-----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, BleKUfL6atgn0ad5yG+E2fJ/g17xqG/SOh0Hb0RrgvTNaEbZhm0imaTruNllyvvE IBs7p4ZnqkTP7k24bHRZ5g== 0000891554-98-001304.txt : 19981014 0000891554-98-001304.hdr.sgml : 19981014 ACCESSION NUMBER: 0000891554-98-001304 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980731 FILED AS OF DATE: 19981013 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JLG INDUSTRIES INC CENTRAL INDEX KEY: 0000216275 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531] IRS NUMBER: 251199382 STATE OF INCORPORATION: PA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-12123 FILM NUMBER: 98724577 BUSINESS ADDRESS: STREET 1: JLG DR CITY: MCCONNELLSBURG STATE: PA ZIP: 17233 BUSINESS PHONE: 7174855161 10-K 1 ANNUAL REPORT ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 -------------- FORM 10-K (Mark One) [X] Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the fiscal year ended July 31, 1998 [ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from ___________ to ___________ Commission file number: 0-8454 JLG INDUSTRIES, INC. (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-1199382 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1 JLG Drive, McConnellsburg, PA 17233-9533 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (7l7) 485-5161 -------------- Securities registered pursuant to Section 12(b) of the Act: (Title of class) (Name of exchange on which registered) ---------------- -------------------------------------- Capital Stock ($.20 par value) New York Stock Exchange -------------- Securities registered pursuant to Section 12(g) of the Act: None -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No _____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] At September 11, 1998, there were 44,095,560 shares of capital stock of the Registrant outstanding, and the aggregate market value of the voting stock held by nonaffiliates of the Registrant at that date was $642,691,778. Documents Incorporated by Reference Portions of the Proxy Statement for the 1998 Annual Meeting of Shareholders are incorporated by reference into Part III. ================================================================================ TABLE OF CONTENTS
Item PART I 1. Business ............................................................................ 1 Products .......................................................................... 1 Marketing and Distribution ........................................................ 1 Customer Service and Support ...................................................... 1 Product Development ............................................................... 2 Competition ....................................................................... 2 Material and Supply Arrangements .................................................. 2 Product Liability ................................................................. 2 Employees ......................................................................... 3 Foreign Operations ................................................................ 3 Executive Officers of the Registrant .............................................. 3 2. Properties .......................................................................... 3 3. Legal Proceedings ................................................................... 3 4. Submission of Matters to a Vote of Security Holders ................................. 3 PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters ........... 3 6. Selected Financial Data ............................................................. 4 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 8. Financial Statements and Supplementary Data ......................................... 8 Consolidated Balance Sheets ....................................................... 8 Consolidated Statements of Income ................................................. 9 Consolidated Statements of Shareholders' Equity ................................... 9 Consolidated Statements of Cash Flows ............................................. 10 Notes to Consolidated Financial Statements ........................................ 11 Report of Ernst & Young LLP, Independent Auditors ................................. 16 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................................ 16 PART III 10. Directors and Executive Officers of the Registrant .................................. 17 11. Executive Compensation .............................................................. 17 12. Security Ownership of Certain Beneficial Owners and Management ...................... 17 13. Certain Relationships and Related Transactions ...................................... 17 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ............................................................... 17 Financial Statement Schedules ................................................... 17 Exhibits ........................................................................ 17 Signatures .............................................................................. 19
PART I ITEM 1. BUSINESS The Company is the world's leading manufacturer, distributor and international marketer of aerial work platforms used primarily in industrial, commercial, institutional and construction applications. Sales are made principally to independent equipment rental companies that rent the Company's products and provide service support to equipment users. Equipment purchases by end-users, either directly from the Company or through distributors, comprise a significant, but smaller portion of sales. The Company also generates revenues from sales of used equipment and from equipment rentals and services provided by its JLG Equipment Services operations. Products Aerial work platforms are designed to permit workers to position themselves and their tools and materials easily and quickly in elevated work areas that otherwise might have to be reached by the erection of scaffolding, by the use of ladders, or through other devices. Aerial work platforms consist of boom, scissor and vertical mast lifts. These work platforms are mounted either at the end of telescoping and/or articulating booms or on top of scissor-type or other vertical lifting mechanisms, which, in turn, are mounted on mobile, four-wheel chassis. The Company offers aerial work platforms powered by electric motors or gasoline, diesel, or propane engines. All of the Company's aerial work platforms are designed for stable operation in elevated positions. Boom lifts are especially useful for reaching over machinery and equipment that is mounted on floors and for reaching other elevated positions not easily approached by other vertical lifting devices. The Company produces boom lift models of various sizes with platform heights of up to 150 feet. The boom may be rotated up to 360 degrees in either direction, raised or lowered from vertical to below horizontal, and extended while the work platform remains horizontal and stable. These machines can be maneuvered forward or backward and steered in any direction by the operator from the work platform, even while the boom is extended. Boom-type models have standard-sized work platforms, which vary in size up to 3 by 8 feet, and the rated lift capacities range from 500 to 1,000 pounds. The distributor net price of the Company's standard models at July 31, 1998, ranged from approximately $19,300 to $325,000. Scissor lifts are designed to provide larger work areas, and generally to allow for heavier loads than boom lifts. Scissor lifts may be maneuvered in a manner similar to boom lifts, but the platforms may be extended only vertically, except for an available option that extends the deck horizontally up to 6 feet. Scissor lifts are available in various models, with maximum platform heights of up to 50 feet and various platform sizes up to 6 by 14 feet. The rated lift capacities range from 500 to 2,500 pounds. The distributor net price of the Company's standard models at July 31, 1998, ranged from approximately $9,500 to $50,800. Self-propelled and push-around vertical mast lifts consist of a work platform attached to an aluminum mast that extends vertically, which, in turn, is mounted on either a push-around or self-propelled base. Available in various models, these machines in their retracted position can fit through standard door openings, yet reach platform heights of up to 41 feet when fully extended. The rated lift capacity is 350 pounds. The distributor net price of the Company's standard models at July 31, 1998, ranged from approximately $3,300 to $8,000. Marketing and Distribution The Company's products are marketed internationally through independent rental companies and a network of independent distributors who rent and sell the Company's products and provide service support. North American customers are located in all fifty states in the U.S., as well as in Canada and Mexico. International customers are located in Europe, the Asia/Pacific region, Australia, Japan and South America, including a joint-venture arrangement in Brazil. The Company has been certified as meeting ISO-9001 and 9002 standards. The Company believes that certification is valuable because a number of customers require certification as a condition to doing business. Customer Service and Support The Company's customer service and support operations focus on after-sales service and support activities, including replacement parts sales, equipment rentals, used equipment sales, reconditioning used equipment and training. The service and support business is a significant factor in overall customer satisfaction and a strong contributor to the equipment purchase decision. 1 The Company distributes replacement parts to customers through a system of several parts depots and supplier direct shipment programs. These parts depots provide the Company's customers with immediate access to substantially all the parts required to support the Company's equipment. Sales of replacement parts have historically been less cyclical and typically generate higher margins than sales of new equipment. The Company maintains a national rental fleet of aerial work platforms. The purpose of this fleet is to assist the Company's customers in servicing large, one-time projects and in meeting periods of unanticipated rental demand, and to make available more equipment to customers with growing markets, but limited financial resources. This business also repairs and reconditions equipment for its own use or for sale to its customers. This operation has been certified as meeting ISO 9002 standards relating to customer service quality. The Company supports the sales, service, and rental programs of its customers with product advertising, cooperative promotional programs, major trade show participation, and training programs covering service, products and safety. The Company supplements domestic sales and service support to its international customers through its overseas facilities in the United Kingdom and Australia. To facilitate the sale of its products, the Company provides an array of financing and leasing services to its customers and end-users through its JLG Financial Services business. These programs are diverse and provide customers with various financing options and are funded through a third party financial institution generally without recourse to the Company. Product Development The Company invests significantly in product development and diversification, including improvement of existing products and modification of existing products for special applications. Product development expenditures totaled $9,579,000, $7,280,000 and $6,925,000 for the fiscal years 1998, 1997 and 1996, respectively. New and redesigned products introduced in the past two years accounted for approximately 32% of fiscal 1998 sales. The Company has various registered trademarks and patents relating to its products and business. While the Company considers them to be beneficial in the operation of its business, the Company is not dependent on any single patent or trademark or group of patents or trademarks. Competition The Company competes principally with nine aerial work platform manufacturers. The Company believes that its product quality, customer service, experienced distribution network, national rental fleet and reputation for leadership in product improvement and development provide significant competitive advantages. The Company offers the widest breadth of products as well as the widest array of product capabilities and functions in the aerial work platform industry. The Company believes this provides a competitive advantage in the marketplace. The Company believes it commands the largest share of the market for boom lift and scissor lift products and is one of the three largest producers of vertical mast lifts. The Company's products also compete with more traditional means of accomplishing the tasks performed by aerial work platforms, such as ladders, scaffolding and other devices. The Company believes that its aerial work platforms in many applications are safer, more versatile and more efficient, taking into account labor costs, than traditional methods and that its aerial work platforms enjoy competitive advantages when the job calls for frequent movement from one location to another at the same site, or when there is a need to return to the ground frequently for tools and materials. Material and Supply Arrangements The Company obtains raw materials, principally steel; other component parts, most notably engines, drive motors, tires, bearings and hydraulics; and supplies from third parties. The Company is currently experiencing constraints in the supply of certain purchased parts resulting from suppliers operating at or near capacity. The Company expects these constraints to be resolved in the near future. Product Liability Because the Company's products are used to elevate and move personnel and materials above the ground, use of the Company's products involves exposure to personal injury, as well as property damage, particularly if operated carelessly or without proper maintenance. Based upon the Company's best estimate of anticipated losses, product liability costs approximated 1.0%, 0.7% and 0.9% of net sales, for the years ended July 31, 1998, 1997 and 1996, respectively. 2 For additional information relative to product liability insurance coverage and cost, see the note entitled Commitments and Contingencies of the Notes to Consolidated Financial Statements, Item 8 of Part II of this report. Employees The Company had 2,664 and 2,686 persons employed as of July 31, 1998 and 1997, respectively. The Company believes its employee relations are good, and it has experienced no work stoppages as a result of labor problems. Foreign Operations The Company manufactures its products in the U.S. for sales throughout the world. Sales to customers outside the U.S. were 32%, 30% and 24% of total net sales for 1998, 1997 and 1996, respectively. Executive Officers of the Registrant Positions with the Company Name Age (date of initial election) - ---- --- -------------------------- L. David Black 61 Chairman of the Board, President and Chief Executive Officer (1993). Charles H. Diller, Jr. 53 Executive Vice President and Chief Financial Officer (1990). Rao G. Bollimpalli 60 Senior Vice President - Engineering (1990). Raymond F. Treml 58 Senior Vice President - Operations (1998); prior to 1998, Senior Vice President - Manufacturing (1990). All executive officers listed above are elected to hold office for one year or until their successors are elected and qualified, and have been employed in the capacities noted for more than five years, except as indicated. No family relationship exists among the above-named executive officers. ITEM 2. PROPERTIES The Company has manufacturing plants and office space at five sites in Pennsylvania totaling 759,000 square feet and situated on 102 acres of land. Of this, 708,000 square feet are owned, with the remainder under long-term lease. The Company has several international sales offices under operating leases. The Company's properties used in its operations are considered to be in good operating condition, well-maintained and suitable for their present purposes. The Company's McConnellsburg and Bedford facilities are encumbered as security for long-term borrowings. ITEM 3. LEGAL PROCEEDINGS The Company makes provisions relating to probable product liability claims. For information relative to product liability claims, see the note entitled Commitments and Contingencies of the Notes to Consolidated Financial Statements, Item 8 of Part II of this report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLER MATTERS The Company's capital stock is traded on the New York Stock Exchange under the symbol JLG. The table below sets forth the market prices and average shares traded daily for the past two fiscal years. - -------------------------------------------------------------------------------- Average Shares Price per Share Traded Daily ---------------------------------------------------------- Quarter Ended 1998 1997 1998 1997 - -------------------------------------------------------------------------------- High Low High Low - -------------------------------------------------------------------------------- October 31 ....... $13.44 $11.00 $24.25 $13.50 247,997 334,032 January 31 ....... $14.88 $11.38 $20.63 $14.50 159,738 273,575 April 30 ......... $17.25 $13.00 $21.38 $11.50 228,716 375,933 July 31 .......... $20.75 $15.50 $16.25 $11.00 135,681 325,347 - -------------------------------------------------------------------------------- The Company's quarterly cash dividend rate is currently $.005 per share, or $.02 on an annual basis. 3 ITEM 6. SELECTED FINANCIAL DATA ELEVEN-YEAR FINANCIAL SUMMARY (in thousands of dollars, except per share data)
========================================================================================================== Years ended July 31 1998 1997 1996 1995 ========================================================================================================== RESULTS OF OPERATIONS ========================================================================================================== Net sales ........................................ $ 530,859 $ 526,266 $ 413,407 $ 269,211 Gross profit ..................................... 128,157 130,005 108,716 65,953 Selling, administrative and product development expenses .................... (55,388) (56,220) (44,038) (33,254) Restructuring charge ............................. (1,689) (1,897) Income (loss) from operations .................... 71,080 71,888 64,678 32,699 Interest expense ................................. (254) (362) (293) (376) Other income (expense), net ...................... (356) (288) 1,281 376 Income (loss) before taxes ....................... 70,470 71,238 65,666 32,699 Income tax (provision) benefit ................... (23,960) (25,090) (23,558) (11,941) Net income (loss) ................................ 46,510 46,148 42,108 20,758 ========================================================================================================== PER SHARE DATA ========================================================================================================== Earnings per common share ........................ 1.07 1.06 0.98 0.49 Earnings per common share - assuming dilution .... 1.05 1.04 0.96 0.48 Cash dividends ................................... .02 .02 0.015 0.0092 ========================================================================================================== PERFORMANCE MEASURES ========================================================================================================== Return on sales .................................. 8.8% 8.8% 10.2% 7.7% Return on average assets ......................... 17.9% 21.7% 28.5% 20.2% Return on average shareholders' equity ........... 26.2% 33.6% 47.9% 37.1% ========================================================================================================== FINANCIAL POSITION ========================================================================================================== Working capital .................................. 122,672 84,129 71,807 45,404 Current assets as a percent of current liabilities 248% 218% 226% 216% Property, plant and equipment, net ............... 57,652 56,064 34,094 24,785 Total assets ..................................... 307,339 248,374 182,628 119,708 Total debt ....................................... 3,708 3,952 2,194 2,503 Shareholders' equity ............................. 207,768 160,927 113,208 68,430 Total debt as a percent of total capitalization . 2% 2% 2% 4% Book value per share ............................. 4.71 3.68 2.61 1.60 ========================================================================================================== OTHER DATA ========================================================================================================== Product development expenditures ................. 9,579 7,280 6,925 5,542 Capital expenditures, net of retirements ......... 13,577 29,757 16,668 8,618 Additions to rental fleet, net of disposals ...... 5,377 14,199 9,873 1,548 Depreciation and amortization .................... 15,750 10,389 6,505 3,875 Employees ........................................ 2,664 2,686 2,705 2,222 ==========================================================================================================
This summary should be read in conjunction with Management's Discussion and Analysis. All share and per share data have been adjusted for the two-for-one stock splits distributed in April and October 1995 and the three-for-one stock split distributed in July 1996. 4
