with respect to Registrable Securities held by Management Stockholders on the date hereof, such Registrable Securities shall only be disproportionately reduced up to 50% of such Registrable Securities; and (iii) third, all other Registrable Securities requested to be included in such Registration. Section 2.3 Registration Procedures. The Company will use its reasonable efforts to effect each Required Registration pursuant to Section 2.1 and each Incidental Registration pursuant to Section 2.2, and to cooperate with the sale of such Registrable Securities in accordance with the intended method of disposition thereof as quickly as possible, and the Company will as expeditiously as possible: (a) subject, in the case of an Incidental Registration, to the proviso to Section 2.2(a), prepare and file with the SEC the registration statement and use its reasonable efforts to cause the Registration to become effective; provided, however, that, to the extent practicable, the Company will furnish to the holders of the Registrable Securities covered by such registration statement and their counsel, copies of all such documents proposed to be filed and any such holder shall have the opportunity to comment on (i) any information pertaining solely to such holder and its plan of distribution that is contained therein and the Company shall make the corrections reasonably requested by such holder with respect to such information prior to filing any such registration statement or amendment or (ii) any other part of such registration statement to the extent consistent with any investigation described in Section 2.4 and the Company shall consider such comments in good faith prior to any such filing; (b) subject, in the case of an Incidental Registration, to the proviso to Section 2.2(a), prepare and file with the SEC such amendments and post-effective amendments to any registration statement and any prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement and cause the prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act; (c) furnish, upon request, to each holder of Registrable Securities to be included in such Registration and the underwriter or underwriters, if any, without charge, at least one signed copy of the registration statement and any post-effective amendment thereto, and such number of conformed copies thereof and such number of copies of the prospectus (including each preliminary prospectus and each prospectus filed under Rule 424 under the Securities Act), any amendments or supplements thereto and any documents incorporated by reference therein, as such holder or underwriter may reasonably request in order to facilitate the -9- 13 disposition of the Registrable Securities being sold by such holder (it being understood that the Company consents to the use of the prospectus and any amendment or supplement thereto by each holder of Registrable Securities covered by such registration statement and the underwriter or underwriters, if any, in connection with the Public Offering and sale of the Registrable Securities covered by the prospectus or any amendment or supplement thereto); (d) notify each holder of the Registrable Securities to be included in such Registration and the underwriter or underwriters, if any: (i) of any stop order or other order suspending the effectiveness of any registration statement, issued or threatened by the SEC in connection therewith, and take all reasonable actions required to prevent the entry of such stop order or to remove it or obtain withdrawal of it at the earliest possible moment if entered; (ii) when such registration statement or any prospectus used in connection therewith, or any amendment or supplement thereto, has been filed and, with respect to such registration statement or any post-effective amendment thereto, when the same has become effective; (iii) of any written request by the SEC for amendments or supplements to such registration statement or prospectus; and (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction; (e) if requested by the managing underwriter or underwriters or any holder of Registrable Securities to be included in such Registration in connection with any sale pursuant to a registration statement, promptly incorporate in a prospectus supplement or post-effective amendment such information relating to such underwriting as the managing underwriter or underwriters or such holder reasonably requests to be included therein; and make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after being notified of the matters incorporated in such prospectus supplement or post-effective amendment; (f) on or prior to the date on which a Registration is declared effective, use its reasonable efforts to register or qualify, and cooperate with the holders of Registrable Securities to be included in such Registration, the underwriter or underwriters, if any, and their counsel, in connection with the registration or qualification of the Registrable Securities covered