==================================================================================================================================== Years ended July 31 1994 1993 1992 1991 1990 1989 1988 ==================================================================================================================================== RESULTS OF OPERATIONS ==================================================================================================================================== Net sales ........................................ $176,443 $123,034 $110,479 $ 94,439 $149,281 $121,330 $ 81,539 Gross profit ..................................... 42,154 28,240 22,542 20,113 37,767 32,384 23,598 Selling, administrative and product development expenses .................... (27,147) (23,323) (22,024) (21,520) (21,834) (18,974) (14,117) Restructuring charge ............................. (4,922) (2,781) (1,015) Income (loss) from operations .................... 15,007 4,917 (4,404) (4,188) 14,918 13,410 9,481 Interest expense ................................. (380) (458) (1,218) (1,467) (2,344) (1,375) (925) Other income (expense), net ...................... (24) 180 (149) (707) 858 399 485 Income (loss) before taxes ....................... 14,603 4,639 (5,771) (6,362) 13,432 12,434 9,041 Income tax (provision) benefit ................... (5,067) (1,410) 2,733 3,122 (4,950) (4,882) (3,766) Net income (loss) ................................ 9,536 3,229 (3,038) (3,240) 8,482 7,552 5,275 ==================================================================================================================================== PER SHARE DATA ==================================================================================================================================== Earnings per common share ........................ 0.23 0.08 (0.07) (0.08) 0.20 0.18 0.13 Earnings per common share - assuming dilution .... 0.23 0.08 (0.07) (0.08) 0.20 0.18 0.13 Cash dividends ................................... 0.0083 0.005 0.0208 0.0167 0.0125 0.0083 ==================================================================================================================================== PERFORMANCE MEASURES ==================================================================================================================================== Return on sales .................................. 5.4% 2.6% (2.8%) (3.4%) 5.7% 6.2% 6.5% Return on average assets ......................... 12.1% 4.6% (4.0%) (4.2%) 10.4% 11.9% 10.8% Return on average shareholders' equity ........... 23.8% 8.5% (7.9%) (7.7%) 21.8% 23.5% 21.2% ==================================================================================================================================== FINANCIAL POSITION ==================================================================================================================================== Working capital .................................. 32,380 26,689 33,304 36,468 47,289 34,745 27,378 Current assets as a percent of current liabilities 208% 217% 268% 266% 304% 254% 250% Property, plant and equipment, net ............... 19,344 13,877 13,511 13,726 14,402 11,343 8,677 Total assets ..................................... 91,634 72,518 73,785 74,861 86,741 70,570 57,692 Total debt ....................................... 7,578 4,471 12,553 14,175 18,404 13,799 11,805 Shareholders' equity ............................. 45,706 38,939 37,186 38,596 44,109 35,331 28,465 Total debt as a percent of total capitalization . 14% 10% 25% 27% 29% 28% 29% Book value per share ............................. 1.09 0.89 0.86 0.90 1.05 0.84 0.68 ==================================================================================================================================== OTHER DATA ==================================================================================================================================== Product development expenditures ................. 4,373 3,385 3,628 3,430 3,520 2,904 2,910 Capital expenditures, net of retirements ......... 7,762 3,570 1,364 1,637 4,615 4,054 1,619 Additions to rental fleet, net of disposals ...... 1,455 273 3,470 534 (1,437) (481) Depreciation and amortization .................... 2,801 2,500 2,569 1,953 1,771 1,609 1,968 Employees ........................................ 1,620 1,324 1,014 1,182 1,565 1,455 972 ====================================================================================================================================
5 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The Company achieved record sales for 1998, marking the fifth consecutive record year. The modest increase in sales from 1997 to 1998 reflected record international sales that were partially offset by lower domestic sales. The 27% increase in sales from 1997 to 1996 resulted from generally stronger demand across all product classes and markets. Sales to customers outside the United States were 32%, 30% and 24% in 1998, 1997 and 1996, respectively. Sales from new and redesigned products introduced over the past two years represented 32%, 46% and 27% of sales in 1998, 1997 and 1996, respectively. Gross profit, as a percent of sales, decreased to 24% in 1998 from 25% in 1997. The major contributors to this decrease were the effects of increased sales discounts related to increasingly competitive market conditions and unfavorable currency effects due to the strength of the U.S. dollar. These reductions were partially offset by lower product costs as a result of cost reductions. Gross profit, as a percent of sales, decreased to 25% in 1997 from 26% in 1996. The decrease was due to a shift in product mix to smaller, less profitable models; product pricing pressures; and product introduction costs. Selling, general and product development expenses decreased $832,000 in 1998 compared to an increase of $12.2 million in 1997 and, as a percent of sales, were 10% for 1998 compared to 11% for 1997 and 1996. For 1998, the decrease in dollars was primarily attributable to reduced personnel related costs and consulting expenses. Partially offsetting these reductions were higher product development costs in support of new and redesigned products. The dollar increase for 1997 principally reflected higher personnel and related costs, increased expenses associated with expanding foreign operations, and increased consulting expenses. For 1998, miscellaneous expense was primarily comprised of currency conversion losses of $1,611,000, partially offset by higher investment income. For 1997, miscellaneous expense included $768,000 in currency conversion losses compared to $812,000 in gains for 1996. The effective income tax rates were 34%, 35% and 36% for 1998, 1997 and 1996, respectively. The decreases in the effective income tax rate are primarily due to tax benefits related to the increasing level of export sales and a lower state income tax expense. Financial Condition The Company continues to maintain a strong financial position, with the funding of capital projects and working capital needs principally out of operating cash flow and cash reserves, while remaining virtually debt-free. Working capital increased by $39 million in 1998 and $13 million in 1997, principally due to increased cash and higher receivable balances associated with extended payment terms dictated by competitive pressures in the marketplace and a higher percent of international sales which typically have longer payment terms. Supplementing its working capital at July 31, 1998, the Company had unused credit lines totaling $30 million. The Company considers these resources, coupled with cash expected to be generated by operations, adequate to meet its foreseeable funding needs for anticipated 1999 expenditures, including higher inventory levels to support shorter delivery requirements, $32 million for additional equipment held for rental and $16 million for other capital-related projects. The Company's exposure to product liability claims is discussed in the note entitled Commitments and Contingencies of the Notes to Consolidated Financial Statements, Item 8 of Part II of this report. Future results of operations, financial condition and liquidity may be affected to the extent that the Company's ultimate exposure with respect to product liability varies from current estimates. Outlook This Outlook section and other parts of this Management's Discussion and Analysis and accompanying Annual Report contain forward-looking information and involve risks and uncertainties that could significantly impact expected results. Certain important factors that, in some cases have affected, and in the future could affect, the Company's results of operations and that could cause such future results of operations to differ are described in "Cautionary Statements Pursuant to the Securities Litigation Reform Act" which is an exhibit to this report. 6 Management anticipates another record year for sales and profits in fiscal 1999, with goals to increase sales by as much as 15% and profit at a somewhat greater rate. Management's outlook assumes continued economic strength in the U.S. and in Europe, as well as continued availability of capital to fuel growth in the rental industry. Management expects that new products, its strategic response to changing market dynamics and expanding global distribution should allow the Company to outpace the growth in its industry. Year 2000 The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. These programs treat years as occurring between 1900 and the end of 1999 and do not self-convert to reflect the upcoming change in the century. If not corrected, computer applications could fail or create erroneous results by or at the Year 2000. The Company has undertaken a program to understand the nature and extent of the work required to make its systems Year 2000 compliant. This program encompasses information systems, shop floor equipment and facilities systems, the Company's products and the readiness of the Company's suppliers and customers. The program includes the following phases: identification and assessment, compliance plan development, remediation and testing, production implementation and contingency plan development for critical areas. The Company's objective is to become Year 2000 compliant with its critical activities and systems by December 31, 1998, allowing substantial time for further testing, verification and conversion of less important activities and systems. The Company has determined that it has no exposure to contingencies related to the Year 2000 issue for products it has sold and that its information technology systems are substantially Year 2000 compliant. Testing of the information systems is scheduled to be completed prior to December 31, 1998. The Company is also requesting assurances by no later than December 31, 1998 from its significant suppliers and customers that they are addressing this issue to ensure that there will be no major disruptions to the Company's business. The total cost of the Year 2000 project to date has not been material. Based on its program to date, the Company does not expect that future costs of modifications will have a material adverse effect on the Company's financial position or results of operations. Because the Company expects that its internal systems will become Year 2000 compliant in a timely manner, the Company believes that the most reasonably likely worst case Year 2000 scenario would result from suppliers or other third parties failing to achieve Year 2000 compliance. Depending upon the number of third parties, their identity and the nature of the non-compliance, the Year 2000 issue could have a material adverse effect on the Company's financial position or results of operations. However, the Company will develop contingency plans, which should be complete in early 1999, should any critical problems occur in any of the assessment areas noted above. Accordingly, the Company does not expect Year 2000 problems to result in any material adverse effect on the Company's financial position or results of operations. Foreign Currency Risk The Company manufactures its products in the United States and sells these products in that market as well as international markets, principally Europe and Australia. As a result of the sales of its products in foreign markets, the Company's financial results are affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies. Based on a sensitivity analysis performed at July 31, 1998, the Company has estimated that a 10% strengthening in the value of the dollar relative to the currencies in which the Company's sales are denominated would result in a decrease in operating income of approximately $6.6 million for the year ended July 31, 1998. The Company's sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices. Euro Conversion On January 1, 1999, certain countries of the European Union are scheduled to establish fixed conversion rates between their existing currencies and one common currency, the euro. The euro will then trade on currency exchanges and may be used in business transactions. Beginning in January 2002, new euro-denominated currencies will be issued and the existing currencies will be withdrawn from circulation. The Company is currently evaluating the systems and business issues raised by the euro conversion. These issues include the need to adapt computer and other business systems and equipment and the competitive impact of cross-border transparency. The Company has not yet completed its estimate of the potential impact likely to be caused by the euro conversion; however, at present the Company has no reason to believe the euro conversion will have a material impact on the Company's financial condition or results of operations. 7 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CONSOLIDATED BALANCE SHEETS
July 31 ---------------------- (in thousands, except per share data) 1998 1997 ======================================================================================= ASSETS Current Assets Cash ....................................................... $ 56,793 $ 25,436 Accounts receivable, less allowance for doubtful accounts of $1,597 in 1998 and $1,282 in 1997 ........................ 94,610 70,164 Inventories ................................................ 47,568 53,727 Other current assets ....................................... 6,544 5,872 ----------------------- Total Current Assets ..................................... 205,515 155,199 Property, Plant and Equipment Land and improvements ...................................... 5,140 4,124 Buildings and improvements ................................. 28,778 21,266 Machinery and equipment .................................... 61,592 58,592 ----------------------- 95,510 83,982 Less allowance for depreciation ............................ 37,858 27,918 ----------------------- 57,652 56,064 Equipment Held for Rental, net of accumulated depreciation of $5,166 in 1998 and $3,626 in 1997 .......... 25,103 24,951 Other Assets ................................................. 19,069 12,160 ----------------------- $ 307,339 $ 248,374 ======================= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current portion of long-term debt .......................... $ 1,253 $ 267 Accounts payable ........................................... 43,119 43,027 Accrued payroll and related taxes .......................... 11,652 10,256 Accrued sales costs ........................................ 3,937 6,025 Income taxes ............................................... 7,251 757 Other current liabilities .................................. 15,631 10,738 ----------------------- Total Current Liabilities ................................ 82,843 71,070 Long-term Debt ............................................... 2,455 3,685 Contingent Liabilities ....................................... 8,800 7,646 Accrued Employee Benefits .................................... 5,473 5,046 Shareholders' Equity Capital stock: Authorized shares: 100,000 at $.20 par value Issued and outstanding shares: 1998 - 44,096 shares; 1997 - 43,726 shares ................................... 8,819 8,745 Additional paid-in capital ................................. 15,626 11,391 Unearned compensation ...................................... (2,633) (1,018) Accumulated other comprehensive income ..................... (3,662) (2,180) Retained earnings .......................................... 189,618 143,989 ----------------------- Total Shareholders' Equity ............................... 207,768 160,927 ----------------------- $ 307,339 $ 248,374 =======================
The accompanying notes are an integral part of these financial statements. 8 CONSOLIDATED STATEMENTS OF INCOME
Years Ended July 31 ----------------------------------- (in thousands, except per share data) 1998 1997 1996 ============================================================================================== Net Sales .............................................. $ 530,859 $ 526,266 $ 413,407 Cost of sales .......................................... 402,702 396,261 304,691 ----------------------------------- Gross Profit ........................................... 128,157 130,005 108,716 Selling, administrative and product development expenses 55,388 56,220 44,038 Restructuring charges .................................. 1,689 1,897 ----------------------------------- Income from Operations ................................. 71,080 71,888 64,678 Other income (deductions): Interest expense ..................................... (254) (362) (293) Miscellaneous, net ................................... (356) (288) 1,281 ----------------------------------- Income before Taxes .................................... 70,470 71,238 65,666 Income tax provision ................................... 23,960 25,090 23,558 ----------------------------------- Net Income ............................................. $ 46,510 $ 46,148 $ 42,108 =================================== Earnings per Common Share .............................. $ 1.07 $ 1.06 $ .98 =================================== Earnings per Common Share-- Assuming Dilution .......... $ 1.05 $ 1.04 $ .96 =================================== Weighted Average Shares Outstanding ................... 43,666 43,606 43,014 =================================== Weighted Average Shares Outstanding-- Assuming Dilution 44,431 44,401 43,770 ===================================
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Accumulated Capital Stock Additional Other ------------------ Paid-in Unearned Comprehensive Retained (in thousands except share data) Shares Par Value Capital Compensation Income Earnings =============================================================================================================== Balances at July 31, 1995 ............... 42,825 $ 8,565 $ 4,411 ($ 1,799) $ 57,253 Comprehensive income: Net income for the year ............... 42,108 Other comprehensive income - Aggregate translation adjustment, net of deferred tax benefit of $737 . (261) Dividends paid: $.015 per share ......... (648) Shares issued under stock option plans .. 557 111 3,468 - --------------------------------------------------------------------------------------------------------------- Balances at July 31, 1996 ............... 43,382 8,676 7,879 (2,060) 98,713 =============================================================================================================== Comprehensive income: Net income for the year ............... 46,148 Other comprehensive income - Aggregate translation adjustment, net of deferred tax benefit of $1,228 (120) Dividends paid: $.02 per share .......... (872) Shares issued under stock option plans and restricted share awards ..... 344 69 3,512 (1,516) Amortization of unearned compensation ... 498 - --------------------------------------------------------------------------------------------------------------- Balances at July 31, 1997 ............... 43,726 8,745 11,391 (1,018) (2,180) 143,989 =============================================================================================================== Comprehensive income: Net income for the year ............... 46,510 Other comprehensive income - Aggregate translation adjustment, net of deferred tax benefit of $1,428 (1,482) Dividends paid: $.02 per share .......... (881) Shares issued under stock option plans and restricted share awards ..... 370 74 4,235 (3,219) Amortization of unearned compensation ... 1,604 - --------------------------------------------------------------------------------------------------------------- Balances at July 31, 1998 ............... 44,096 $ 8,819 $ 15,626 ($ 2,633) ($ 3,662) $189,618 ===============================================================================================================
The accompanying notes are an integral part of these statements 9 CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended July 31 --------------------------------- (in thousands) 1998 1997 1996 ====================================================================================== Operations Net income ..................................... $ 46,510 $ 46,148 $ 42,108 Adjustments to reconcile net income to cash provided by (used for) operating activities: Depreciation ............................... 15,750 10,389 6,505 Provision for self-insured losses .......... 4,844 2,745 2,938 Deferred income taxes ...................... 1,924 775 502 Changes in operating assets and liabilities: Accounts receivable ................... (24,446) (15,822) (23,748) Inventories ........................... 6,159 (14,294) (13,686) Other current assets .................. (672) (997) (278) Accounts payable ...................... 92 8,492 16,680 Accrued expenses and other current liabilities ................. 9,148 5,499 3,076 Changes in other assets and liabilities ........ (9,085) (7,310) (3,406) --------------------------------- Cash provided by operations ...................... 50,224 35,625 30,691 Investments Purchases of property, plant and equipment ................................ (13,577) (29,757) (16,668) Additions to equipment held for rental ......... (5,377) (14,199) (9,873) Proceeds from sale of Material Handling Division ..................................... 10,954 --------------------------------- Cash used for investments ........................ (18,954) (43,956) (15,587) Financing Issuance of long-term debt ..................... 2,000 Repayment of long-term debt .................... (244) (242) (309) Payment of dividends ........................... (881) (872) (648) Exercise of stock options and issuance of restricted awards ........................ 2,694 2,563 3,579 --------------------------------- Cash provided by financing ....................... 1,569 3,449 2,622 Currency Adjustments Effect of exchange rate changes on cash ........ (1,482) (120) (261) Cash Net change in cash ............................. 31,357 (5,002) 17,465 Beginning balance .............................. 25,436 30,438 12,973 --------------------------------- Ending balance ................................. $ 56,793 $ 25,436 $ 30,438 =================================