by such Registration for offer and sale under the securities or "blue sky" laws of each state and other jurisdiction of the United States as any such holder or underwriter reasonably requests in writing; use its reasonable efforts to keep each such registration or qualification effective, including through new filings, or amendments or renewals, during the period such registration statement is required to be kept effective; and do any and all other acts or things necessary or advisable to enable the disposition of the Registrable Securities in all such jurisdictions reasonably requested covered by such Registration; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is -10- 14 not then so qualified or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject; (g) in connection with any sale pursuant to a Registration, cooperate with the holders of Registrable Securities to be included in such Registration and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing securities to be sold under such Registration, and enable such securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or such holders may request; (h) use its reasonable efforts to cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities within the United States and having jurisdiction over the Company or any Subsidiary as may be necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such securities; (i) use its reasonable efforts to obtain: (A) at the time of effectiveness of each Registration, a "comfort letter" from the Company's independent certified public accountants covering such matters of the type customarily covered by "cold comfort letters" as the holders of a majority of the Registrable Securities to be included in such Registration and the underwriters reasonably request; and (B) at the time of any underwritten sale pursuant to the registration statement, a "bring-down comfort letter," dated as of the date of such sale, from the Company's independent certified public accountants covering such matters of the type customarily covered by comfort letters as the Requisite Holders and the underwriters reasonably request; (j) use its reasonable efforts to obtain, at the time of effectiveness of each Registration and at the time of any sale pursuant to each Registration, an opinion or opinions addressed to the underwriter or underwriters, if any, in customary form and scope from counsel for the Company (including a 10b-5 statement); (k) notify each seller of Registrable Securities covered by such Registration, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such Registration, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and promptly prepare and file with the SEC and furnish to such seller or holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers or prospective purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they are made; (l) otherwise comply with all applicable rules and regulations of the SEC, and make generally available to its security holders (as contemplated by Section 11(a) under the -11- 15 Securities Act) an earnings statement satisfying the provisions of Rule 158 under the Securities Act no later than ninety (90) days after the end of the twelve (12) month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the registration statement, which statement shall cover said twelve (12) month period; (m) provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by each Registration from and after a date not later than the effective date of such Registration; (n) use its reasonable efforts to cause all Registrable Securities covered by each Registration to be listed subject to notice of issuance, prior to the date of first sale of such Registrable Securities pursuant to such Registration, on each securities exchange on which the Common Stock is then listed, and admitted to trading on NASDAQ, if the Common Stock or any such other securities of the Company are then admitted to trading on NASDAQ; and (o) enter into such agreements (including underwriting agreements in customary form) and take such other actions as the holders of a majority of Registrable Securities included in such Registration shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities. The Company may require each holder of Registrable Securities that will be included in such Registration to furnish the Company with such information in respect of such holder of its Registrable Securities that will be included in such Registration as the Company may reasonably request in writing and as is required by Applicable Law. Section 2.4 Preparation; Reasonable Investigation. In connection with the preparation and filing of each registration statement registering Registrable Securities under the Securities Act, the Company shall give the holders of such Registrable Securities so registered, their underwriters, if any, and their respective counsel and accountants access to its books and records and an opportunity to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such holders' or such underwriters' to conduct a reasonable investigation within the meaning of Section 11(b)(3) of the Securities Act. Section 2.5 Rights of Requesting Holders. Each holder of Registrable Securities to be included in a Registration which makes a written request therefor in Section 2.1 or 2.2, as the case may be, shall have the right to receive within thirty (30) days of receipt by the Company of such request copies of the information, notices and other documents described in Section 2.3(l) and Section 2.3(o). Section 2.6 Registration Expenses. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities, including, without limitation, any such registration not effected by the Company. Section 2.7 Indemnification; Contribution. (a) The Company shall indemnify, to the fullest extent permitted by law, each holder of Registrable Securities, its officers, directors, partners, employees and agents, if any, and each Person, if any, who controls such holder within the meaning of Section 15 of the Securities Act, against all losses, claims, damages, liabilities (or proceedings in respect thereof) and expenses (under the Securities Act or common law or otherwise), joint or several, -12- 16 resulting from any violation by the Company of the provisions of the Securities Act or any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus (and as amended or supplemented if amended or supplemented) or any preliminary prospectus or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus, in light of the circumstances under which they were made) not misleading, except to the extent that such losses, claims, damages, liabilities (or proceedings in respect thereof) or expenses are caused by any untrue statement or alleged untrue statement contained in or by any omission or alleged omission from information concerning any holder furnished in writing to the Company by such holder expressly for use therein. If the Public Offering pursuant to any registration statement provided for under this Article II is made through underwriters, no action or failure to act on the part of such underwriters (whether or not such underwriter is an Affiliate of any holder of Registrable Securities) shall affect the obligations of the Company to indemnify any holder of Registrable Securities or any other Person pursuant to the preceding sentence. If the Public Offering pursuant to any registration statement provided for under this Article II is made through underwriters, the Company agrees to enter into an underwriting agreement in customary form with such underwriters and the Company agrees to indemnify such underwriters, their officers, directors, employees and agents, if any, and each Person, if any, who controls such underwriters within the meaning of Section 15 of the Securities Act to the same extent as herein before provided with respect to the indemnification of the holders of Registrable Securities; provided that the Company shall not be required to indemnify any such underwriter, or any officer, director or employee of such underwriter or any Person who controls such underwriter within the meaning of Section 15 of the Securities Act, to the extent that the loss, claim, damage, liability (or proceedings in respect thereof) or expense for which indemnification is claimed results from such underwriter's failure to send or give a copy of an amended or supplemented final prospectus to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such amended or supplemented final prospectus prior to such written confirmation and the underwriter was provided with such amended or supplemented final prospectus a reasonable time prior to such written confirmation. (b) In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder, severally and not jointly, shall indemnify, to the fullest extent permitted by law, the Company, each underwriter and their respective officers, directors, employees and agents, if any, and each Person, if any, who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, against any losses, claims, damages, liabilities (or proceedings in respect thereof) and expenses resulting from any untrue statement or alleged untrue statement of a material fact, or any omission or alleged omission of a material fact required to be stated in the registration statement or prospectus or preliminary prospectus or any amendment thereof or supplement thereto or necessary to make the statements therein (in the case of any prospectus, in light of the circumstances under which they were made) not misleading, but only to the extent that such untrue statement is contained in or such omission is from information so concerning a holder furnished in writing by such holder expressly for use therein; provided that such holder's obligations hereunder shall be limited to an amount equal to the net proceeds to such holder of the Registrable Securities sold pursuant to such registration statement. (c) Any Person entitled to indemnification under the provisions