The accompanying notes are an integral part of these statements. 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands except per share data) ================================================================================ SUMMARY OF SIGNIFICANT ACCOUNTING POLICES Principles of Consolidation and Statement Presentation The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Certain prior year amounts in the consolidated financial statements have been reclassified to conform to the presentation used for 1998. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents and classifies such amounts as cash. Revenue Recognition Sales of aerial work platforms and service parts are generally unconditional sales that are recorded when product is shipped and invoiced to independently owned and operated distributors and customers. Provisions for warranty are estimated and accrued at the time of sale. Actual warranty costs do not materially differ from estimates. In addition, net sales include rental revenues earned on the lease of equipment held for rental. Rental revenues are recognized in the period earned over the lease term. Inventories Inventories are stated at the lower of cost or market. Cost is determined using the LIFO (last-in, first-out) method because it results in a better matching of current product costs and revenues. Inventories consist of the following at July 31: ================================================================================ 1998 1997 ================================================================================ Finished goods ............................................. $27,784 $33,689 Work in process ............................................ 9,291 13,537 Raw materials .............................................. 15,067 12,371 ------------------ 52,142 59,597 Less LIFO provision ........................................ 4,574 5,870 ------------------ $47,568 $53,727 ================== Property, Plant and Equipment and Equipment Held for Rental Property, plant and equipment and equipment held for rental are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method, based on useful lives of 15 years for land improvements, 10 to 20 years for buildings and improvements, three to 10 years for machinery and equipment and three to seven years for equipment held for rental. Income Taxes Deferred income tax assets and liabilities arise from differences between the tax basis of assets or liabilities and their reported amounts in the financial statements. Deferred tax balances are determined by using the tax rate expected to be in effect when the taxes are paid or refunds received. Capital Stock The Company distributed a three-for-one stock split in July 1996. The split was effected by a stock dividend. All share and per share data included in the financial statements have been restated to reflect the stock split. Product Development The Company incurred product development and other engineering expenses of $9,579, $7,280 and $6,925 in 1998, 1997 and 1996, respectively, which were charged to expense as incurred. Concentrations of Credit Risk Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of trade 11 receivables. This concentration of credit risk is mitigated by a geographically diverse customer base and the Company's credit and collection process. The Company performs credit evaluations for all customers and secures transactions with letters of credits where necessary. Write-offs for uncollected trade receivables have not been significant. Translation of Foreign Currencies The financial statements of the Company's Australian operation are measured in its local currency and then translated into U.S. dollars. All balance sheet accounts have been translated using the current rate of exchange at the balance sheet date. Results of operations have been translated using the average rates prevailing throughout the year. Translation gains or losses resulting from the changes in the exchange rates from year-to-year are accumulated in a separate component of shareholders' equity. The financial statements of the Company's European operation are prepared using the U.S. dollar as its functional currency. The transactions of this operation that are denominated in foreign currencies have been remeasured in U.S. dollars, and any resulting gain or loss is reported in income. The aggregate foreign currency transactions included in the results of operations were losses of $1,611 and $768 in 1998 and 1997, respectively and gains of $812 in 1996. Recent Accounting Pronouncements In June 1997, the Financial Accounting Standards Board issued Statement No. 131, "Disclosure about Segments of an Enterprise and Related Information" which establishes standards for reporting information about operating segments. The Company is required to adopt this standard effective July 31, 1999. Adoption will not have any effect on reported results of operations or financial position. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1, "Accounting for the Costs of Developing or Obtaining Computer Internal-Use Software". This statement will require the capitalization of certain costs incurred after the date of adoption in connection with developing or obtaining software for internal use. It is effective for the Company beginning August 1, 1999. The Company does not believe its adoption will have a material impact on its results of operations or financial position. In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" which requires that an entity record all derivatives in the statement of financial position at their fair value. It also requires changes in the fair value of derivatives to be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The Company is required to adopt this new accounting standard beginning August 1, 1999. The Company does not expect adoption of this statement to have a significant impact on its results of operations or financial position. EMPLOYEE RETIREMENT PLAN The Company has a discretionary, defined-contribution retirement plan covering all its eligible U.S. employees. The Company's policy is to fund the pension cost as accrued. Plan assets are invested in mutual funds and the Company's common stock. The aggregate expense relating to these plans was $5,332, $4,716 and $4,355 in 1998, 1997 and 1996, respectively. INDUSTRY AND EXPORT DATA The Company operates in one dominant industry segment - the manufacture and sale of aerial work platforms. The Company manufactures its products in the U.S., and the majority of its customers are U.S.-based equipment rental firms. One customer accounted for 12% of sales for 1998 and 13% for 1997 and 1996. Export sales were 32%, 30% and 24% of total sales for 1998, 1997 and 1996, respectively, of which Europe accounted for 18%, 15% and 12% of total sales. 12 INCOME TAXES The income tax provision consisted of the following for the years ended July 31: ================================================================================ 1998 1997 1996 ================================================================================ Current: Federal ................. $ 23,900 $ 23,442 $ 20,476 State ................... 1,984 2,423 2,580 -------------------------------------------- 25,884 25,865 23,056 Deferred: Federal ................. (1,828) (674) 435 State ................... (96) (101) 67 -------------------------------------------- (1,924) (775) 502 -------------------------------------------- $ 23,960 $ 25,090 $ 23,558 ============================================ The Company made income tax payments of $16,790, $24,928, and $24,435 in 1998, 1997, and 1996, respectively. Components of deferred tax assets and liabilities were as follows at July 31: ================================================================================ 1998 1997 ================================================================================ Future income tax benefits: Contingent liabilities provisions ................ $ 5,908 $ 4,542 Employee benefits ................................ 2,736 1,910 Translation adjustments .......................... 1,561 1,361 Inventory valuation provisions ................... 959 921 Other ............................................ 512 288 --------------------- 11,676 9,022 --------------------- Deferred tax liabilities: Depreciation and asset basis differences ......... 2,307 1,577 --------------------- Net deferred tax assets ............................ $ 9,369 $ 7,445 ===================== The current and long-term deferred tax asset amounts are included in other current and other asset amounts on the consolidated balance sheets. STOCK BASED INCENTIVE PLANS The Company's stock incentive plan has reserved 4,954 common shares that may be awarded to key employees in the form of options to purchase capital stock or restricted shares. The option price is set by the Company's Board of Directors. For all options currently outstanding, the option price is the fair market value of the shares on their date of grant. The Company's stock option plan for directors provides for annual grants to each outside director of a single option to purchase six thousand shares of capital stock, providing the Company earned a net profit, before extraordinary items, for the prior fiscal year. The option price shall be equal to the shares' fair market value on their date of grant. An aggregate of 1,917 shares of capital stock is authorized to be issued under the plan. Outstanding options and transactions involving the plans are summarized as follows:
- ----------------------------------------------------------------------------------- 1998 1997 1996 - ----------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Options Price Options Price Options Price - ----------------------------------------------------------------------------------- Outstanding options at the beginning of the year .. 1,466 $ 4.88 1,705 $ 4.28 1,911 $ 2.58 Options granted .......... 479 14.59 36 17.44 275 12.57 Options canceled ......... (40) 8.66 (34) 3.96 (8) 2.93 Options exercised ........ (110) 3.00 (241) 2.33 (473) 2.07 ----------------------------------------------------- Outstanding options at the end of the year ........ 1,795 $ 7.51 1,466 $ 4.88 1,705 $ 4.28 ===================================================== Exercisable options at the end of the year ........ 1,281 $ 4.63 1,082 $ 3.95 778 $ 2.65 =====================================================
13 Information with respect to stock options outstanding at July 31, 1998 is as follows: Options Outstanding Options Exercisable - -------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Range of Number Remaining Exercise Number Exercise Exercise Prices Outstanding Life Price Exercisable Price - -------------------------------------------------------------------------------- $1.12 to $1.59 470 5 $ 1.14 470 $ 1.14 $2.93 to $3.30 353 6 3.03 353 3.03 $5.64 to $9.21 321 7 6.84 321 6.84 $11.41 to$17.69 651 9 14.85 137 15.46 The Company has elected to apply Accounting Principals Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its stock options. Under this Opinion, the Company does not recognize compensation expense arising from such grants because the exercise price of the Company's stock options equals the market price of the underlying stock on the date of grant. Pro forma information regarding net income and earnings per share has been determined as if the Company had accounted for its employee stock options under the fair value method. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions: - -------------------------------------------------------------------------------- 1998 1997 1996 - -------------------------------------------------------------------------------- Volatility factor ................................. .478 .484 .400 Expected life in years ............................ 3.0 2.0 2.5 Dividend yield .................................... .15% .11% .18% Interest rate ..................................... 5.73% 5.69% 6.04% Weighted average fair market value at date of grant $ 5.12 $ 5.37 $ 3.72 For purposes of pro forma disclosures, the estimated fair value of the options is amortized over the options' vesting period. The Company's pro forma information follows for the years ending: - -------------------------------------------------------------------------------- 1998 1997 1996 - -------------------------------------------------------------------------------- Pro forma net income .................... $ 46,021 $ 45,837 $ 41,998 Pro forma basic earnings per common share $ 1.05 $ 1.05 $ .96 This pro forma impact only takes into account options granted since January 1, 1995 and is likely to increase in future years as additional options are granted and amortized over the vesting period. BASIC AND DILUTED EARNINGS PER SHARE In 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share". Statement 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, the calculation of basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented, and where appropriate, restated to conform to the Statement 128 requirements. The following table sets forth the computation of basic and diluted earnings per share for the years ended July 31:
- --------------------------------------------------------------------------------------- 1998 1997 1996 - --------------------------------------------------------------------------------------- Net income .............................................. $46,510 $46,148 $42,108 Denominator for basic earnings per share-- weighted average shares ............................... 43,666 43,606 43,014 Effect of dilutive securities - employee stock options and unvested restricted shares ........................ 765 795 756 --------------------------- Denominator for diluted earning per share-- weighted average shares adjusted for dilutive securities 44,431 44,401 43,770 =========================== Earnings per common share ............................... $ 1.07 $ 1.06 $ .98 =========================== Earnings per common share-- assuming dilution ........... $ 1.05 $ 1.04 $ .96 ===========================
COMMITMENTS AND CONTINGENCIES The Company is a party to personal injury and property damage litigation arising out of incidents involving the use of its products. The Company's insurance program for fiscal year 1998 is comprised of a self-insured retention of $5 million 14 for domestic claims, insurance coverage of $5 million for international claims and catastrophic coverage of $50 million in excess of the retention and primary insurance. The Company contracts with an independent firm to provide claims handling and adjustment services. The Company's estimates with respect to claims are based on internal evaluations of the merits of individual claims and the reserves assigned by the Company's independent firm. The methods of making such estimates and establishing the resulting accrued liability are reviewed frequently, and any adjustments resulting therefrom are reflected in current earnings. Claims are paid over varying periods, which generally do not exceed five years. Accrued liabilities for future claims are not discounted. With respect to all product liability claims of which the Company is aware, accrued liabilities of $12.4 million and $9.6 million were established at July 31, 1998 and 1997, respectively. While the Company's ultimate liability may exceed or be less than the amounts accrued, the Company believes that it is unlikely that it would experience losses that are materially in excess of such reserve amounts. As of July 31, 1998 and 1997, there were no insurance recoverables or offset implications and there were no claims by the Company being contested by insurers. RESTRUCTURING COSTS During the calendar 1997, the Company downsized and rationalized its operations. This resulted in restructuring charges for severance and termination benefits, costs associated with closing a smaller, less productive manufacturing facility and other asset impairments of $1,689 and $1,897 for 1998 and 1997, respectively. UNAUDITED QUARTERLY FINANCIAL INFORMATION Unaudited financial information was as follows for the fiscal quarters within the years ended July 31: - -------------------------------------------------------------------------------- Earnings Per Earnings Common Per Share Net Common Assuming Net Sales Gross Profit Income Share Dilution - -------------------------------------------------------------------------------- 1998 October 31 ......... $ 95,644 $ 21,168 $ 4,626 $ .11 $ .10 January 31 ......... 111,707 24,885 7,646 .17 .17 April 30 ........... 146,323 35,954 14,071 .3 .32 July 31 ............ 177,185 46,150 20,167 .47 .46 -------------------------------------------------------- $530,859 $128,157 $ 46,510 $ 1.07 $ 1.05 ======================================================== 1997 October 31 ......... $120,206 $ 32,703 $ 12,342 $ .28 $ .28 January 31 ......... 121,246 30,996 11,227 .26 .25 April 30 ........... 143,642 35,691 12,921 .30 .29 July 31 ............ 141,172 30,615 9,658 .22 .22 -------------------------------------------------------- $526,266 $130,005 $ 46,148 $ 1.06 $ 1.04 ======================================================== REPORT OF MANAGEMENT The consolidated financial statements of JLG Industries, Inc. in this report were prepared by its management, which is responsible for their content. In management's opinion, the financial statements reflect amounts based upon its best estimates and informed judgments and present fairly the financial position, results of operations and cash flows of the Company in conformity with generally accepted accounting principles. The Company maintains a system of internal accounting controls and procedures which are intended, consistent with justifiable cost, to provide reasonable assurance that transactions are executed as authorized, that they are properly recorded to produce reliable financial records, and that accountability for assets is maintained. The accounting controls and procedures are supported by careful selection and training of personnel, examination by an internal auditor and continuing management commitment to the integrity of the internal control system. The financial statements have been audited by Ernst & Young LLP, independent auditors. The independent auditors have evaluated the Company's internal control and performed tests of procedures and accounting records in connection with the issuance of their reports on the fairness of the financial statements. 15 The Board of Directors has appointed an Audit Committee composed entirely of directors who are not employees of the Company. The Audit Committee meets with representatives of management, the internal auditor and independent auditors both separately and jointly. Its functions include recommending the independent auditors and reviewing the scope and fee of the prospective annual audit and the results of their work; reviewing the adequacy of the Company's internal audit function, as well as the accounting and financial controls and procedures; and approving the nature and scope of nonaudit services performed by the independent auditors. /s/ L. David Black /s/ Charles H. Diller, Jr. L. David Black Charles H. Diller, Jr. Chairman of the Board, Executive Vice President President and and Chief Financial Officer Chief Executive Officer September 11, 1998 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS To The Board of Directors and Shareholders JLG Industries, Inc. McConnellsburg, Pennsylvania We have audited the accompanying consolidated balance sheets of JLG Industries, Inc. as of July 31, 1998 and 1997, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended July 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of JLG Industries, Inc. at July 31, 1998 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended July 31, 1998, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Baltimore, Maryland September 3, 1998 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 16 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item 10 relating to identification of directors is set forth under the caption "Election of Directors" in the Company's Proxy Statement and is incorporated herein by reference. Identification of officers is presented in Item 1 of this report under the caption "Executive Officers of the Registrant." ITEM 11. EXECUTIVE COMPENSATION The information required by this Item 11 relating to executive compensation is set forth under the captions "Board of Directors" and "Executive Compensation" in the Company's Proxy Statement and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item 12 relating to security ownership of certain beneficial owners and management is set forth under the caption "Voting Securities and Principal Holders" in the Company's Proxy Statement and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) The consolidated financial statements of the registrant and its subsidiaries are set forth in Item 8 of Part II of this report. (2) Financial Statement Schedules The schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. (3) Exhibits 3.1 Articles of Incorporation of JLG Industries, Inc., which appears as Exhibit 3 to the Company's Form 10-Q (File No. 0-8454-- filed December 13, 1997), is hereby incorporated by reference. 3.2 By-laws of JLG Industries, Inc. 4.1 Trust Indenture between the Bedford County, Pennsylvania Industrial Development Authority and the Fulton County National Bank and Trust Company, as Trustee, which appears as Exhibit B5 to the Company's Form 10-K (File No. 0-8454 - filed October 24, 1979), is hereby incorporated by reference. 4.2 Installment Sale Agreement between Bedford County, Pennsylvania Industrial Development Authority and JLG Industries, Inc., which appears as Exhibit B6 to the Company's Form 10-K (File No. 0-8454 -- filed October 24, 1979), is hereby incorporated by reference. 4.3 Agreement to disclose upon request. 10.1 JLG Industries, Inc. Directors' Deferred Compensation Plan amended and restated as of August 1, 1997 which appears as Exhibit 10.2 to the Company's 10-K (File No. 0-8454 -- filed October 6, 1997, is hereby incorporated by reference. 10.2 JLG Industries, Inc. Stock Incentive Plan amended and restated as of August 1, 1998. 10.3 Credit Agreement dated December 21, 1989 among JLG Industries, Inc., the First National Bank of Maryland, and CoreStates Bank N. A., which appears as Exhibit 4.1 to the Company's 10-Q (File No. 0-8454 filed March 12, 1990), is hereby incorporated by reference. 10.4 First Modification Agreement, dated January 29, 1990 to the Credit Agreement dated December 21, 1989 among JLG Industries, Inc., the First National Bank of Maryland, and CoreStates Bank N. A., which appears as Exhibit 4.3 to the Company's 10-Q (File No. 0-8454 -- filed March 12, 1990), is hereby incorporated by reference. 17 10.5 Second Modification Agreement, dated September 17, 1993 to the Credit Agreement dated December 21, 1989 among JLG Industries, Inc., the First National Bank of Maryland, and CoreStates Bank N. A., which appears as Exhibit 10.12 to the Company's 10-K (File No. 0-8454-- filed October 20, 1993), is hereby incorporated by reference. 10.6 JLG Industries, Inc. Directors Stock Option Plan amended and restated as of August 1, 1998. 10.7 JLG Industries, Inc. Supplemental Executive Retirement Plan effective June 1, 1995, which appears as Exhibit 10.8 to the Company's Form 10-K (File No. 0-8454 -- filed October 17, 1996), is hereby incorporated by reference. 10.8 JLG Industries, Inc. Executive Retiree Medical Benefits Plan effective June 1, 1995, which appears as Exhibit 10.9 to the Company's Form 10-K (File No. 0-8454 -- filed October 17, 1996), is hereby incorporated by reference. 10.9 JLG Industries, Inc. Executive Severance Plan effective June 1, 1995, which appears as Exhibit 10.10 to the Company's Form 10-K (File No. 0-8454 -- filed October 17, 1996), is hereby incorporated by reference. 10.10 JLG Industries, Inc. Executive Deferred Compensation Plan amended and restated as of August 1, 1997 which appears as Exhibit 10.11 to the Company's 10-K (File No. 0-8454 -- filed October 6, 1997, is hereby incorporated by reference. 