of this Section 2.7 shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks -13- 17 indemnification and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, permit such indemnifying party to assume the defense of such claim, with counsel reasonably satisfactory to the indemnified party; and if such defense is so assumed, such indemnifying party shall not enter into any settlement without the consent of the indemnified party if such settlement attributes liability to the indemnified party and such indemnifying party shall not be subject to any liability for any settlement made without its consent (which shall not be unreasonably withheld); and any underwriting agreement entered into with respect to any registration statement provided for under this Article II shall so provide. In the event an indemnifying party shall not be entitled, or elects not, to assume the defense of a claim, such indemnifying party shall not be obligated to pay the fees and expenses of more than one counsel or firm of counsel for all parties indemnified by such indemnifying party in respect of such claim, unless in the reasonable judgment of any such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties in respect to such claim. (d) If for any reason the foregoing indemnity is unavailable, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of such indemnifying party on the one hand and the indemnified party on the other. Notwithstanding the foregoing, no holder of Registrable Securities shall be required to contribute any amount in excess of the amount such holder would have been required to pay to an indemnified party if the indemnity under Section 2.7(b) was available. No Person guilty of fraudulent misrepresentation (within the meaning of section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The obligation of any Person to contribute pursuant to this Section 2.7 shall be several and not joint. (e) An indemnifying party shall make payments of all amounts required to be made pursuant to the foregoing provisions of this Section 2.7 to or for the account of the indemnified party from time to time promptly upon receipt of bills or invoices relating thereto or when otherwise due or payable. (f) The indemnity and contribution agreements contained in this Section 2.7 shall remain in full force and effect regardless of any investigation made by or on behalf of a participating holder of Registrable Securities, its officers, directors, agents or any Person, if any, who controls such holder as aforesaid, and shall survive the Transfer of Registrable Securities by such holder and the termination of this Agreement for any reason. Section 2.8 Holdback Agreements. (a) In the event and to the extent requested by the managing underwriter or, if the Registrable Securities are not being disposed of in an underwritten Public Offering, if requested by the Company, each Stockholder agrees not to sell, make any short sale of, grant any option for the purchase of, or otherwise dispose of any securities, other than those Registrable Securities included in such Registration pursuant to Section 2.1(a), 2.1(b) or 2.2(a), for the thirty (30) days prior to and the ninety (90) days (one hundred eighty (180) days in the case of the initial Public Offering of the Company) after the effectiveness of the registration statement pursuant to which such Public Offering shall be made (or such shorter period of time as is sufficient and appropriate, in the opinion of the managing underwriter or, as the case may be, the Company in order to complete the sale and distribution of the securities included in such Public Offering; provided that, in no event shall any Stockholder be subject to a longer period of time than Harvest); provided further, -14- 18 that the limitations contained in this Section 2.8(a) shall not apply to the extent a Stockholder is prohibited by Applicable Law from so withholding such Registrable Securities from sale during such period. (b) During the period beginning thirty (30) days prior to the effective date of any registration statement filed with respect to Registrable Securities pursuant to an underwritten Public Offering and ending no later than (i) one hundred eighty (180) days after the effective date of any such registration statement and (ii) the expiration of any lock-up period required by the underwriters, if any, of such Public Offering, the Company shall not (except as part of such registration) effect any public sale or distribution of any of its equity securities or of any security convertible into or exchangeable or exercisable for any equity security of the Company. Section 2.9 Availability of Information. Following the Company's initial Public Offering, the Company shall comply with the reporting requirements of Sections 13 and 15(d) of the Exchange Act and will comply with all other public information reporting requirements of the SEC as from time to time in effect, and cooperate with holders of Registrable Securities, so as to permit disposition of the Registrable Securities pursuant to an exemption from the Securities Act for the sale of any Registrable Securities (including, without limitation, the current public information requirements of Rule 144(c) and Rule 144A under the Securities Act). The Company shall also cooperate with each Stockholder who is a holder of any Registrable Securities in supplying such information as may be necessary for such holder to complete and file any information reporting forms presently or hereafter required by the SEC as a condition to the availability of an exemption from the Securities Act for the sale of any Registrable Securities. Section 2.10 Additional Registration Rights. Nothing contained in this Agreement shall prevent the Company from granting additional registration rights to any person or entity; provided, that, with respect to any cutbacks hereunder, all cutbacks will continue to be on a pro rata basis, except as otherwise specified herein. ARTICLE III COVENANTS Section 3.1 Transactions with Affiliates. (a) Until the Affiliate Restriction Termination Date, Harvest, and any of its Affiliates may engage in or possess an interest in any other business venture of any kind, nature or description, independently or with others, whether or not such ventures are competitive with the Company, notwithstanding that representatives of Harvest or any of its Affiliates are serving as a Director of the Company. Nothing in this Agreement shall be deemed to prohibit Harvest or any of its Affiliates from dealing, or otherwise engaging in business, with Persons transacting business with the Company. Neither the Company nor any Stockholder shall have any rights or obligations by virtue of this Agreement, in or to any independent venture of Harvest or any of its Affiliates, or the income or profits or losses or distributions derived therefrom, and such ventures shall not be deemed wrongful or improper even if competitive with the business of the Company. (b) Until the Affiliate Restriction Termination Date, the Company will not, and will not permit any of its Subsidiaries to, enter into any transaction (other than for legal services) with any Harvest Entity or any employee, officer, director or Affiliate of any Harvest Entity other than transactions which are on terms not substantially less favorable to the Company or its Subsidiaries, as -15- 19 the case may be, as it could obtain in a transaction with a party without a conflict of interest, it being understood that a transaction approved by a majority of the votes of the Board of Directors without a conflict of interest in such transaction shall be deemed to be on terms not substantially less favorable; provided, however, that this Section 3.1(b) shall not prohibit transactions specifically permitted under the Harvest Letter. ARTICLE IV MISCELLANEOUS Section 4.1 Effectiveness, Binding Effect; Specific Performance. (a) This Agreement shall be effective upon consummation of the Exchange. (b) Except as otherwise provided in this Agreement, every covenant, term and provision of this Agreement shall be binding upon and inure to the benefit of the Stockholders and their respective heirs, legatees, legal representatives and successors. The rights of any Stockholder under this Agreement may not be assigned or otherwise conveyed by such Stockholder except as otherwise specifically provided for in this Agreement. (c) The parties hereto recognize that irreparable damage will result if this Agreement shall not be specifically enforced. If any dispute arises concerning any Company Equity Securities hereunder, the parties hereto agree that an injunction may be issued to compel specific performance of any term of this Agreement pending determination of such controversy and that no bond or other security may be required in connection therewith. If any dispute arises concerning the right or obligation of the Stockholders or the Company to purchase or sell any Company Equity Securities subject hereto, such right or obligation shall be enforceable by a decree of specific performance. Such remedies shall, however, not be exclusive and shall be in addition to any other remedy which the parties may have. Section 4.2 Notices. Any and all notices, demands, consents, approvals, requests or other communications which the Company or any Stockholder may desire or be required to give hereunder (collectively, "Notices") shall be by personal delivery, facsimile, by overnight courier or by prepaid certified mail to the Company at c/o Harvest Partners, Inc., 280 Park Avenue, 33rd Floor, New York, N.Y. 10017 Attention: Stephen Eisenstein; facsimile (212) 812-0100, and to the Stockholders at their addresses referred to in Exhibit A, Exhibit B, Exhibit C or, as the case may be, Exhibit D or such other address as a Stockholder may from time to time designate to the Company. Any Stockholder may designate another address or change its address for Notices hereunder by a Notice given pursuant to