22 Listing of subsidiaries 23 Consent of independent auditors 27 Financial Data Schedule 99 Cautionary Statements Pursuant to the Securities Litigation Reform Act of 1995 (b) The Company was not required to file Form 8-K pursuant to requirements of such form in the fourth quarter of fiscal 1998 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on September 23, 1998 JLG INDUSTRIES, INC. (Registrant) /s/ L. David Black -------------------------------------- L. David Black, Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of September 23, 1998. /s/ Charles H. Diller, Jr. - ------------------------------------------------ Charles H. Diller, Jr., Executive Vice President, Chief Financial Officer, Secretary and Director /s/ George R. Kempton - ------------------------------------------------ George R. Kempton, Director /s/ James A. Mezera - ------------------------------------------------ James A. Mezera, Director /s/ Gerald Palmer - ------------------------------------------------ Gerald Palmer, Director /s/ Charles O. Wood, III - ------------------------------------------------ Charles O. Wood, III, Director 19 NOTES 20 INVESTOR INFORMATION ================================================================================ Common Stock Data The Company's capital stock is traded on the New York Stock Exchange under the symbol JLG. The Company's quarterly cash dividend rate is currently $.005 per share, or $.02 on an annual basis. When declared, dividends are paid in January, April, July and October. The Company believes that approximately 50% of its stock is held by about 126 institutions, mutual funds, banks, insurance and investment companies and pension funds. In addition, there are about 4,700 shareholders of record, including 2,300 employees, as well as approximately 20,000 beneficial shareholders. Investor Relations Program The Company has an active investor relations program directed to both individual and institutional investors. The Company's investor relations mission is to maintain an ongoing awareness of the Company's performance among its shareholders and the investment community, in accordance with applicable reporting requirements. During the 1998 fiscal year, the Company held numerous meetings with members of the investment community, participated in various investment conferences and hosted meetings at its corporate headquarters with security analysts and portfolio managers. The Company is followed by about ten sell-side analysts, in addition to Value Line and Standard & Poor's. In June 1998, the Company hosted a two-day field trip at its corporate headquarters in McConnellsburg, Pennsylvania which was attended by 30 analysts, institutional shareholders and potential investors. The theme of the meeting was "Strategically Positioned for Market Leadership in a New Century." During fiscal 1998, the Company became a Corporate Member of the National Association of Investors Corporation (NAIC) and participated in six Investor Fairs. The Company is ranked among the Top 200 Companies in the NAIC for shares held by NAIC investment clubs. The Company's investor relations contact is Charles H. Diller, Jr., Executive Vice President and Chief Financial Officer, who may be reached at (717) 485-5161. Corporate Headquarters JLG Industries, Inc. 1 JLG Drive McConnellsburg, PA 17233-9533 Telephone: (717) 485-5161 Fax: (717) 485-6417 Annual Meeting of Shareholders The Annual Meeting will be held at the Company's headquarters in McConnellsburg, Pennsylvania, at 4:30 p.m., Thursday, November 19, 1998. All shareholders are cordially invited to attend. Whether planning to attend or not, shareholders are urged to mark, sign, date, and return their proxy cards promptly, so their interests will be represented at the Meeting. Shareholder Services For prompt assistance regarding address changes, consolidation of duplicate accounts, lost certificates and related matters, please contact ChaseMellon Shareholder Services, 85 Challenger Road, Overpeck Centre, Ridgefield Park, NJ 07660, telephone (800) 756-3353. Shareholders who add to their holdings of the Company's stock are advised to have their broker or bank register the shares in exactly the same name and account as those of present holdings. Whenever there is the slightest variation in the name or address of a shareholder, a separate account must be established. This leads to duplicate mailings and added expense to the Company. 21 Anyone presently having more than one account registered in his or her name can assist the Company by consolidating their accounts. To combine such holdings, shareholders should forward the names and numbers of the accounts involved, along with a signed request, to the Company's transfer agent. Shareholder Communications In order to receive the hard copy circulation of quarterly earnings releases to shareholders, please request to be placed on a special Direct Mail List by sending a letter or postcard including your name and complete mailing address to: JLG Industries, Inc. Investor Relations - Direct Mail List 1 JLG Drive McConnellsburg, PA 17233-9533 Financial information is available by calling the Company's investor line at (717) 485-6523. The Company also offers investors and shareholders information via its web site at www.jlg.com where you can view Company product and general information, the annual report and access to press releases. EX-3.2 2 BY-LAWS EXHIBIT 3.2 BY-LAWS OF JLG INDUSTRIES, INC. (A Pennsylvania Corporation) OFFICES 1. The registered office shall be at P.O. Box 695, McConnellsburg, Pennsylvania 17233. 2. The Corporation may also have offices at such other places as the Board of Directors may from time to time appoint or the business of the Corporation may require. SEAL 3. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Pennsylvania". SHAREHOLDERS' MEETING 4. All meetings of the shareholders shall be held at such place within or without the Commonwealth of Pennsylvania as the Board of Directors may designate from time to time and in the absence of such designation shall be held at the principal office of the Corporation in Ayr Township, Pennsylvania. 5. The annual meeting of the shareholders shall be held on the fourth Monday of November in each year, or at such other date as may be fixed by the Board of Directors, in order to elect the Board of Directors of the Corporation and transact such other business as may properly be brought before the meeting. If the annual meeting shall not be called and held within six months after the fourth Monday in November, any shareholder may call such meeting. 6. The presence, in person or by proxy, of the holders of a majority of the outstanding shares entitled to vote, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by law, by articles of incorporation or by these by-laws. If however, such quorum shall not be present or represented at any meeting of the shareholders, those entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite number of shares shall be present. In the case of any meeting called for the election of directors, adjournment or adjournments may be taken only from day to day until such directors have been elected, and those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. 7. At each meeting of the shareholders every shareholder having the right to vote shall be entitled to vote in person or by proxy appointed by an instrument in writing subscribed by such shareholder and delivered to the Secretary at or prior to the meeting. No unrevoked proxy shall be valid after eleven months from the date of its execution, unless a longer time is expressly provided therein, but in no event shall a proxy, unless coupled with an interest, be voted on after three years from the date of its execution. In all elections for directors cumulative voting shall not be permitted. No share shall be voted at any meeting upon which any installment is due and unpaid. The original share ledger or transfer book, or a duplicate thereof kept in this Commonwealth shall be prima facie evidence of the right of the person named therein to vote thereon. 8. Written notice of the annual meeting shall be mailed to each shareholder entitled to vote thereat, at such address as appears on the books of the Corporation, at least five days prior to the meeting. 9. In advance of any meeting of shareholders, the Board of Directors may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election be not so appointed, the chairman of any such meeting may, and on the request of any shareholders or his proxy, shall make such appointment at the meeting. The number of judges may be one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present and entitled to vote shall determine whether one or three judges are to be appointed. On request of the chairman of the meeting, or of any shareholder or his proxy, the judges shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. No person who is a candidate for office shall act as a judge. 10. Special meetings of the shareholders may be called at any time by resolution adopted by the Board of Directors. At any time upon adoption of a resolution by the Board of -15- Directors to call a special meeting, it shall be the duty of the Secretary to call a special meeting of the shareholders, to be held at such time as the Secretary may fix, not less than 10 nor more than 60 days after receipt of the request. 11. Business transacted at all special meetings shall be confined to the objects stated in the call and matters germane thereto. 12. Written notice of a special meeting of the shareholders, stating the time and place and object thereof, shall be mailed, postage prepaid, to each shareholder entitled to vote thereat at such address as appears on the books of the Corporation, at least five days before such meeting, unless a greater period of notice is required by statute in a particular case. VOTING LIST 13. The officer or agent having charge of the transfer books shall make a complete list of the shareholders entitled to vote at the meetings, arranged in alphabetical order, with the address of and the number of shares held by each. Such list shall be produced and kept open at the time and places of the meeting, and shall be subject to the inspection of any such shareholder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof kept in this Commonwealth, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book, or to vote in person or by proxy, at any meeting of shareholders. DIRECTORS 14. The business of this Corporation shall be managed by its Board of Directors, which shall consist of such number of persons, not less than 3 and no more than 15, as may be determined from time to time by the Board of Directors; provided that no determination by the Board of Directors may reduce the term of office of any incumbent Director. Directors shall be elected by the shareholders at the annual meeting of shareholders of the Corporation. Any person to be eligible for election by the shareholders must meet the requirements of a "Qualified Nominee" as defined below in this section and must be nominated by either the Board of Directors or by a shareholder or group of shareholders that own, as reflected on the Corporation's share register, at least one share of the Corporation's stock that is then currently entitled to vote at a meeting called for the election of directors. Any such nominations by persons other than the Board of Directors must be received by the Secretary of the Corporation no later than the anniversary of the date which shall have been ninety (90) days prior to the date of the immediately preceding year's annual meeting accompanied by written statements signed by each person so nominated setting forth all information in respect of such person as would be required to be included in a proxy statement filed with the Securities and Exchange Commission pursuant to Rule 14(a) under the Securities Exchange Act of 1934, as amended, had such person been nominated, or intended to be nominated, by the Board of Directors, and stating that such person consents to such nomination and consents to serve as a Director of the Corporation if elected. The Secretary shall promptly refer all such proposed nominations to the Nominating Committee of the Board of Directors. Within fifteen (15) days following the receipt by the Secretary of a stockholder notice of nomination pursuant hereto, the Nominating Committee shall instruct the Secretary of the Corporation to advise the notifying stockholder of any deficiencies in the notice as determined by the Committee. The notifying stockholder shall cure such deficiencies within fifteen (15) days of receipt of such notice. No persons shall be eligible for election as a director of the Corporation unless nominated in accordance herewith. Nominations not made in accordance herewith may, in the discretion of the presiding officer at the meeting and with the advice of the Nominating Committee, be disregarded by the presiding officer and, upon his or her instructions, all votes cast for each such nominee may be disregarded. The determinations of the presiding officer at the meeting shall be conclusive and binding upon all stockholders of the Corporation for all purposes. A person will be a "Qualified Nominee" if such person (i) beneficially owns at least one thousand shares of the Corporation's Common Stock, par value $.20 per share, such amount to be adjusted from time to time following September 5, 1996, by any stock split, stock dividend, reclassification or recapitalization by the Corporation (the "Minimum Shares"), or (ii) commits to the Corporation in writing to purchase the Minimum Shares within 18 months of being nominated as a director candidate, provided that any person who fails to acquire the Minimum Shares within 18 months of being nominated may not be considered a Qualified Nominee until such person beneficially owns the Minimum Shares. 15. In addition to the powers and authorities by these by-laws expressly conferred upon them, the Board may exercise all such powers of the Corporation and do all such lawful acts and things as are not be statute or by the articles of incorporation or by these by-laws directed or required to be exercised or done by the shareholders. -16- MEETINGS OF THE BOARD OF DIRECTORS 16. The meetings of the Board of Directors may be held at such place within this Commonwealth, or elsewhere, as a majority of the directors may from time to time appoint, or as may be designated in the notice calling the meeting. 17. Each newly elected Board may meet at such place and time as shall be fixed by the shareholders at the meeting at which such directors are elected, and no notice shall be necessary to the newly elected directors in order legally to constitute the meeting, or they may meet at such place and time as may be fixed by the consent in writing of all the directors. 18. Regular meetings of the Board shall be held without notice at such time and place as shall be determined by the Board. 19. Special meetings of the Board may be called by the Chairman of the Board on at least three days notice to each director, either personally or by mail or by telegram; special meetings shall be called by the Chairman of the Board of Secretary in a like manner and on like notice on the written request of two directors, or more. 20. A majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors. If all the directors shall severally or collectively consent in writing to any action to be taken by the Corporation, such action shall be as valid corporate action as though it had been authorized at a meeting of the Board of Directors. 21. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided by resolution of the Board of Directors, shall have and shall exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. In the absence or disqualification of any member of any such committee or committees, the member of members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may, by unanimous vote, appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. LIABILITY OF DIRECTORS 22. A director, as such, shall not be personally liable for monetary damages for any action taken, or any failure to take any action, unless the director has breached or failed to perform the duties of his or her office under 42 Pa. C.S. Section 8363 and the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. The provisions of this Section shall not apply to the responsibility or liability of a director pursuant to any criminal statue or the liability of a director for the payment of taxes pursuant to local, state or federal law. COMPENSATION OF DIRECTORS 23. Directors as such, shall not receive any stated salary for their services, but by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board PROVIDED, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. OFFICERS 24. The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chairman of the Board, a President, a Vice-President, a Secretary and a Treasurer. The Board of Directors may also choose additional Vice-Presidents, and one or more Assistant Secretaries and Assistant Treasurers. Any number of offices may be held by the same person. It shall not be necessary for the officers to be directors. 25. The Board of Directors shall fix the salaries of all officers of the Corporation. 26. The officers of the Corporation shall hold office for one year and until their successors are chosen and have qualified. Any officer elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in their judgment the best interests of the Corporation will be served thereby. -17- LIABILITY OF OFFICERS 27. An officer, as such, shall not be personally liable to the Corporation or its shareholders, for monetary damages, unless the officer has breached or failed to perform the duties of his or her office under the Corporation's articles of incorporation, these by-laws or applicable provisions of law, and the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. The provisions of this Section shall not apply to the responsibility or liability of an officer pursuant to any criminal statute or the liability of an officer for the payment of taxes pursuant to local, state or federal law. CHAIRMAN OF THE BOARD 28. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors, and shall see that all orders and resolutions of the Board of Directors are carried into effect. He may sign certificates representing stock of the Corporation the issuance of which shall have been authorized by the Board of Directors. From time to time he shall report to the Board of Directors all matters within his knowledge which the interests of the Corporation may require to be brought to their notice. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. He shall be ex-officio a member of all committees of the Board of Directors. He shall perform such other duties as are given to him by these by-laws or as from time to time may be assigned to him by the Board of Directors. PRESIDENT 29. The President shall be the chief executive officer of the Corporation, and subject to the direction of the Board of Directors, shall have general supervision over the business and affairs of the Corporation and over its officers and agents and general management and control of all of its properties. In the absence of the Chairman of the Board, he shall preside at all meetings of the stockholders or of the Board of Directors at which he is present. He may sign certificates of stock of the Corporation the issuance of which shall have been authorized by the Board of Directors. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. He shall perform such other duties as are given to him by these by-laws or as may from time to time be assigned to him by the Board of Directors. VICE-PRESIDENT 30. In the absence of the President to perform the duties of chief executive officer of the Corporation, or in the event of his inability to act, the Vice-President (or in the event there be more than one Vice-President, the Vice-Presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall have all the powers of and be subject to all the restrictions upon the President. The Vice-Presidents, under the supervision of the President, shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or the President. SECRETARY 31. The Secretary shall attend all sessions of the Board and all meetings of the shareholders and act as clerk thereof, and record all the votes of the Corporation and the minutes of all its transactions in a book to be kept for that purpose; and shall perform like duties for all committees of the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the shareholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, and under whose supervision he shall be. He shall keep in safe custody the corporate seal of the Corporation, and when authorized by the Board, affix the same to any instrument requiring it. 32. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Secretary, under the supervision of the President, and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or President. -18- TREASURER 33. The Treasurer shall have 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 keep the moneys of the Corporation in a separate book account to the credit of the Corporation. 34. He 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 President and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. 35. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurer in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Treasurer, under the supervision of the President, and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or President. VACANCIES 36. If the office of any officer or agent, one or more, becomes vacant for any reason, the Board of Directors may choose a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred. Vacancies in the Board of Directors shall be filled, by persons who are Qualified Nominees as defined in Section 14 of those By-Laws, by the vote of a majority of the remaining members of the Board though less than a quorum, and each person so elected shall be a director until his successor is elected by the shareholders, who may make such election at the next annual meeting of the shareholders or at any special meeting duly called for that purpose and held prior thereto. -19- CORPORATE RECORDS 37. There shall be kept at the principal office of the Corporation an original or duplicate record of the proceedings of the shareholders and of the directors, and the original or a copy of its by-laws, including all amendments or alterations thereto to date, certified by the Secretary of the Corporation. An original or duplicate share register shall also be kept at the principal office, or at the office of a transfer agent or registrar within this Commonwealth, giving the names of the shareholders in alphabetical order, and showing their respective addresses and the number and classes of shares held by each. SHARE CERTIFICATES 38. The share certificates of the Corporation shall be numbered and registered in the transfer books of the Corporation, as they are issued. They shall be signed by either the Chairman of the Board or the President and by the Secretary and shall bear the corporate seal. Any or all signatures on the certificates may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. TRANSFERS OF SHARES 39. Assuming no conflict with valid share transfer restrictions, transfers of shares shall be made on the books of the Corporation upon surrender of the certificates therefor, endorsed by the person named in the certificate or by his attorney, lawfully constituted in writing. CLOSING TRANSFER BOOKS OR FIXING RECORD DATE 40. The Board of Directors may fix a time, not less than ten or more than ninety days, prior to the date of any meeting of shareholders, or the date fixed for the payment of any dividend or distribution, or the date for the allotment of rights, or the date when any change, conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend or distribution or to receive any such allotment of rights, or to exercise the rights in respect to any change, conversion or exchange of shares. In such cases, only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of, and to vote at, such meeting, or to receive payment of such dividend or distribution, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after any record date fixed, as aforesaid. The Board of Directors may close the books of the Corporation against transfers of shares during the whole or any part of such period, and in such case written or printed notice thereof shall be mailed at least ten days before the closing thereof to each shareholder of record at the address appearing on the records of the Corporation or supplied by him to the Corporation for the purpose of notice. While the stock transfer books of the Corporation are closed, no transfer of shares shall be made thereon. If no record date is fixed for the determination of shareholders entitled to receive notice of, or vote at, a shareholders meeting, transferees of shares which are transferred on the books of the Corporation within ten days next preceding the date of such meeting shall not be entitled to notice of or vote at such meeting. LOST CERTIFICATE 41. Any person claiming a share certificate to be lost or destroyed shall make an affidavit or affirmation of that fact and advertise the same in such manner as the Corporation may require, and shall, if required by the Corporation, give the Corporation a bond of indemnity with sufficient surety to protect the Corporation or any person injured by the issue of a new certificate from any liability or expense which it or they may incur by reason of the original certificate remaining outstanding, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed, but always subject to the approval of the Corporation. CHECKS 42. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers as the Board of Directors may from time to time designate. FISCAL YEAR -20- 43. The fiscal year shall begin the 1st day of August of each year. DIVIDENDS 44. Subject to the provisions of the statutes, the Board of Directors may declare and pay dividends upon the outstanding shares of the Corporation out of its surplus from time to time and to such extent as they deem advisable, in cash, property or in shares of the Corporation. Before payment of any dividend there may be set aside out of the net profits of the Corporation such sum or sums as the directors, from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interests of the Corporation, and the directors may abolish any such reserve in the manner in which it was created. DIRECTORS' ANNUAL STATEMENT 45. The Chairman of the Board and Board of Directors shall present at each annual meeting a full and complete statement of the business and affairs of the Corporation for the preceding year. Such statement shall be prepared and presented in whatever manner the Board of Directors shall deem advisable and need not be verified by a certified public accountant. NOTICES 46. Whenever written notice is required to be given to any person, it may be given to such person, either personally or by sending a copy thereof through the mail, or by telegram, charges prepaid, to his address appearing on the books of the Corporation, or supplied by him to the Corporation for the purpose of notice. If the notice is sent by mail or by telegraph, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office for transmission to such person. Such notice shall specify the place, day and hour of the meeting and, in the case of a special meeting, the general nature of the business to be transacted. Any shareholder or director may waive any notice required to be given under these by-laws. -21- INDEMNIFICATION 47.A. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer or member of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his 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, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. B. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer or member of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation; provided, however, that no indemnification shall be made in respect of any claim, issue or matter as to be which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the court of common pleas of the county in which the registered office of the Corporation is located 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 circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court of common pleas or such other court shall deem proper. C. To the extent that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraphs A or B of this Section 47 or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. D. Any indemnification under paragraphs A or B of this Section 47 (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 or officer is proper in the circumstances because he had met the applicable standard of conduct set forth in such paragraph. 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 quorum is not obtainable, or, even if obtainable, a majority vote of a quorum of disinterested directors so directs, by independent legal counsel in a written opinion; or (3) by the shareholders. E. Expenses incurred 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 in the manner provided in paragraph D of this Section 47 upon receipt of an undertaking by or on behalf of the director or officer to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Section 47. F. The indemnification provided by this Section 47 shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his 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 or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. 48.A. The Corporation shall indemnify any person who was or is an "authorized representative" of the Corporation (which shall mean for purposes of this Section a director or officer of the Corporation, or a person serving at the request of the Corporation as a director, officer, partner, trustee or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise) and who was or is a party (which shall mean for -22- purposes of this Section any threatened, pending or completed action, suit, appeal or proceeding of any nature, whether civil, criminal, administrative, or investigative, whether formal or informal, including an action by or in the right of the Corporation or a class of its security holders) by reason of the fact that he or she was or is an authorized representative of the Corporation, against any liability (which shall mean for purposes of this Section any damage, judgment, penalty, fine, amount paid in settlement, punitive damages, excise tax assessed with respect to an employee benefit plan, or cost or expense of any nature including, without limitation, attorneys' fees and disbursements) including, without limitation, liabilities resulting from any actual or alleged breach or neglect of duty, error, misstatement or misleading statement, negligence, gross negligence or act giving rise to strict or products liability, except where such indemnification is for acts or failures to act constituting self-dealing, willful misconduct or recklessness. If an authorized representative is entitled to indemnification in respect of a portion, but not all, of any liabilities to which such person may be subject, the Corporation shall indemnify such authorized representative to the maximum extent for such portion of the liabilities. The termination of any proceeding by judgment, order, settlement, indictment or conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the authorized representative is not entitled to indemnification. B. Notwithstanding any other provision of this Section, the Corporation shall not indemnify under this Section an authorized representative for any liability incurred in a proceeding initiated (which shall not be deemed to include counter-claims or affirmative defenses) or participated in as an intervenor or amicus curiae by the person seeking indemnification unless such initiation of or participation in the proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors in office. This paragraph does not apply to reimbursement of expenses incurred in successfully prosecuting or defending the rights of an authorized representative granted by or pursuant to this Section. C. Expenses (including attorneys' fees and disbursements) incurred in good faith shall be paid by the Corporation on behalf of an authorized representative in advance of the final disposition of a proceeding described in paragraph A of this Section upon receipt of an undertaking by or on behalf of the authorized representative to repay such amount if it shall ultimately be determined pursuant to paragraph F of this Section that such person is not entitled to be indemnified by the Corporation as authorized in this Section. The financial ability of such authorized representative to make such repayment shall not be a prerequisite to the making of an advance. D. To further effect, satisfy or secure the indemnification obligations provided herein or otherwise, the Corporation may maintain insurance, obtain a letter of credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the Corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the Board of Directors shall deem appropriate. Absent fraud, the determination of the Board of Directors with respect to such amounts, costs, terms and conditions shall be conclusive against all security holders, officers and directors and shall not be subject to voidability. E. An authorized representative shall be entitled to indemnification within 30 days after a written request for indemnification has been received by the Secretary of the Corporation. F. Any dispute related to the right to indemnification or advancement of expenses as provided under this Section, except with respect to indemnification for liability arising under the Securities Act of 1933 which the Corporation has undertaken to submit to a court for adjudication, shall be decided only by arbitration, to be conducted at the Corporation's executive offices (or such other location to which the Corporation has given its consent), in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the Corporation, the second of whom shall be selected by the authorized representative and the third of whom shall be selected by the other two arbitrators. In the absence of the American Arbitration Association or if for any reason arbitration under the arbitration rules of the American Arbitration Association cannot be initiated, or if the arbitrators selected by the Corporation and the authorized representative cannot agree on the selection of the third arbitrator within 30 days after such time as the Corporation and the authorized representative have each been notified of the selection of the other's arbitrator, the necessary arbitrator or arbitrators shall be selected by the presiding judge of the Court of Common Pleas of Fulton County, Pennsylvania (or of the court of general jurisdiction in the municipality in which the Corporation's executive offices are located). Each arbitrator selected as provided herein is required to be or have been a director of a corporation whose shares of common stock were listed during at least one year of such service on the New York Stock Exchange or the American Stock Exchange or quoted on the National Association of Securities Dealers Automated quotations Systems. The -23- party or parties challenging the right of an authorized representative to the benefits of this Section shall have the burden of proof. The Corporation shall reimburse an authorized representative for the expenses (including attorneys' fees and disbursements) incurred in successfully prosecuting or defending such arbitration. Any award entered by the arbitrators shall be final, binding and nonappealable, and judgement may be entered thereon by any party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. G. An authorized representative shall be deemed to have discharged such person's duty to the Corporation if he or she has relied in good faith on information, advice or an opinion, report or statement prepared by: (1) one or more officers or employees of the Corporation whom such authorized representative reasonably believes to be reliable and competent with respect to the matter presented; (2) legal counsel, public accountants or other persons as to matters that the authorized representative reasonably believes are within the person's professional or expert competence; or (3) a committee of the Board of Directors on which he or she does not serve as to matters within its area of designated authority, which committee he or she reasonably believes to merit confidence. H. All rights to indemnification under this Section shall be deemed a contract between the Corporation and the authorized representative pursuant to which the Corporation and each authorized representative intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not affect any rights or obligations then existing. I. The indemnification and advancement of expenses provided by, or granted pursuant to, this Section shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any statute, certificate or articles of incorporation, by-law, agreement, vote of shareholders or directors or otherwise, both as to action in his or her official capacity and as to action in any other capacity, and shall continue as to a person who has ceased to be an authorized representative in respect of matters arising prior to such time and shall inure to the benefit of the heirs, executors, administrators and personal representatives of such a person. J. Each person who shall act as an authorized representative of the Corporation shall be deemed to be doing so in reliance upon the rights of indemnification provided by this Section. AMENDMENTS 49. Except as otherwise provided by the Business Corporation Law, these by-laws may be amended (i) at any regular or special meeting of the Board of Directors by the affirmative vote of a majority of the members of the Board, or (ii) at any annual or special meeting of the shareholders by the affirmative vote of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast thereon, provided that in the case of any such meeting of the shareholders, notice of the proposed amendment shall have been contained in the notice of such meeting and provided further that the shareholders shall always have the power to change any such action by the Board. EX-4.3 3 AGREEMENT -24- EXHIBIT 4.3 Agreement To Disclose Upon Request JLG Industries, Inc. (the "Company") hereby agrees that, with respect to any agreement relating to long-term debt of the Company that has not been filed as an exhibit to the Company's reports filed pursuant to the Securities Exchange Act of 1934 because such filing is not required pursuant to the provisions of S-K Item 601 (b) (4) (iii) (A), the Company will furnish a copy of any such agreement to the Securities and Exchange Commission upon request. JLG INDUSTRIES, INC. (Registrant) /s/ Charles H. Diller -------------------------------------- Charles H. Diller, Jr., Executive Vice President and Chief Financial Officer EX-10.2 4 STOCK INCENTIVE PLAN EXHIBIT 10.2 JLG INDUSTRIES, INC. STOCK INCENTIVE PLAN August 1, 1998 (As Amended and Restated) 1. PURPOSE The JLG Industries, Inc. Stock Incentive Plan (the "Plan"), as amended and restated as of May 23, 1991, is designed to enable key personnel of JLG Industries, Inc. (the "Company") and its Subsidiaries to acquire or increase a proprietary interest in the Company, and thus to share in the future success of the Company's business. Accordingly, the Plan is intended as a further means not only of attracting and retaining outstanding personnel, but also of promoting a closer identity of interests between management and shareholders. Since the personnel eligible to receive Awards under the Plan will be those who are in positions to make important and direct contributions to the success of the Company, the directors believe that the grant of Awards under the Plan will be in the Company's interest. 2. DEFINITIONS In this Plan document, unless the context clearly indicates otherwise, words in the masculine gender shall be deemed to refer to females as well as males, any term used in the singular also shall refer to the plural, and the following capitalized terms shall have the following meanings set forth in this Section 2: (a) "Award" means an Option, Restricted Shares or a Right. Unless the context clearly indicates otherwise, the term "Awards" shall include Options, Restricted Shares and Rights. (b) "Beneficiary" means the person or persons designated in writing by the Grantee as his beneficiary in respect of an Award; or, in the absence of an effective designation or if the designated person or persons predecease the Grantee, the Grantee's Beneficiary shall be the person or persons who acquire by bequest or inheritance the Grantee's rights in respect of an Award. In order to be effective, a Grantee's designation of a Beneficiary must be on file with the Company before the Grantee's death. Any such designation may be revoked and a new designation substituted therefor at any time before the Grantee's death. (c) "Board of Directors" or "Board" means the Board of Directors of the Company. (d) "Change in Control" means the first to occur of the following events: (1) an acquisition (other than directly from the Company) of securities of the Company by any person, immediately after which such person, together with all securities law affiliates and associates of such person, becomes the beneficial owner of securities of the Company representing 25 percent or more of the voting power; provided that, in determining whether a Change in Control has occurred, the acquisition of securities of the Company in a non-control acquisition will not constitute an acquisition that would cause a Change in Control; or (2) three or more directors, whose election or nomination for election is not approved by a majority of the members of the incumbent Board then serving as members of the Board of Directors, are elected within any single 12- month period to serve on the Board of Directors; provided that an individual whose election or nomination for election is approved as a result of either an actual or threatened election contest or proxy contest, including by reason of any agreement intended to avoid or settle any election contest -15- or proxy contest, will be deemed not to have been approved by a majority of the incumbent Board for purposes of this definition; or (3) members of the incumbent Board cease for any reason to constitute at least a majority of the Board of Directors; or (4) approval by shareholders of the Company of: (i) a merger, consolidation, or reorganization involving the Company, unless (A) the shareholders of the Company, immediately before the merger, consolidation, or reorganization, own, directly or indirectly immediately following such merger, consolidation, or reorganization, at least 75 percent of the combined voting power of the outstanding voting securities of the corporation resulting from such merger, consolidation, or reorganization in substantially the same proportion as their ownership of the voting securities immediately before such merger, consolidation, or reorganization; (B) individuals who were members of the incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation, or reorganization constitute at least a majority of the board of directors of the surviving corporation; and (C) no person (other than (I) the Company or any Subsidiary thereof, (II) any employee benefit plan (or any trust forming a part thereof) maintained by the Company, any Subsidiary thereof, or the surviving corporation, or (III) any person who, immediately prior to such merger, consolidation, or reorganization, had beneficial ownership of securities representing 25 percent or more of the voting power) has beneficial ownership of securities representing 25 percent or more of the combined voting power of the Surviving Corporation's then outstanding voting securities; (ii) a complete liquidation or dissolution of the Company; or (iii) an agreement for the sale or other disposition of all or substantially all of the assets of the Company to any person (other than a transfer to a Subsidiary). (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (f) "Committee" means a committee consisting of such number of members of the Compensation Committee of the Board of Directors with such qualifications as are required to satisfy the requirements of (i) Rule 16b-3 under the Securities Exchange Act of 1934, as in effect from time to time (or any successor rule of similar import) and (ii) Section 162(m) of the Code, and the regulations thereunder, as in effect from time to time (or any successor provision of similar import), to the extent that Awards made under the Incentive Plan are intended to qualify as performance-based compensation thereunder. (g) "Company" means JLG Industries, Inc. (h) "Disability" or "Disabled" means having a total and permanent disability as defined in Section 22(e)(3) of the Code. (i) "Fair Market Value" means, when used in connection with the Shares on a certain date, the fair market value of a Share as determined by the Committee, and shall be deemed equal to the mean of the high and low prices at which Shares are traded on such date (or on the next preceding day for which such information is ascertainable at the time of the Committee's determination) as reported for such -16- date by The Wall Street Journal (or if Shares are not traded on such date, on the next preceding day on which Shares are traded) (or if Shares are traded on such date but no edition of The Wall Street Journal reporting such prices for such date is published, the fair market value shall be deemed equal to the mean of the high and low prices at which Shares are traded on such date as reported through the National Association of Securities Dealers Automated Quotations System in any other newspaper). (j) "Grantee" means a person to whom an Award has been granted under the Plan. (k) "Incentive Stock Option" means an Option that complies with the terms and conditions set forth in Section 422(b) of the Code and is designated by the Committee as an Incentive Stock Option. (l) "Limited Stock Appreciation Right" or "Right" means a right that provides for payment in accordance with Section 10 hereof. (m) "Non-qualified Stock Option" means an Option granted under the Plan other than an Incentive Stock Option. (n) "Option" means any option to purchase a Share or Shares pursuant to the provisions of the Plan. Unless the context clearly indicates otherwise, the term "Option" shall include both Incentive Stock Options and Non-qualified Stock Options. (o) "Option Agreement" means the written agreement to be entered into by the Company and the Grantee, as provided in Section 7 hereof. (p) "Parent" means any parent corporation of the Company within the meaning of Section 424(e) of the Code (or a successor provision of similar import). (q) "Performance-Based Restricted Shares" means Restricted Shares that are intended to qualify as performance-based compensation under Section 162(m) of the Code, and the regulations thereunder. (r) "Plan" means the JLG Industries, Inc. Stock Incentive Plan, as amended and restated on May 23, 1991, as set forth herein and as amended from time to time (except where the context makes clear that the reference is to the Plan as in effect prior to May 23, 1991, which was called the JLG Industries, Inc. 1983 Stock Option Plan (as amended and restated)). (s) "Quota" means the portion of the total number of Shares subject to an Option that the Grantee of the Option may purchase during each of the several periods of the Term of the Option (if the Option is subject to Quotas), as provided in Section 12(a) hereof. (t) "Restricted Shares" means Shares granted pursuant to Section 11 hereof or purchased under a Non-qualified Stock Option pursuant to Section 9(d) hereof and subject to such restrictions and other terms and conditions as the Committee shall determine in accordance with the Plan. (u) "Retirement" means retirement pursuant to the JLG Industries, Inc. Employees' Retirement Savings Plan, as amended from time to time. (v) "Shares" means shares of the Company's $.20 par value common stock. (w) "Subsidiary" means a subsidiary corporation of the Company within the meaning of Section 424(f) of the Code (or a successor provision of similar import.) (x) "Term" means the period during which a particular Option or Right may be exercised. -17- 3. EFFECTIVE DATE AND DURATION OF THE AMENDED AND RESTATED PLAN (a) This amendment and restatement of the Plan became effective as of May 23, 1991, and shall continue in effect for a term of ten years after that date. This amendment and restatement of the Plan as of May 23, 1991 shall not affect the terms of any Option that was outstanding on May 22, 1991; all such Options shall continue to be governed by the terms of the Plan in effect on May 22, 1991. (b) Awards may be granted at any time prior to the earlier of the expiration of the ten-year term of the Plan, as described in subsection (a) above, or the termination of the Plan pursuant to Section 19 hereof. For the purpose of commencing the ten-year period specified in Section 422(b)(2) of the Code during which Incentive Stock Options may be granted, this amendment and restatement of the Plan as of May 23, 1991 shall constitute the adoption of a new plan. An Award outstanding at the time the Plan is terminated (either by expiration of the ten-year term of the Plan or by termination of the Plan pursuant to Section 19 hereof) shall not cease to be or cease to become exercisable pursuant to its terms