this Section. A Notice sent in compliance with the provisions of this Section shall be deemed delivered when actually received by the party to whom sent. Rejection or other refusal to accept or the inability to deliver because of a changed address or addressee of which no Notice was given as provided in this Section shall be deemed to be receipt of the Notice sent. Section 4.3 Entire Agreement; Amendment and Waivers. This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof, and fully supersedes any and all prior agreements or understandings between the parties hereto pertaining to the subject matter hereof. This Agreement may be amended or waived, each party hereto may take any action herein prohibited or omit to take action herein required to be performed by it and any breach of or compliance with any covenant, agreement, warranty or representation may be waived, only by the -16- 20 written consent or written waiver of holders of at least a majority of the Common Stock Equivalents; provided, however, that if any Stockholder shall be disproportionately and adversely affected by any such amendment or waiver, such amendment or waiver shall only be effective against such Stockholder upon receipt of the written consent or waiver of Stockholders holding at least a majority of the Common Stock Equivalents held by the Stockholder disproportionately and adversely affected by such amendment or waiver; provided, further, however, that, with respect to the definitions of "Affiliate", "Harvest Entity", "Incentive Securities", "Original Financial Stockholders", or "Registrable Securities", to 2.1(b), 2.2(a) or to this Section 4.3, if any Stockholder shall be adversely affected by any such amendment or waiver, such amendment or waiver shall only be effective against such Stockholder upon receipt of the written consent or waiver of Stockholders holding at least a majority of the Common Stock Equivalents held by the Stockholders adversely affected by such amendment or waiver including, in any event, the written consent or waiver of one of the Original Financial Stockholders; provided, further, however, that any amendment or waiver of Section 2.1(a)(z) or this proviso shall only be effective upon receipt of the written consent or waiver of Saw Mill and provided, further, however, that any amendment or waiver of Section 2.1(c)(y) or this proviso shall only be effective upon receipt of the written consent or waiver of Subordinated Loan Holders holding a majority of the Common Stock Equivalents represented by the Company Equity Securities which were distributed on the date hereof by Holdings I to its shareholders who are party to the Senior Subordinated Loans. Section 4.4 Section Headings. The section headings used in this Agreement are intended solely for convenience of reference and shall not in any manner amplify, limit, modify or otherwise be used in the interpretation of any of the provisions hereof. Section 4.5 Counterparts. This Agreement may be executed in several counterparts and all such executed counterparts shall constitute a single agreement, binding on all of the parties hereto, their successors and their assigns, notwithstanding that all of the parties hereto are not signatories to the original or to the same counterpart. Each counterpart signature page so executed may be attached to a master counterpart of this Agreement to be kept by the Company at the principal office of the Company and such master counterpart as well as any and all other counterparts executed by any of the parties hereto shall constitute a single agreement. Section 4.6. Severability. In case any one or more of the provisions contained in this Agreement shall be invalid or unenforceable in any jurisdiction, the validity and enforceability of all remaining provisions contained herein shall not in any way be affected or impaired thereby, and the invalid or unenforceable provisions shall be interpreted and applied so as to produce as near as may be the economic result intended by the parties hereto. Section 4.7. Governing Law. This Agreement, including its existence, validity, construction and operating effect, and the rights of each of the parties hereto, shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflict of laws. Section 4.8. Incorporation by Reference. Every Schedule attached to this Agreement and referred to herein is incorporated in this Agreement by reference unless this Agreement otherwise expressly provides. Section 4.9. Limitation on Liability. The Stockholders shall not be bound by, or be personally liable for, by reason of being a Stockholder, a judgment, decree or order of a court or in any other manner, for the expenses, liabilities or obligations of the Company. -17- 21 Section 4.10. Variation of Pronouns. All pronouns and any variations thereof shall be deemed to refer to masculine, feminine, or neuter, singular or plural, as the identity of the person or persons may require. Section 4.11. Further Action. Each Stockholder