solely because of the termination of the Plan. 4. NUMBER AND SOURCE OF SHARES SUBJECT TO THE PLAN (a) Subject to the provision of subsection (d) below, the Company may grant Awards (including Replacement Options granted under Section 13(b) hereof) under the Plan, as amended and restated as of May 23, 1991, and as further amended as of November 21, 1994, with respect to not more than (i) the remaining number of Shares with respect to which additional Options were authorized to be granted under the Plan immediately prior to its amendment and restatement as of May 23, 1991 (namely 2,383 Shares) plus (ii) 500,000 additional Shares (subject, however, to increase as provided in subsection (c) below and to adjustment as provided in Section 17 hereof) which shall be provided from Shares in the treasury or by the issuance of Shares authorized but unissued. (b) If an Option granted on or after May 23, 1991 is surrendered before exercise, or lapses or is terminated without being exercised, in whole or in part, for any reason other than the exercise of a Right, the Shares subject to the Option shall be restored to the aggregate maximum number of Shares (specified in subsection (a) above) with respect to which Awards may be granted under the Plan, but only to the extent that the Option or any related Right has not been exercised. Similarly, if any Restricted Shares are forfeited and returned to the Company, such forfeited Shares shall be restored to such aggregate maximum number of Shares with respect to which Awards may be granted under the Plan. (c) If, on or after May 23, 1991, any of the Options granted before May 23, 1991 under the Plan as in effect before May 23, 1991 (which Options, to the extent still outstanding on May 23, 1991, were granted with respect to a total of 61,725 Shares) is surrendered before exercise, or lapses or is terminated without being exercised, in whole or in part, for any reason, the Company may grant Awards under the Plan with respect to the Shares subject to the Option in addition to the aggregate maximum number of Shares specified in subsection (a) above, but only to the extent that the Option has not been exercised. (d) The Company may grant Incentive Stock Options under the Plan only with respect to not more than 500,000 of the Shares specified in subsection (a) above. If an Incentive Stock Option granted on or after May 23, 1991 is surrendered before exercise, or lapses or is terminated without being exercised, in whole or in part, for any reason other than the exercise of a Right, the Shares subject to the Incentive Stock Option shall be restored to the aggregate maximum number of Shares (specified in subsection (a) above) with respect to which Awards may be granted under the Plan and to the aggregate maximum number (specified in the first sentence of this subsection (d)) of those Shares with respect to which Incentive -18- Stock Option may be granted under the Plan, but only to the extent that the Incentive Stock Option or any related Right has not been exercised. (e) The maximum number of Shares that can be the subject of Awards to any individual in any fiscal year of the Company is 100,000 Shares. For purposes of this subsection (e), (i) if an Award is canceled, the canceled Award shall be counted against the maximum number of Shares for which Awards may be granted to the individual, and (ii) if, after grant, the exercise price of an Option or Right is reduced (other than pursuant to the adjustment provisions of Section 17 hereof), the transaction shall be treated as the cancellation of the Option or Right and the grant of a new Option or Right, and both the Option or Right that is deemed to be canceled and the Option or Right that is deemed to be granted shall reduce the maximum number of Shares for which Options and Rights may be granted to the individual. 5. ADMINISTRATION OF THE PLAN (a) The Plan shall be administered by the Committee. (b) The Committee may adopt, amend and rescind rules and regulations relating to the Plan as it may deem proper, shall make all other determinations necessary or advisable for the administration of the Plan, and may provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company, to the extent not contrary to the express provisions of the Plan; provided, however, that the Committee may take action only upon the agreement of a majority of its members then in office. Notwithstanding the provisions of the preceding sentence, no action or determination by the Committee may adversely affect any right acquired by any Grantee or Beneficiary under the terms of any Award granted before the date such action or determination is taken or made, unless the affected Grantee or Beneficiary shall expressly consent; but it shall be conclusively presumed that any adjustment pursuant to Section 17 does not adversely affect any such right. Any action that the Committee may take through a written instrument signed by all of its members then in office shall be as effective as though taken at a meeting duly called and held. (c) The powers of the Committee shall include plenary authority to interpret the Plan, and, subject to the provisions hereof, the Committee may determine (i) the persons to whom Awards shall be granted; (ii) the number of Shares subject to each Award; (iii) the Term of each Award; (iv) the frequency of Awards and the date on which each Award shall be granted; (v) the type of each Award; (vi) the Quotas (if any), exercise periods, and other terms and conditions applicable to each Option and Right, and the provisions of each Option Agreement; (vii) any performance criteria pursuant to which Awards may be granted; and (viii) the restrictions and other terms and conditions of each grant of Restricted Shares and the provisions of any instruments evidencing such grants. The Committee also may accelerate at any time the exercisability of outstanding Options, provided that no Option shall be exercisable prior to the expiration of the mandatory six-month holding period specified in Section 12(a) hereof. (d) The determinations, interpretations, and other actions made or taken by the Committee pursuant to the provisions of the Plan shall be final, binding, and conclusive for all purposes and upon all persons. 6. EMPLOYEES ELIGIBLE TO RECEIVE OPTIONS (a) Awards may be granted under the Plan to key employees of the Company or any Subsidiary (including employees who are directors and/or officers). All determinations by the Committee as to the identity of the persons to whom Awards shall be granted hereunder shall be conclusive. -19- (b) Directors who are not regular salaried employees of the Company or a Subsidiary shall not be eligible to receive Awards. (c) An individual Grantee may receive more than one Award. 7. OPTION AGREEMENT (a) No Option or Right shall be exercised by a Grantee unless he shall have executed and delivered an Option Agreement evidencing the grant of such Option or Right. The Agreement shall set forth the number of Shares subject to the Option or Right and the terms, conditions and restrictions applicable thereto. (b) Appropriate officers of the Company are hereby authorized to execute and deliver Option Agreements in the name of the Company as directed from time to time by the Committee. 8. INCENTIVE STOCK OPTIONS (a) The Committee may authorize the grant of Incentive Stock Options to officers and key employees, subject to the terms and conditions set forth in the Plan. The Option Agreement relating to an Incentive Stock Option shall state that the Option evidenced by the Option Agreement is intended to be an "incentive stock option" within the meaning of Section 422(b) of the Code. (b) The Term of each Incentive Stock Option shall end (unless the Option shall have terminated earlier under another provision of the Plan) on a date fixed by the Committee and set forth in the applicable Option Agreement. In no event shall the Term of an Incentive Stock Option extend beyond ten years from the date of grant. In the case of any Grantee who, on the date the Option is granted, owns (within the meaning of Section 424(d) of the Code) more than ten percent of the total combined voting power of all classes of stock of the Company, a Parent, or a Subsidiary, the Term of the Option shall not extend beyond five years from the date of grant. (c) To the extent that the aggregate Fair Market Value of the stock with respect to which Incentive Stock Options(determined without regard to this paragraph (c)) are exercisable by any Grantee for the first time during any calendar year (under all stock option plans of the Company, its Parent and its Subsidiaries) exceeds $100,000, such Options shall not be Incentive Stock Options. For the purpose of this paragraph c), the Fair Market Value of stock shall be determined as of the time the Option with respect to such stock is granted. This paragraph (c) shall be applied by taking Options into account in the order in which they were granted. (d) The Option price to be paid by the Grantee to the Company for each Share purchased upon the exercise of an Incentive Stock Option shall be equal to the Fair Market Value of a Share on the date the Option is granted, except that with respect to any Incentive Stock Option granted to a Grantee who, on the date the Option is granted, owns (within the meaning of Section 424(d) of the Code) more than ten percent of the total combined voting power of all classes of stock of the Company, a Parent, or a Subsidiary, the Option price for each Share purchased shall not be less than 110 percent of the Fair Market Value of a Share on the date the Option is granted. In no event may an Incentive Stock Option be granted if the Option price per Share is less than the par value of a Share. (e) Any Grantee who disposes of Shares purchased upon the exercise of an Incentive Stock Option either (i) within two years after the date on which the Option was granted, or (ii) within one year after the transfer of such Shares to the Grantee, shall promptly notify the Company of the date of such disposition and of the amount realized upon such disposition. -20- 9. NON-QUALIFIED STOCK OPTIONS (a) The Committee may authorize the grant of Non- qualified Stock Options subject to the terms and conditions set forth in the Plan. Unless an Option is designated by the Committee as an Incentive Stock Option, it is intended that the Option will not be an "incentive stock option" within the meaning of Section 422(b) of the Code and, instead, will be a Non-qualified Stock Option. The Option Agreement relating to a Non-qualified Stock Option shall state that the Option evidenced by the Option Agreement will not be treated as an Incentive Stock Option. (b) The Term of each Non-qualified Stock Option shall end (unless the Option shall have terminated earlier under another provision of the Plan) on a date fixed by the Committee and set forth in the applicable Option Agreement. In no event shall the Term of a Non-qualified Stock Option extend beyond ten years from the date of grant of the Option. (c) In no event may a Non-qualified Stock Option be granted if the Option price per Share is less than the par value of a Share. (d) At the time of the grant of a Non-qualified Stock Option, the Committee shall specify whether the Shares purchased under the Option shall or shall not be Restricted Shares (or whether they shall be a specified combination of Shares that are, and Shares that are not, Restricted Shares). Restricted Shares purchased under an Option shall be subject to the terms, conditions and restrictions set out in subsections (b) through (e) of Section 11, and such additional terms, conditions and restrictions as the Committee may determine. Subject to the provisions of subsections (b) through (e) of Section 11, the Committee, at the time of grant, shall determine (and the Option Agreement shall specify) the terms and conditions of any Restricted Shares that may be purchased under the Non-qualified Stock Option, including the duration of the restrictions that shall be imposed on the Restricted Shares, and the dates on which, or circumstances in which, the restrictions shall expire, lapse or be removed or the Restricted Shares shall be forfeited. Shares purchased under an Option after the Company obtains actual knowledge that a Change in Control has occurred shall not be subject to any restrictions. 10. LIMITED STOCK APPRECIATION RIGHTS (a) The Committee may authorize the grant of Limited Stock Appreciation Rights in connection with all or part of any Option. (b) A Right may be exercised only at such times, by such persons, and to such extent, as the related Option is exercisable. Furthermore, a Right may be exercised only within the 60-day period beginning on the date on which the Company obtains actual knowledge that a Change in Control has occurred. As soon as the Company obtains actual knowledge that a Change in Control has occurred, the Company shall promptly notify each Grantee in writing of the Change in Control, whether or not the Grantee holds a Right. (c) The Shares that are subject to a Right shall not be used more than once to calculate the amount to be received pursuant to the exercise of the Right. The right of a Grantee to exercise an Option shall be canceled if and to the extent that the Shares subject to the Option are used to calculate the amount to be received upon the exercise of the related Right, and the right of a Grantee to exercise a Right shall be canceled if and to the extent that the Shares with respect to which the Right may be exercised are purchased upon the exercise of the related Option. -21- (d) A Right may be granted coincident with or after the grant of any related Option, provided that the Committee shall consult with counsel before granting a Right after the grant of a related Incentive Stock Option. (e) The amount to be paid to the Grantee upon exercise of a Right that is related to a Non-qualified Stock Option shall be paid in cash, and shall be equal to the number of Shares with respect to which the Right is exercised multiplied by the excess of (1) the higher of (i) the highest Fair Market Value of a Share during the period commencing on the ninetieth (90th) day preceding the exercise of the Right and ending on the date of exercise; or (ii) if an event described in paragraph (i) of the definition of "Change in Control", above, has occurred, the highest price per Share (A) paid for any Share in any transaction occurring during the period described in clause (i) by any person or group (as defined in the definition of "Change in Control", above) whose acquisition of Shares caused the Change in Control to occur, or (B) paid for any Share as shown on Schedule 13D (or an amendment thereto) filed pursuant to Section 13(d) of the Securities Exchange Act of 1934 by any such person or group, over (2) the Option price of the related Non-qualified Stock Option. (f) The amount to be paid to the Grantee upon exercise of a Right that is related to an Incentive Stock Option shall be paid in cash, and shall be equal to the number of Shares with respect to which the Right is exercised multiplied by the excess of (i) the Fair Market Value (as of the exercise date of the Right) of a Share over (ii) the Option price of the related Incentive Stock Option. 11. RESTRICTED SHARES (a) The Committee may authorize the grant of Restricted Shares subject to the terms and conditions set forth in the Plan. The following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Committee shall apply to Restricted Shares. Subject to the provisions of this Section 11 (including, in the case of Performance-Based Restricted Shares, paragraph (f)), the Committee shall determine at the time of grant the size and the terms and conditions of each grant of Restricted Shares, including the duration of the restrictions that shall be imposed on the Restricted Shares, the dates on which, or circumstances in which, the restrictions shall expire, lapse or be removed or the Restricted Shares shall be forfeited, and the price to be paid to the Company by the Grantee (and the terms of payment thereof) for the Restricted Shares. In no event, however, shall the price of a Restricted Share be less than the par value of a Share on the date of grant. The Committee may cause to be issued an instrument evidencing the grant of the Restricted Shares to the Grantee, which instrument may set forth the restrictions and other terms and conditions of the grant. (b) A Grantee who has acquired Restricted Shares (pursuant to either a grant of Restricted Shares or the exercise of an Option to purchase Restricted Shares) shall have beneficial ownership of the Restricted Shares, including the right to receive dividends on (subject, in the case of Performance-Based Restricted Shares, to the provisions of paragraph (f)) and the right to vote, the Restricted -22- Shares. A certificate or certificates representing the number of Restricted Shares acquired shall be registered in the name of the Grantee. The Committee, in its sole discretion, shall determine when the certificate or certificates shall be delivered to the Grantee (or, in the event of the Grantee's death, to his Beneficiary), may provide for the holding of such certificate or certificates in custody by a bank or other institution or by the Company itself pending their delivery to the Grantee or Beneficiary, and may provide for any appropriate legend to be borne by the certificate or certificates referring to the terms, conditions and restrictions applicable to the Shares. Any attempt to dispose of the Shares in contravention of such terms, conditions and restrictions shall be ineffective. (c) While subject to the restrictions imposed by the Committee in accordance with this Section 11, Restricted Shares (1) shall not be sold, assigned, conveyed, transferred, pledged, hypothecated, or otherwise disposed of, and (2) shall be returned to the Company forthwith, and all the rights of the Grantee to such Shares shall immediately terminate, if the Grantee's continuous employment with the Company or any Subsidiary shall terminate for any reason, except as provided in Section 11(d). The return of the Shares shall be accomplished, if necessary, by the Grantee's delivering or causing to be delivered to the Company the certificate(s) for the Shares, accompanied by such endorsement(s) and/or instrument(s) of transfer as may be required by the Company. Upon the return of Shares in accordance with this paragraph (2), the Company shall pay to the Grantee an amount in cash equal to the lesser of the aggregate price paid for the Shares returned or the current fair market value of the Shares returned. (d) Subject to the following provisions of this Section 11(d), the restrictions imposed on Restricted Shares shall lapse on such date or dates as the Committee shall determine when the Restricted Shares (or any Option to purchase them) are granted . In addition, if a Grantee who has been in the continuous employment of the Company or a Subsidiary since the date on which he acquired the Restricted Shares becomes Disabled or dies while in such employment, then the restrictions imposed on the Restricted Shares shall lapse; provided that, if such Restricted Shares are intended to qualify as Performance-Based Restricted Shares, they shall cease to qualify as performance-based compensation for purposes of Section 162(m) of the Code if the restrictions lapse on the account of the Disability or death of the Grantee. Further, all restrictions imposed on Restricted Shares shall lapse immediately following the date on which the Company obtains actual knowledge that a Change in Control has occurred; provided that, if such Restricted Shares are intended to qualify as Performance-Based Restricted Shares, they shall cease to qualify as performance-based compensation for purposes of Section 162(m) of the Code if the restrictions lapse on account of a Change in Control. (e) If, after Restricted Shares are transferred to a Grantee (pursuant to either a grant of Restricted Shares or the exercise of an Option to purchase Restricted Shares), the Grantee properly elects, pursuant to section 83(b) of the Code, to include in gross income for Federal income tax purposes the amount determined under section 83(b) of the Code, the Grantee shall furnish to the Company a copy of his completed and signed election form, and shall pay (or make arrangements satisfactory to the Company to pay) to the Company any Federal, state or local taxes required to be withheld with respect to the Shares. If the Grantee fails to make such payments, the Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Grantee any Federal, state or local taxes of any kind required by law to be withheld with respect to the Shares. -23- (f) The Committee may authorize the grant of Performance-Based Restricted Shares subject to the following terms and conditions, in addition to all other applicable terms and conditions set forth in the Plan: (1) The restrictions imposed on Performance-Based Restricted Shares shall expire, lapse or be removed based solely on the account of the attainment of performance targets established by the Committee using one or more of the following objective financial criteria pertaining to the Company as the applicable business objectives: (i) earning per share, (ii) return on equity, (iii) return on assets, (iv) stock price appreciation, (v) annual sales and (vi) annual net income. The establishment of the actual performance targets and, if an award is based on more than one of the foregoing financial criteria, the weighing of such financial criteria, shall be at the sole discretion of the Committee; provided, however, that in all cases the performance targets must be established by the Committee in writing no later than 90 days after the commencement of the fiscal year to which the performance target(s) relates and when achievement of the performance target(s) is substantially uncertain. Once established by the Committee, the performance target(s) may not be changed to increase the amount of compensation that otherwise would be due upon the attainment of the performance target(s). (2) Dividends shall be payable on Performance-Based Restricted Shares only to the extent of the Shares received based upon the attainment of the preestablished performance target(s). (3) Prior to the release of restrictions on any Performance-Based Restricted Shares, the Committee shall certify in writing (which may be set forth in the minutes of the Committee) that the preestablished performance target(s) have been satisfied. 12. TERMS AND QUOTAS OF OPTION (a) Each Option and Right granted under the Plan shall be exercisable only during a Term commencing at least six months after the date on which the Option or Right was granted. The Committee shall have authority to grant both Options exercisable in full at any time during their Term and Options exercisable in Quotas. In exercising an Option that is subject to Quotas, the Grantee may purchase less than the full Quota available under the Option during any period. Quotas or portions thereof not purchased in earlier periods shall accumulate and shall be available for purchase in later periods within the Term of the Option. (b) Upon the expiration of the mandatory six-month holding period specified in subsection (a) above, any Option shall be exercisable in full, notwithstanding the applicability of any Quota or other limitation on the exercise of such Option, immediately following the date on which the Company obtains actual knowledge that a Change in Control has occurred. 13. EXERCISE OF OPTION OR RIGHT (a) Options or Rights shall be exercised by delivering or mailing to the Committee: (1) a notice, in the form and in the manner prescribed by the Committee, specifying the number of Shares to be purchased, or the number of Shares with respect to which a Right shall be exercised, and (2) if an Option is exercised, payment in full of the Option price for the Shares so purchased -24- (i) by money order, cashier's check, or certified check; (ii) by the tender of Shares to the Company, or by the attestation to the ownership of the Shares that otherwise would be tendered to the Company in exchange for the Company's reducing the number of Shares that it issues to the Grantee by the number of Shares necessary for payment in full of the Option price for the Shares so purchased; (iii) by money order, cashier's check, or certified check and the tender of Shares to the Company, or by money order, cashier's check, or certified check and the attestation to the ownership of the Shares that otherwise would be tendered to the Company in exchange for the Company's reducing the number of Shares that it issues to the Grantee by the number of Shares necessary for payment in full of the Option price for the Shares so purchased ; or (iv) unless the Committee expressly notifies the Grantee otherwise (at the time of grant in the case of an Incentive Stock Option or at any time prior to full exercise in the case of a Non-qualified Stock Option), and except to the extent that the Option is an Option to purchase Restricted Shares, by the Grantee's (a) irrevocable instructions to the Company to deliver the Shares issuable upon exercise of the Option promptly to the broker for the Grantee's account and (b) irrevocable instruction letter to the broker to sell Shares sufficient to pay the exercise price and upon such sale to deliver the exercise price to the Company, provided that at the time of such exercise, such exercise would not subject the Grantee to liability under section 16(b) of the Securities Exchange Act of 1934, or would be exempt pursuant to Rule 16b-3 promulgated under such Act or any other exemption from such liability. The Company shall deliver an acknowledgment to the broker upon receipt of instructions to deliver the Shares. The Company shall deliver the Shares to the broker upon the settlement date. The broker shall deliver to the Company cash sale proceeds sufficient to cover the exercise price upon receipt of the Shares from the Company. Shares tendered or attested to in exchange for Shares issued under the Plan must be held by the Grantee for at least six months prior to their tender or their attestation to the Company, and may not be Restricted Shares at the time they are tendered or attested to. The Committee shall determine acceptable methods for tendering or attesting to Shares to exercise an Option under the Plan, and may impose such limitations and prohibitions on the use of Shares to exercise Options as it deems appropriate. For purposes of determining the amount of the Option price satisfied by tendering or attesting to Shares, such Shares shall be valued at their Fair Market Value on the date of tender or attestation, as applicable. Except as provided in this paragraph, the date of exercise shall be deemed to be the date that the notice of exercise and payment of the Option price are received by the Committee. For exercise pursuant to Section 13(a)(2)(iv) of the Plan, the date of exercise shall be deemed to be the date that the notice of exercise is received by the Committee. (b) At the time it grants a Non-qualified Stock Option, the Committee may provide in the Option Agreement that if the Grantee exercises the Non-qualified Stock Option (the "Exercised Option") by tendering Shares to the Company to pay the Option price in accordance with subsection (a) above, he shall be granted, as of the date of exercise, a Non-qualified Stock Option (the "Replacement Option") to purchase a number of Shares not exceeding the number of Shares he tendered to pay the Option price in exercising the Exercised Option; provided, however, that no Replacement Option shall be granted to the extent that it, would cause the limitations set forth in Sections 4(a) and 4(e) hereof to be exceeded. The terms of the Replacement Option shall be identical to the terms of the Exercised Option, except that (i) the Option price per Share shall be equal to the Fair Market Value of -25- a Share on the date on which the Replacement Option is granted, but in no event shall the Option price per Share be less than the par value of a Share on that date; (ii) the Term shall commence at least six months after the date the Replacement Option is granted, and (iii) the Committee may establish new Quotas (or no Quotas at all) with respect to the Replacement Option. (c) Subject to subsection (d) below, upon receipt of the notice of exercise and, if an Option is exercised, upon payment of the Option price, the Company shall promptly deliver to the Grantee (or Beneficiary) a certificate or certificates for the Shares purchased, without charge to him for issue or transfer tax, and if a Right is exercised, shall promptly distribute cash to be paid upon the exercise of the Right. (d) The exercise of each Option and Right and the grant or distribution of Restricted Shares under the Plan shall be subject to the condition that if at any time the Company shall determine (in accordance with the provisions of the following sentence) that it is necessary as a condition of, or in connection with, such exercise (or the delivery or purchase of Shares thereunder), grant or distribution (i) to satisfy withholding tax or other withholding liabilities, (ii) to effect the listing, registration, or qualification on any securities exchange or under any state or Federal law of any Shares otherwise deliverable in connection with such exercise, grant or distribution, or (iii) to obtain the consent or approval of any regulatory body, then in any such event such exercise, grant or distribution shall not be effective unless such withholding, listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company in its reasonable and good faith judgment. Any such determination (described in the preceding sentence) by the Company must be reasonable, must be made in good faith, and must be made without any intent to postpone or limit such exercise, grant or distribution beyond the minimum extent necessary and without any intent otherwise to deny or frustrate any Grantee's rights in respect of any Award. In seeking to effect or obtain any such withholding, listing, registration, qualification, consent or approval, the Company shall act with all reasonable diligence. Any such postponement or limitation affecting the right to exercise an Option or Right or the grant or distribution of Restricted Shares shall not extend the time within which the Option or Right may be exercised or the Restricted Shares may be granted or distributed, unless the Company and the Grantee choose to amend the terms of the Award to provide for such an extension; and neither the Company nor its directors or officers shall have any obligation or liability to the Grantee or to a Beneficiary with respect to any Shares with respect to which the Award shall lapse, or with respect to which the grant or distribution shall not be effected, because of a postponement or limitation that conforms to the provisions of this subsection (d). (e) Except as provided in Section 13(f) below, Options and Rights granted under the Plan shall be nontransferable other than by will or by the laws of descent and distribution in accordance with Section 14(a) hereof, and an Option or Right may be exercised during the lifetime of the Grantee only by him. (f) Subject to the approval of the Committee in its sole discretion, Non-qualified Stock Options, Limited Stock Appreciation Rights that are granted in connection with Non-qualified Stock Options, and Restricted Stock may be transferable to members of the immediate family of the Grantee and to one or more trusts for the benefit of such family members, partnerships in which such family members are the only partners, or corporations in which such family members are the only stockholders. "Members of the immediate family" means the Grantee's spouse, children, stepchildren, grandchildren, parents, grandparents, siblings (including half brothers and sisters), and individuals who are family members by adoption. (g) Upon the purchase of Shares under an Option, the stock certificate or certificates may, at the request of the purchaser, be issued in his name and the name of another person as joint tenants with right of survivorship. -26- 14. EXERCISE OF OPTION OR RIGHT AFTER DEATH, DISABILITY, RETIREMENT, OTHER TERMINATION OF EMPLOYMENT, OR CHANGE IN CONTROL (a) Death If a Grantee's employment with the Company and its Subsidiaries shall cease due to the Grantee's death, or if the Grantee shall die within three months after cessation of employment while an Option is exercisable pursuant to subsection (d) or (e) below, any Option held by the Grantee on the date of his death may be exercised only within twelve months after the Grantee's death, and only by the Grantee's Beneficiary, to the extent that the Option could have been exercised immediately before the Grantee's death. (b) Disability If a Grantee's employment with the Company and its Subsidiaries shall cease due to his Disability, after at least six months of continuous employment with the Company and/or a Subsidiary immediately following the date on which an Option was granted, the Grantee may exercise the Option, to the extent that the Option could be exercised at the cessation of employment, at any time within two years after the Grantee shall so cease to be an employee. (c) Retirement If a Grantee's employment with the Company and its Subsidiaries ceases due to his Retirement, after at least six months of continuous employment with the Company and/or a Subsidiary immediately following the date on which an Option was granted, the Grantee may exercise the Option, to the extent the Option could be exercised at the cessation of employment, at any time within five years after the Grantee's Retirement. (d) Termination of Employment for Any Other Reason The Option Agreement shall specify the period, if any, during which an Option may be exercised subsequent to the termination of a Grantee's employment with the Company and its Subsidiaries at any time other than within three months after the date on which the Company obtains actual knowledge that a Change in Control has occurred and for any reason other than those specified in subsections (a) through (c) above; provided, however, that the Option Agreement shall not permit the exercise of any Option later than three months after such termination; and provided further that the Option may not be exercised to an extent greater than the extent to which it could be exercised at the cessation of employment. (e) Termination of Employment After a Change in Control If, within three months after the Company obtains actual knowledge that a Change in Control has occurred, a Grantee's employment with the Company and its Subsidiaries ceases for any reason other than those specified in subsections (a) through (c) above, the Grantee may exercise the Option at any time within three months after such cessation of employment. (f) Notwithstanding any other provision of this Section 14, in no event shall an Option be exercisable after the expiration date specified in the Option Agreement. 15. TAX WITHHOLDING (a) The Company shall have the right to collect an amount sufficient to satisfy any Federal, State and/or local withholding tax requirements that might apply with respect to any Award to a Grantee (including, without limitation, the exercise of an Option or Right, the disposition of Shares, or the grant or distribution of Restricted Shares) in the manner specified in subsection (b) or (c) below. Alternatively, a Grantee may elect to satisfy any such withholding tax requirements in the manner specified in subsection (d) or (e) below to the extent permitted therein. -27- (b) The Company shall have the right to require Grantees to remit to the Company an amount sufficient to satisfy any such withholding tax requirements. (c) The Company and its Subsidiaries also shall, to the extent permitted by law, have the right to deduct from any payment of any kind (whether or not related to the Plan) otherwise due to a Grantee any such taxes required to be withheld. (d) If the Committee in its sole discretion approves, a Grantee may irrevocably elect to have any withholding tax obligation satisfied by (i) having the Company withhold Shares otherwise deliverable to the Grantee, or (ii) delivering Shares (other than Restricted Shares) to the Company, provided that the Shares withheld or delivered have a Fair Market Value (on the date that the amount of tax to be withheld is determined) equal to the amount required to be withheld. (e) A Grantee may elect to have any withholding tax obligation satisfied in the manner described in Section 13(a)(2)(iv) hereof, to the extent permitted therein. 16. SHAREHOLDER RIGHTS No person shall have any rights of a shareholder by virtue of an Option or Right except with respect to Shares actually issued to him, and the issuance of Shares shall confer no retroactive right to dividends. 17. ADJUSTMENT FOR CHANGES IN CAPITALIZATION (a) Subject to the provisions of Section 18 hereof, in the event that there is any change in the Shares through merger, consolidation, reorganization, recapitalization or otherwise; or if there shall be any dividend on the Shares, payable in Shares; or if there shall be a stock split or a combination of Shares, the aggregate number of shares available for Awards, the number of Shares subject to outstanding Awards, and the Option price per Share of each out standing Option may be proportionately adjusted by the Board of Directors as it deems equitable in its absolute discretion to prevent dilution or enlargement of the rights of the Grantees; provided that any fractional Shares resulting from such adjustments shall be eliminated. (b) Subject to the provisions of Section 18 hereof, any Shares to which a Grantee shall become entitled as a result of a stock dividend on Restricted Shares, or as a result of a stock split, combination of Shares, merger, consolidation, reorganization, recapitalization or other event affecting Restricted Shares, shall have the same status, be subject to the same restrictions, and bear the same legend (if any) as the Shares with respect to which they were issued, except as may be otherwise provided by the Board of Directors. (c) The Board's determination with respect to any such adjustments shall be conclusive. 18. EFFECTS OF MERGER OR OTHER REORGANIZATION If the Company shall be the surviving corporation in a merger or other reorganization, Awards shall extend to stock and securities of the Company after the merger or other reorganization to the same extent that a person who held, immediately before the merger or reorganization, the number of Shares corresponding to the number of Shares covered by the Award would be entitled to have or obtain stock and securities of the Company under the terms of the merger or reorganization. 19. TERMINATION, SUSPENSION, OR MODIFICATION OF PLAN The Board of Directors may at any time terminate, suspend, or modify the Plan, except that the Board shall not, without approval by the affirmative votes of the holders of a majority of the securities of the Company present, or represented, and entitled to vote, at a meeting -28- duly held in accordance with applicable law, change (other than through adjustment for changes in capitalization as provided in Section 17 hereof) (a) the aggregate number of Shares for which Awards may be granted; (b) the class of persons eligible for Awards; (c) the minimum Option price, applicable to Options or Rights, that is provided for under the terms of the Plan; or (d) the maximum duration of the Plan. No termination, suspension or modification of the Plan shall adversely affect any right acquired by any Grantee, or by any Beneficiary, under the terms of any Award granted before the date of such termination, suspension or modification, unless such Grantee or Beneficiary shall expressly consent; but it shall be conclusively presumed that any adjustment pursuant to Section 17 hereof does not adversely affect any such right. 20. APPLICATION OF PROCEEDS The proceeds received by the Company from the sale of Shares (including Restricted Shares) under the Plan shall be used for general corporate purposes. 21. GENERAL PROVISIONS The grant of an Award in any year shall not give the Grantee any right to similar grants in future years or any right to be retained in the employ of the Company or its Subsidiaries. 22. GOVERNING LAW The Plan shall be construed and its provisions enforced and administered in accordance with the laws of the Commonwealth of Pennsylvania except to the extent that such laws may be superseded by any Federal law. EX-10.5 5 STOCK OPTION PLAN -29- EXHIBIT 10.6 JLG Industries, Inc. Directors Stock Option Plan August 1, 1998 1. Purpose The JLG Industries, Inc. Directors Stock Option Plan (the "Plan") is designed to enable Outside Directors of JLG Industries, Inc. (the "Company") to acquire or increase a proprietary interest in the Company, and thus to share in the future success of the Company's business. Accordingly, the Plan is intended as a further means not only of attracting and retaining outstanding Outside Directors, but also of promoting a closer identity of interests between Outside Directors and shareholders. 2. Definitions In this Plan document, unless the context clearly indicates otherwise, words in the masculine gender shall be deemed to refer to females as well as males, any term used in the singular also shall refer to the plural, and the following capitalized terms shall have the following meanings set forth in this Section 2: (a) "Beneficiary" means the person or persons designated in writing by the Grantee as his beneficiary in respect of an Option; or, in the absence of an effective designation or if the designated person or persons predecease the Grantee, the Grantee's Beneficiary shall be the person or persons who acquire by bequest or inheritance the Grantee's rights in respect of an Option. In order to be effective, a Grantee's designation of a Beneficiary must be on file with the Company before the Grantee's death. Any such designation may be revoked and a new designation substituted therefor at any time before the Grantee's death. (b) "Board of Directors" or "Board" means the Board of Directors of the Company. (c) "Change in Control" means the first to occur of the following events: (1) an acquisition (other than directly from the Company) of securities of the Company by any person, immediately after which such person, together with all securities law affiliates and associates of such person, becomes the beneficial owner of securities of the Company representing 25 percent or more of the voting power; provided that, in determining whether a Change in Control has occurred, the acquisition of securities of the Company in a non-control acquisition will not constitute an acquisition that would cause a Change in Control; or (2) three or more directors, whose election or nomination for election is not approved by a majority of the members of the incumbent Board then serving as members of the Board of Directors, are elected within any single 12-month period to serve on the Board of Directors; provided that an individual whose election or nomination for election is approved as a result of either an actual or threatened election contest or proxy contest, including by reason of any agreement intended to avoid or settle any election contest or proxy contest, will be deemed not to have been approved by a majority of the incumbent Board for purposes of this definition; or (3) members of the incumbent Board cease for any reason to constitute at least a majority of the Board of Directors; or -30- (4) approval by shareholders of the Company of: (i) a merger, consolidation, or reorganization involving the Company, unless (A) the shareholders of the Company, immediately before the merger, consolidation, or reorganization, own, directly or indirectly immediately following such merger, consolidation, or reorganization, at least 75 percent of the combined voting power of the outstanding voting securities of the corporation resulting from such merger, consolidation, or reorganization in substantially the same proportion as their ownership of the voting securities immediately before such merger, consolidation, or reorganization; (B) individuals who were members of the incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation, or reorganization constitute at least a majority of the board of directors of the surviving corporation; and (C) no person (other than (I) the Company or any Subsidiary thereof, (II) any employee benefit plan (or any trust forming a part thereof) maintained by the Company, any Subsidiary thereof, or the surviving corporation, or (III) any person who, immediately prior to such merger, consolidation, or reorganization, had beneficial ownership of securities representing 25 percent or more of the voting power) has beneficial ownership of securities representing 25 percent or more of the combined voting power of the Surviving Corporation's then outstanding voting securities; (ii) a complete liquidation or dissolution of the Company; or (iii) an agreement for the sale or other disposition of all or substantially all of the assets of the Company to any person (other than a transfer to a Subsidiary). (d) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (e) "Committee" means a committee consisting of such number (not less than two) of members of the Compensation Committee of the Board of Directors with such qualifications as are required to satisfy the requirements of Rule 16b-3 of the Securities Exchange Act of 1934 as in effect from time to time (or any successor rule of similar import). (f) "Company" means JLG Industries, Inc. (g) "Disability" means having a total and permanent disability as defined in Section 22(e)(3) of the Code. (h) "Employee" means any person who is an employee , as defined in Section 3401(c) of the Code, of the Company, any Subsidiary, or any Parent. (i) "Fair Market Value" means, when used in connection with the Shares on a certain date, the mean of the high and low prices at which Shares are traded on the trading day preceding the date of determination as reported for such day by The Wall Street Journal (or if Shares are not traded on such day, on the next preceding day on which Shares are traded) or, if the prices at which Shares are traded are not reported by the Wall Street Journal, any other appropriate method that the Company deems fair and equitable. (j) "Grantee" means a person to whom an Option has been granted under the Plan. -31- (k) "Option" means any option to purchase a Share or Shares pursuant to the provisions of the Plan. (l) "Option Agreement" means the written agreement to be entered into by the Company and the Grantee, as provided in Section 5 hereof. (m) "Outside Director" means each member of the Board of Directors who is not an Employee. (n) "Parent" means any parent corporation of the Company within the meaning of Section 424(e) of the Code (or a successor provision of similar import). (o) "Plan" means the JLG Industries, Inc. Directors Stock Option Plan, as set forth herein and as amended from time to time. (p) "Shares" means shares of the Company's $.20 par value capital stock. (q) "Subsidiary" means a subsidiary corporation of the Company within the meaning of Section 424(f) of the Code (or a successor provision of similar import). (r) "Term" means the period during which a particular Option may be exercised. 