agrees to perform all further acts and execute, acknowledge, and deliver any documents which may be reasonably necessary, appropriate or desirable to carry out the provisions of this Agreement. Section 4.12. Termination. This Agreement shall terminate in its entirety upon a liquidation of the Company. Section 4.13. Benefits Only to Parties. Nothing expressed by or mentioned in this Agreement is intended or shall be construed to give any Person (other than the parties hereto and their respective successors) any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and their respective successors, and for the benefit of no other Person except as otherwise specifically provided for in this Agreement. Section 4.14. Saw Mill Ownership. For purposes of determining ownership of Common Stock under this Agreement, Saw Mill, Saw Mill Investments, L.L.C. and William Gerstner shall be deemed to be a single entity. Section 4.15. Termination of the Equityholders Agreement. The Equityholders Agreement shall terminate on the date hereof. * * * -18- 22 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. GLOBAL POWER EQUIPMENT GROUP INC. By: ----------------------------- Name: Title: 23 [Signature page for this Registration Rights Agreement]
HARVEST PARTNERS III, L.P. By: Harvest Associates III, LLC, its General Partner By: ----------------------------- Name: Title:
24 [Signature page for this Registration Rights Agreement] HARVEST PARTNERS III BETEILIGUNGSGESELLSCHAFT BURGERLICHEN RECHTS MIT HAFTUNGSBESCHRANKUNG
By: Harvest Associates III, LLC, its General Partner By: ----------------------------- Name: Title:
25 [Signature page for this Registration Rights Agreement] Q.P.O.N. BETEILIGUNGS GMBH By: ----------------------------- Name: Title: 26 [Signature page for this Registration Rights Agreement] BT INVESTMENT PARTNERS, INC. By: ----------------------------- Name: Title: 27 [Signature page for this Registration Rights Agreement] DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: ----------------------------- Name: Title: 28 [Signature page for this Registration Rights Agreement] DLJ CAPITAL PARTNERS V, LLC By: ----------------------------- Name: Title: 29 [Signature page for this Registration Rights Agreement] ARES LEVERAGED INVESTMENT FUND II, L.P. By: ----------------------------- Name: Title: 30 [Signature page for this Registration Rights Agreement] CHASE BANK OF TEXAS, N.A. as Trustee for By: ----------------------------- Name: Title: 31 [Signature page for this Registration Rights Agreement] CARLYLE HIGH YIELD PARTNERS, L.P. By: ----------------------------- Name: Title: 32 [Signature page for this Registration Rights Agreement] DLJ ESC II, L.P. By: ----------------------------- Name: Title: 33 [Signature page for this Registration Rights Agreement] DLJ INVESTMENT FUNDING II, INC. By: ----------------------------- Name: Title: 34 [Signature page for this Registration Rights Agreement] DLJ INVESTMENT PARTNERS, L.P. By: ----------------------------- Name: Title: 35 [Signature page for this Registration Rights Agreement] DLJ INVESTMENT PARTNERS II, L.P. By: ----------------------------- Name: Title: 36 [Signature page for this Registration Rights Agreement] GSC PARTNERS CDO FUND, LIMITED By: ----------------------------- Name: Title: 37 [Signature page for this Registration Rights Agreement] HIGHLAND LEGACY LIMTED By: ----------------------------- Name: Title: 38 [Signature page for this Registration Rights Agreement] J.H. WHITNEY MARKET VALUE FUND, L.P. By: ---------------------------- Name: Title: 39 [Signature page for this Registration Rights Agreement] NORSE CBO, LTD By: ------------------------------ Name: Title: 40 [Signature page for this Registration Rights Agreement] REGIMENT CAPITAL, LTD By: ----------------------------- Name: Title: 41 [Signature page for this Registration Rights Agreement] STANFIELD CLO, LTD By: ----------------------------- Name: Title: 42 [Signature page for this Registration Rights Agreement] STANFIELD/RMF TRANSATLANTIC CDO, LTD By: --------------------------------- Name: Title: 43 [Signature page for this Registration Rights Agreement] ARES LEVERAGED INVESTMENT FUND, L.P. By: ----------------------------- Name: Title: 44 [Signature page for this Registration Rights Agreement] SAW MILL INVESTMENTS, LLC By: ----------------------------- Name: Howard Unger Title: President 45 [Signature page for this Registration Rights Agreement] SMC POWER HOLDINGS, LLC By: ----------------------------- Name: Howard Unger Title: Managing Member 46 [Signature page for this Registration Rights Agreement] PARIBAS PRINCIPAL INCORPORATED By: ----------------------------- Name: Title: 47 [Signature page for this Registration Rights Agreement] INDOSUEZ GEEG PARTNERS By: Indosuez CM II, Inc., its Managing G.P. By ------------------------------------------ Name: Title: By ------------------------------------------ Name: Title: 48 [Signature page for this Registration Rights Agreement] -------------------------------- Larry Edwards 49 [Signature page for this Registration Rights Agreement] -------------------------------- James Wilson 50 [Signature page for this Registration Rights Agreement] -------------------------------- Gary Obermiller 51 [Signature page for this Registration Rights Agreement] -------------------------------- Michael Hackner 52 [Signature page for this Registration Rights Agreement] -------------------------------- Gene Schockemoehl 53 [Signature page for this Registration Rights Agreement] -------------------------------- Jack Silver 54 [Signature page for this Registration Rights Agreement] -------------------------------- John Rieckman 55 [Signature page for this Registration Rights Agreement] -------------------------------- Monte Ness 56 [Signature page for this Registration Rights Agreement] -------------------------------- Kevin Zahler 57 [Signature page for this Registration Rights Agreement] -------------------------------- Tike Wong 58 [Signature page for this Registration Rights Agreement] -------------------------------- Albert Breuer 59 [Signature page for this Registration Rights Agreement] -------------------------------- Jack McSweeney 60 [Signature page for this Registration Rights Agreement] -------------------------------- Bengt Sohlen 61 [Signature page for this Registration Rights Agreement] NATIONAL CITY EQUITY PARTNERS, INC. By: -------------------------------- Name: Title: 62 [Signature page for this Registration Rights Agreement] GREAT LAKES CAPITAL INVESTMENTS II, LLC By: -------------------------------- Name: Title: 63 [Signature page for this Registration Rights Agreement] HELLER FINANCIAL, INC. By: ----------------------------- Name: Title: 64 [Signature page for this Registration Rights Agreement] BANCBOSTON CAPITAL INC. By: ----------------------------- Name: Title: 65 [Signature page for this Registration Rights Agreement] LIBERTY MUTUAL INSURANCE COMPANY By: ----------------------------- Name: Title: 66 [Signature page for this Registration Rights Agreement] PPM AMERICA PRIVATE EQUITY FUND, L.P. By: PPM America Capital Partners, LLC its general partner By: ----------------------------- Name: Title: Manager By: ----------------------------- Name: Title: Manager 67 [Signature page for this Registration Rights Agreement] CASCADE INVESTMENT PARTNERS, L.L.C. By: WILLIAM BLAIR MEZZANINE CAPITAL PARTNERS II, L.L.C., Sole Manager By --------------------------------- Name: Title 68 [Signature page for this Registration Rights Agreement] MAGNETITE ASSET INVESTORS L.L.C. By -------------------------------- Name: Title 69 [Signature page for this Registration Rights Agreement] GOLDEN TREE ASSET MANAGEMENT, L.P., as Agent for Highbridge International LLC By -------------------------------- Name: Title 70 [Signature page for this Registration Rights Agreement] GOLDEN TREE ASSET MANAGEMENT, L.P., as Agent for Deutsche Bank Sharps Pixley Inc. By --------------------------------- Name: Title 71 [Signature page for this Registration Rights Agreement] GOLDEN TREE HIGH YIELD PARTNERS, L.P. By ---------------------------------- Name: Title 72 EXHIBIT A Original Financial Stockholders SMC Power Holdings, L.L.C. Saw Mill Investments, L.L.C. William Gerstner Paribas Principal Incorporated Indosuez GEG Partners 73 EXHIBIT B Management Stockholders Larry Edwards James Wilson Gary Obermiller Michael Hackner Gene Schockemoehl Jack Silver John Rieckman Monte Ness Kevin Zahler Tike Wong Albert Breuer Jack McSweeney Bengt Sohlen 74 EXHIBIT C Former Holdings I Stockholders Harvest Partners III, L.P. Harvest Partners III, GbR BT Investment Partners, Inc. Q.P.O.N. Beteiligungs GmbH Donaldson, Lufkin & Jenrette Securities Corporation Magnetite Asset Investors L.L.C. Golden Tree Asset Management, L.P., as Agent for Highbridge International LLC Golden Tree Asset Management, L.P. as Agent for Deutsche Bank Sharps Pixley Inc. Golden Tree High Yield Partners, L.P. DLJ Capital Parners V, LLC Ares Leveraged Investment Fund II, L.P. Chase Bank of Texas, N.A. as Trustee for Carlyle High Yield Partners, L.P. DLJ ESC II, L.P. DLJ Investment Funding II, Inc. DLJ Investment Partners, L.P. DLJ Investment Partners II, L.P. GSC Partners CDO Fund, Limited Highland Legacy Limited J.H. Whitney Market Value Fund, L.P. Norse CBO, LTD Regiment Capital, Ltd. Stanfield CLO, Ltd. 75 EXHIBIT C Page 2 Stanfield/RMF Transatlantic CDO, Ltd. Ares Leveraged Investment Fund, L.P. 76 EXHIBIT D Former Holdings II Members National City Equity Partners, Inc. Great Lakes Capital Investments II, LLC Heller Financial, Inc. Banc Boston Capital Inc. Liberty Mutual Insurance Company PPM America Private Equity Fund, L.P. EX-23.1 7 y45366a2ex23-1.txt CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports and to all references to our Firm included in or made part of this registration statement. /s/ Arthur Andersen LLP - ----------------------------- Arthur Andersen LLP Minneapolis, Minnesota, April 24, 2001 -----END PRIVACY-ENHANCED MESSAGE-----