3. Adoption Date and Duration of the Plan The Plan is effective September 27, 1993, and shall continue in effect until December 31, 2003, unless it is sooner terminated in accordance with Section 13 hereof; provided, however, that if the Plan is not approved by the affirmative votes of the holders of a majority of the securities of the Company present, or represented, and entitled to vote, at a meeting duly held in accordance with applicable law, the Plan and all Options shall be of no effect. An Option outstanding at the time the Plan is terminated shall not cease to be or cease to become exercisable pursuant to its terms solely because of the termination of the Plan. 4. Number and Source of Shares Subject to the Plan (a) The Company may grant Options under the Plan with respect to not more than 1,968,000 Shares, which shall be provided from Shares in the Company's treasury, by the issuance of Shares authorized but unissued, or from outstanding Shares purchased in the open market. (b) If an Option previously granted is surrendered before exercise, or lapses or is terminated without being exercised, in whole or in part, the Shares subject to the Option shall become available for the granting of Options under the Plan within the aggregate maximum number of Shares stated in subsection (a), but only to the extent that such Option has not been exercised. 5. Grant of Options (a) In each year during the term of the Plan, a single Option to purchase 6,000 Shares shall automatically be granted to each individual who is an Outside Director on the date of grant for that year; provided, however, that such Options shall not be granted unless the Company had a net profit before extraordinary events (as determined by the Company's independent auditors and reflected in the Company's annual report) for the immediately preceding fiscal year. The date of grant of such Options in each year shall be the date on which the results of the election of directors held at the Company's annual meeting for that year are certified by the judge of elections. (b) At any time after shareholder approval of the Plan and prior to the termination of the Plan, a single Option shall automatically be granted to each individual who is appointed to the Board for the first time by action of the Board and not action of the Company's shareholders. The date of grant of such an Option shall be the date on -32- which the Outside Director is appointed to the Board for the first time. The number of Shares subject to such an Option shall be determined according to the following formula: 16.4384 x (365 -Y), where Y is the number of days between the immediately preceding annual meeting and the date of grant. (c) All such grants shall be subject to and conditioned upon shareholder approval of the Plan as provided in Section 3. The Options shall not be incentive stock options within the meaning of Section 422(b) of the Code. Options may be granted under the Plan only as provided in this Section 5. (d) Appropriate officers of the Company are hereby authorized to execute and deliver Option Agreements in the name of the Company. 6. Terms of Options (a) The Option price per Share of each Option shall be equal to the Fair Market Value of a Share on the date of the grant of the Option. (b) Each Option shall have a Term of ten years, unless it is sooner terminated in accordance with the provisions of the Plan. In no event shall an Option be exercisable after the expiration of such Term. (c) Each Option shall first become exercisable with respect to all of the Shares on the first anniversary of the date of the grant of the Option, except that no Option may be exercised prior to the expiration of six months after the later of (i) the date of the grant of the Option or (ii) the date of shareholder approval of the Plan. (d) A Grantee may at any time or from time to time during the Term of an Option exercise all or any portion of the Option that is then exercisable. (e) Notwithstanding the provisions of subsection (c), upon the expiration of the mandatory six-month holding period specified in subsection (c) above, all outstanding Options shall become exercisable in full, immediately following the date on which the Company obtains actual knowledge that a Change in Control has occurred. 7. Exercise of Option (a) Options shall be exercised by delivering or mailing to the Company: (1) a notice, in the form and in the manner prescribed by the Company, specifying the number of Shares to be purchased, and (2) payment in full of the Option price for the Shares so purchased (i) by money order, cashier's check, or certified check; (ii) by the tender of Shares to the Company, or by the attestation to the ownership of the Shares that otherwise would be tendered to the Company in exchange for the Company's reducing the number of Shares that it issues to the Grantee by the number of Shares necessary for payment in full of the Option price for the Shares so purchased; (iii) a combination thereof; or (iv) unless the Committee expressly notifies the Grantee otherwise at any time prior to full exercise, by the Grantee's (a) irrevocable instructions to the Company to deliver the Shares issuable upon exercise of the Option promptly to the broker for the Grantee's account and (b) irrevocable instruction letter to the broker to sell Shares sufficient to pay the exercise price and upon such sale to deliver the exercise price to the Company, provided that at the time of exercise, such exercise would not subject the Grantee to liability under section 16(b) of the Securities Exchange Act of 1934, or would be exempt pursuant to Rule 16b-3 promulgated under such Act or any other exemption from such liability. The Company shall deliver an acknowledgment to the broker upon receipt of instructions to deliver the -33- Shares. The Company shall deliver the Shares to the broker upon the settlement date. The broker shall deliver to the Company cash sale proceeds sufficient to cover the exercise price upon receipt of the Shares from the Company. The Company shall determine acceptable methods for tendering or attesting to Shares to exercise an Option under the Plan, and may impose such limitations and prohibitions on the use of Shares to exercise Options as it deems appropriate. For purposes of determining the amount of the Option price satisfied by tendering or attesting to Shares, such Shares shall be valued at their Fair Market Value on the date of tender or attestation, as applicable. Except as provided in this paragraph, the date of exercise shall be deemed to be the date that the notice of exercise and payment of the Option price are received by the Committee. For exercise pursuant to Section 7(a)(2)(iv) of the Plan, the date of exercise shall be deemed to be the date that the notice of exercise is received by the Committee. (b) Subject to subsection (c) below, upon receipt of the notice of exercise and upon payment of the Option price, the Company shall promptly deliver to the Grantee (or Beneficiary) a certificate or certificates for the Shares purchased, without charge to him for issue or transfer tax. (c) The exercise of each Option under the Plan shall be subject to the condition that if at any time the Company shall determine (in accordance with the provisions of the following sentence) that it is necessary as a condition of, or in connection with, such exercise (or the delivery or purchase of Shares thereunder) (i) to satisfy withholding tax or other withholding liabilities, (ii) to effect the listing, registration, qualification on any securities exchange, on any quotation system, or under any state or federal law, of any Shares otherwise deliverable in connection with such exercise, or (iii) to obtain the consent or approval of any regulatory body, then in any such event such exercise shall not be effective unless such withholding, listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company in its reasonable and good faith judgment. In seeking to effect or obtain any such withholding, listing, registration, qualification, consent or approval, the Company shall act with all reasonable diligence. Any such postponement or limitation affecting the right to exercise an Option shall not extend the time within which the Option may be exercised, unless the Company and the Grantee choose to amend the terms of the Option to provide for such an extension; and neither the Company nor its directors or officers shall have any obligation or liability to the Grantee or to a Beneficiary by reason of any such postponement or limitation. (d) Except as provided in Section 7(e) below, Options granted under the Plan shall be nontransferable other than by will or by the laws of descent and distribution in accordance with Section 8(a) hereof, and an Option may be exercised during the lifetime of the Grantee only by him. (e) Subject to the approval of the Committee in its sole discretion, Options may be transferable to members of the immediate family of the Grantee and to one or more trusts for the benefit of such family members, partnerships in which such family members are the only partners, or corporations in which such family members are the only stockholders. "Members of the immediate family" means the Grantee's spouse, children, stepchildren, grandchildren, parents, grandparents, siblings (including half brothers and sisters), and individuals who are family members by adoption. (f) Upon the purchase of Shares under an Option, the stock certificate or certificates may, at the request of the purchaser, be issued in his name and the name of another person as joint tenants with right of survivorship. 8. Exercise of Option after Termination of Status as a Director -34- (a) Death If a Grantee's status as a member of the Board shall terminate due to the Grantee's death, or if the Grantee shall die while an Option is exercisable pursuant to subsection (d) below, any Option held by the Grantee on the date of his death may be exercised at any time within twelve months after the Grantee's death, and only by the Grantee's Beneficiary. (b) Disability If a Grantee's status as a member of the Board shall terminate due to his Disability, the Grantee may exercise the Option at any time within two years after such termination. (c) Retirement If a Grantee's status as a member of the Board shall terminate due to his retirement, the Grantee may exercise the Option at any time within five years after such termination. (d) Termination of Status as a Director for any Other Reason If a Grantee's status as a member of the Board shall terminate for any reason other than those specified in subsection (a), (b) or (c) above, the Grantee may exercise the Option at any time within six months after the termination of such status, to the extent that the Option was exercisable on the date of such termination. (e) Notwithstanding any other provision of this Plan, except for the six-month waiting period described in the final sentence of Section 6(c) and the ten-year Term of the Option described in Section 6(b), an Option shall become immediately exercisable in full upon Disability or death of the Grantee, and any Option that would have become immediately exercisable in full upon the Grantee's Disability or death but for the application of such six-month waiting period shall become immediately exercisable in full upon the expiration of such six-month waiting period. 9. Tax Withholding The Company shall have the right to collect an amount sufficient to satisfy any federal, state and/or local withholding tax requirements that might apply with respect to any Option to a Grantee. 10. Shareholder Rights An Option shall not confer upon the Grantee any rights of a shareholder, unless and until Shares are actually issued to him pursuant to the exercise of the Option. 11. Adjustment for Changes in Capitalization Subject to the provisions of Section 13 hereof, in the event that there if any change in the Shares through merger, consolidation, reorganization, recapitalization or otherwise; or if there shall be any dividend on the Shares, payable in Shares; or if there shall be a stock split or a combination of Shares, the number of Shares subject to outstanding Options, and the Option price per Share of each outstanding Option may be proportionately adjusted by the Board of Directors as it deems equitable in its sole and absolute discretion to prevent dilution or enlargement of the rights of the Grantees; provided that any fractional Shares resulting from such adjustments shall be eliminated. 12. Effects of Merger or Other Reorganization If the Company shall be the surviving corporation in a merger or other reorganization, Options shall extend to stock and securities of the Company after the merger or other -35- reorganization to the same extent that a person who held, immediately before the merger or reorganization, the number of Shares corresponding to the number of Shares covered by the Award would be entitled to have or obtain stock and securities of the Company under the terms of the merger or reorganization. 13. Termination, Suspension or Modification of Plan The Board of Directors may at any time terminate, suspend, or modify the Plan; provided that the Board shall not, without approval by the affirmative votes of the holders of a majority of the securities of the Company present, or represented, and entitled to vote, at a meeting duly held in accordance with applicable law, (a) change the class of persons eligible for Options; (b) change the Option price of Options as provided in Section 6 (other than through adjustments for changes in capitalization as provided in Section 11 hereof); (c) increase the maximum duration of the Plan; (d) materially increase the benefits accruing to participants under the Plan; or (e) materially increase the number of securities that may be issued under the Plan; and provided further that the provisions of the Plan that affect the eligibility to participate in the Plan, or that affect the number, Option price or timing of Options shall not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act, or the rules thereunder. The last proviso is intended to comply with the exemption for formula awards under 17 C.F.R. ss. 240.16b-3(c)(2)(ii)(B) and shall be construed consistent with, applied only to the extent required by such provision. No termination, suspension or modification of the Plan shall adversely affect any right acquired by any Grantee, or by any Beneficiary, under the terms of any Option granted before the date of such termination, suspension or modification, unless such Grantee or Beneficiary shall expressly consent; but it shall be conclusively presumed that any adjustment pursuant to Section 11 hereof does not adversely affect any such right. 14. Application of Proceeds The proceeds received by the Company from the sale of Shares under the Plan shall be used for general corporate purposes. 15. General Provisions The grant of an Option in any year shall not confer upon the Grantee any right to remain a member of the Board. 16. Governing Law The Plan shall be construed and its provisions enforced and administered in accordance with the laws of the Commonwealth of Pennsylvania, except to the extent that such laws may be superseded by any federal law. -36- EXHIBIT 22 Listing of Subsidiaries Percent of Voting Securities Jurisdiction of Owned by Subsidiary Incorporation the Company - ---------- --------------- -------------- JLG Equipment Services, Inc. Pennsylvania 100% Fulton International, Inc. Delaware 100% Fulton International Foreign Sales Corporation Barbados 100% Zontess Pty. Ltd. Australia 100% JLG Manufacturing, LLC Pennsylvania 100% The financial statements of the above listed subsidiaries are included in the Company's Consolidated Financial Statements incorporated herein by reference. EX-23 6 CONSENT -37- EXHIBIT 23 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements on Form S-8, No. 33-60366, No. 33-61333 and No. 33-75746 and Form S-3, No. 333-47487 of our report dated September 3, 1998, with respect to the consolidated financial statements of JLG Industries, Inc. included in the Annual Report (Form 10-K) for the year ended July 31, 1998. /s/ Ernst & Young LLP Baltimore, Maryland October 7, 1998 EX-27 7 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 1000 12-MOS JUL-31-1998 JUL-31-1998 56793 0 96207 1597 47568 205515 95510 37858 307339 82843 0 8819 0 0 198949 307339 530859 530859 402702 459779 356 0 254 70470 23960 46510 0 0 0 46510 1.07 1.05
EX-99 8 CAUTIONARY STATEMENTS -39- EXHIBIT 99 Cautionary Statements Pursuant to the Securities Litigation Reform Act of 1995 The Company wishes to inform its investors of the following important factors that in some cases have affected, and in the future could affect, the Company's results of operations and that could cause such future results of operations to differ materially from those expressed in any forward looking statements made by or on behalf of the Company. Disclosure of these factors is intended to permit the Company to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Many of these factors have been discussed in prior SEC filings by the Company. Though the Company has attempted to list comprehensively these important cautionary factors, the Company wishes to caution investors that other factors may in the future prove to be important in affecting the Company's results of operations. Cyclical Demand -- Demand for new equipment manufactured by the Company tends to be cyclical, responding historically to varying levels of construction and industrial activity, principally in the United States and, to a lesser extent, in other industrialized nations. Other factors affecting demand include the availability and cost of financing for equipment purchases and the market availability of used equipment. Company management regularly monitors these and other factors that affect demand for the Company's equipment. However, predicting levels of demand beyond a short term is necessarily imprecise and demand may at times change dramatically. Consolidating Customers Base; Rental Companies -- The principal customers for the Company's new equipment are independent equipment rental companies that rent the Company's products and provide service support to equipment users. In recent years, growth in sales to equipment rental companies has outpaced growth in direct sales to end-users, resulting in equipment rental companies comprising a larger share of total sales. At the same time, there has been substantial consolidation in ownership among rental companies, resulting in a more limited number of major customers comprising a substantial portion of total sales. A change in purchasing decisions by any of these major customers could materially affect overall demand for the Company's products and the Company's financial performance. More generally, during recessionary conditions, demand for equipment by equipment rental companies typically declines more sharply than demand for equipment purchased by end-users. Manufacturing Capacity -- Given the cyclical nature of demand, the Company must periodically expand and contract its manufacturing facilities. Capital investment to acquire additional manufacturing facilities involves significant risks. Excess manufacturing capacity adversely affects profitability because higher fixed costs are spread over a lower sales volume. Insufficient capacity adversely affects profitability as long lead-times required to fill customer orders may impair the Company's ability to compete for new business and subcontracting costs incurred to increase capacity affect profitability. Product Liability -- Use of the Company's products involves risks of personal injury and property damage and liability exposure for the Company. The Company insures against this liability through a combination of a self-insurance retention and catastrophic insurance coverage in excess of the retention. The Company monitors all incidents of which it becomes aware involving the use of its products that result in personal injury or property damage and establishes accrued liability reserves on its financial statements based on liability estimates with respect to claims arising from such incidents. Future or unreported incidents involving personal injury or property damage or unanticipated variances between actual liabilities for known incidents and Company estimates may adversely affect the Company's financial performance. Availability of Product Components -- The Company obtains raw materials and certain manufactured components from third-party suppliers. To reduce material costs and inventories, the Company relies on supplier partnership arrangements with preferred vendors as a sole source for "just-in-time" delivery of many raw materials and manufactured components. Because the Company maintains limited raw material inventories, even brief unanticipated delays in delivery by suppliers, including those due to capacity constraints, labor disputes, impaired financial condition of -40- suppliers, weather emergencies or other natural disasters, may adversely affect the Company's ability to satisfy its customers on a timely basis and thereby affect the Company's financial performance. Foreign Sales; Currency Risks -- A growing component of the Company's business has been export sales to Europe, Australia, Latin America and Asia. Maintenance and continued growth of this segment of the Company's business may be affected by changes in trade, monetary and fiscal policies, laws and regulations of the United States and other trading nations and by foreign currency exchange rate fluctuations and the ability or inability of the Company to hedge against exchange rate risks. Competition; Continued Innovation -- The Company faces substantial competition in the market for its products. Product line expansion by existing competitors and potential entry by new competitors also may affect the Company's market position. Throughout its history, the Company has devoted substantial resources to product development and has generally succeeded in being a market leader in introducing new high-reach products or incorporating new features and functions into existing products. Successful product innovation by competitors that reach the market prior to comparable innovation by the Company or that are amenable to patent protection may adversely affect the Company's financial performance. Mergers and Acquisitions -- The Company intends to pursue strategic acquisitions as a means of increasing sales and earnings and promoting shareholder value. Acquisitions generally may involve a number of risks that may affect the Company's financial performance including increased leverage, diversion of management resources, possible shareholder dilution, assumption of liabilities of acquired businesses and corporate culture conflicts. In addition, specific acquisitions may involve other risks unique to the acquired business. Finally, there is no assurance that the Company will be able to conclude satisfactory agreements to acquire any businesses as a means to increase sales and earnings. Unanticipated Litigation -- The Company occasionally has faced unanticipated intellectual property and shareholder litigation which has involved significant unbudgeted expenditures. The costs and other effects of any future, unanticipated legal or administrative proceedings may be significant. Dependence Upon Key Personnel -- The Company believes that it has developed a strong management team, which intends to continue the Company's growth and profitability. However, the loss or unavailability of certain key management personnel, principally L. David Black, the Company's Chairman of the Board, President and Chief Executive Officer, could adversely affect the Company's business and prospects. -----END PRIVACY-ENHANCED MESSAGE-----